Council Rates: A reasonable tax?
Its that time of the year when many Australian property investors and owners will be receiving their Council rates bill. It is of course traditional to complain about ever increasing Council taxes but they may be the best value for money taxes that you pay on behalf of your property.
Unlike the sales tax on an Australian property purchase which disappears off into the government's general slush fund, Council taxes are actually used for local facilities and services.
Councils in Australia typically fund the following from their rates take:
- planning and regulation
- governance and administration
- transport infrastructure
- rubbish collection and sanitation
- youth, family and aged services
- security and emergency services
- building infrastructure
- sinking fund (reserves)
- environmental
- parks infrastructure
- recreation and culture
- library services
Life Saving Championships, Scarborough Beach, Perth
Councils are variously called cities or shires, typically in the bush, but all have the function of local government. Councils pay for local libraries, which are free to residents as well as facilities such as swimming pools and sports fields which are free or low cost for everyone. Council's pay for events such as public firework displays and subsidize events which bring business to the areas such as fun runs and sporting fixtures, and arts festivals such as "opera in the park" type events. The local council is also responsible for maintaining local roads and footpaths - state and federal authorities pay for major freeways and arterial roads.
Councils have a huge effect on the quality of life in a community and therefore directly influences the house values in that community. A community with many well-maintained green open spaces generally enjoys better property values than an area with few facilities.
Spare a thought for the Shire of East Pilbara this Shire is largest Shire or Council in the world comprising an area of over 379,571 km² (larger than the State of Victoria). Total population of East Pilbara: around 5,600: largest town Newman. That's a lot of land to cover with very few rate payers.
Photo Credit: Moving to Australia
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Comments on Council Rates: A reasonable tax?
I agree, Rates do represent good value relative to other fees and charges by governments. On the flipside, property developers and property investors in Australia are sick to death of Governments lumping fees and charges on onto property transactions. Australia is overgoverned with 3 tiers of government and each having a raft of taxes, duties and charges. A number of these charges were “promised” to be removed upon the introduction of the Goods and Services Tax (GST) and this HAS NOT HAPPENED. Stamp duty remains and quite rightly the state governments would be reluctant to remove this cash cow but, werent we promised a GST (10%) in lieu of removing a duty tax? A number of other duties were removed at the same time…except stamp duties.
the list of taxes and charges is endless for investors:
GST, capital gains tax, mortgage duties, stamp duties ($400,000 purchase can be around $20000 in duties + circa 0.8% mortgage duty), personal taxes, local government fees, application fees, levies of all sorts, etc. I’d hate to think of the other charges that I’d pay as a developer eg. payroll taxes etc to employ staff. These charges-make up a large portion of property prices in Australia. Studies show that a new home is largely comprised of TAXES!. As a developer of property in Queensland i can tell you that the local councils are increasingly putting it on the developer to provide everything upfront rather than the rate payer over a period of time (through rates). That said a number of council charges, fees etc have gone have gone up BEYOND WHAT I CONSIDER A JOKE. Personal instances of rises of 120%! in the last 3 years being well ahead of the inflation rate. But greedy councils have thought to profiteer from developers because their greedy minds have justified that if the developers and property investors are making money, why cant we. Some charges have been doubled in one year or more!
Government/s take from property taxation has risen substantially with the boom in property prices through (stamp duties, capital gains tax, mortgage duties, developer charges etc) which are based on a PERCENTAGE RATE. Meanwhile the resources boom has also seen a huge jump in the value of mineral sales .. yet, when one looks at the ROYALTYS governments have received they have not increased significantly (perhaps the governments have based royaltys on tonnage and not % OF SALES), therefore, the mining industry has gotten off lightly in contributing towards the government coffers COMPARED WITH PROPERTY INVESTORS, DEVELOPERS AND HOME OWNERS who have lined the pockets of politicians… oh.. and for example — Queensland still has crisis in the hospital system? the road system? Water infrastructure and supply? education? et. al. http://www.propertyspotter.com.au
One of the problems I see particularly in Queensland that the shires are very parochial – Brisbane develops their water resources separately from the Gold Coast – so the Gold Coast had lots of water at the same time that Brisbane had <20% in their dams – and yet there is only 100km between the cities and the catchement extends all the way south to NSW! I wouldn’t disagree that Australia gouges property investors, sales tax particularly I find completely bewildering – and its on everything – even vehicles! That definitly should have gone with the introduction of GST – as NZ did when they introduced GST every other tax went basically except income tax – and don’t even get me started on capital gains tax! Thanks for your comment.