How rates are calculated
We use the Net Annual Value (NAV) method for calculating rates. For residential properties this is five per cent of the property’s value.
NAV for non-residential properties is approximately the annual market net rental of the property less all necessary expenses required to maintain that property, except Council rates.
NAV cannot be less than five per cent of Capital Improved Value (CIV).
Rates are calculated based on the combination of two variables: the rate in the dollar and the valuation.
The formula for calculating rates is:
Net Annual Value (NAV) x rate in the dollar = rate payable
For example, in 2024-25 the City of Melbourne required revenue of $781 million of which rates contribute $390 million to cover its expected costs. To raise this sum, using NAV as the basis, it was calculated that residential properties pay 3.78 cents for every dollar of their NAV, while non-residential properties pay 4.44 cents in the dollar on their NAV.
Find out more about local government council rates and rate cappingOpens in new tab.
Through the annual budget process Melbourne City Council determines the amount of revenue to raise in general rates required to maintain our services. We then divide this amount by the total value of the properties within the City of Melbourne municipality (this amount changes every year). The resulting figure is called the rate in the dollar. For 2024-25 the total revenue was increased by 2.75 per cent as per the rate cap.
Rate capping was introduced by the Victorian Government on 1 July 2016. Rate capping limits the amount councils may increase overall total general rates from the previous year as of 30 June, without seeking additional approvals.
It doesn’t apply to individual rate notices, so your bill may be more or less depending on how your property valuation compares to others.
The rate cap applies to general rates. It does not apply to waste charges or the state’s fire services property levy.
The rate cap for 2024-25 is 2.75 per cent. Previous rate caps (based on CPI) have been:
- 2023-24: 3.5%
- 2022-23: 1.75%
- 2021-22: 1.5%
- 2020-21: 2.00%
- 2019-20: 2.50%
- 2018-19: 2.25%
- 2000 to 2001 – 6.4
- 2001 to 2002 – 6.5
- 2002 to 2003 – 5.6
- 2003 to 2004 – 5.7
- 2004 to 2005 – 5.0
- 2005 to 2006 – 5.1
- 2006 to 2007 – 5.1
- 2007 to 2008 – 5.3
- 2008 to 2009 – 4.5
- 2009 to 2010 – 4.7
- 2010 to 2011 – 4.4
- 2011 to 2012 – 4.4
- 2012 to 2013 – 3.9
- 2013 to 2014 – 4.1
- 2014 to 2015 – 4.0
- 2015 to 2016 – 4.2
- 2016 to 2017 – 4.1
- 2017 to 2018 – 4.1
- 2018 to 2019 – 4.0
- 2019 to 2020 – 4.11
- 2020 to 2021 – 4.10
- 2021 to 2022 – 4.21
- 2022 to 2023 – 3.6
- 2023 to 2024 – 3.78
- 2024 to 2025 – 3.78 (rounded)
- 2000 to 2001 – 7.9
- 2001 to 2002 – 8.1
- 2002 to 2003 – 6.4
- 2003 to 2004 – 6.5
- 2004 to 2005 – 5.8
- 2005 to 2006 – 6.0
- 2006 to 2007 – 5.9
- 2007 to 2008 – 6.1
- 2008 to 2009 – 5.3
- 2009 to 2010 – 5.5
- 2010 to 2011 – 5.2
- 2011 to 2012 – 5.2
- 2012 to 2013 – 4.6
- 2013 to 2014 – 4.8
- 2014 to 2015 – 4.6
- 2015 to 2016 – 4.8
- 2016 to 2017 – 4.5
- 2017 to 2018 – 4.6
- 2018 to 2019 – 4.6
- 2019 to 2020 – 4.5
- 2020 to 2021 – 4.4
- 2021 to 2022 – 4.8
- 2022 to 2023 – 4.2
- 2023 to 2024 – 4.2
- 2024 to 2025 – 4.44 (rounded)
The City of Melbourne, like many other local governments, maintains a different rate for residential and business ratepayers. This helps to ensure that all ratepayers make a proportionate and reasonable contribution to the council. Many councils adopt differential rating but the City of Melbourne is the only local government to use Net Annual Value as well as differential rates.
Other rating authorities use valuations made by municipal valuers. These other authorities contribute to the cost of making the valuation.
Water authorities such as City West Water, and South East Water use the valuations to calculate components of water rates. The State Revenue Office uses municipal valuations for the calculation of Land Tax.
The valuations are also used as a basis for levying councils for fire services.
In addition, the Commonwealth and Victoria Grants Commissions consider municipal valuations when making direct grants to municipalities.
