Pay rates bill early to save GST: council

Auckland's ratepayers are being urged to beat the 2.5 per cent GST increase by paying their whole rates bill before the tax hike applies from October 1.

Rates are presently subject to the Government's 12.5 per cent GST - on top of the rate set by local councils to fund their activities.

Auckland City finance chairman Doug Armstrong said his council had increased its rates by an average of 1.9 per cent for 2010-11 and the GST, collected on behalf of the Government, came on top of that.

The first rates bill would be sent out by July 30 with 12.5 per cent GST to pay but the second, third and fourth rates instalments would include GST at 15 per cent.

"However, those who choose to pay their entire yearly rates amount before October 1 will be charged 12.5 per cent.

"It's something to weigh-up, whether to pay upfront and make a saving, or have the money in your pocket for the rest of the time and pay more to the Government."

In Auckland City, an average value home, with a CV of $595,700 and rates of $1634 (at 12.5 per cent GST) will pay about $27 more after October 1, with 15 per cent GST included.

The $27 increase is the rise in GST over the last three instalments of the rating year.

A further incentive to pay the year's rates by August 20 is a 1.13 per cent council discount.

Councils promising to hold their costs in an election year are keen to point out they have to be the Government's GST collection agent.

They cannot predict how many people will choose this year to pay rates in full before October 1.

Usually, about 40 per cent of ratepayers pay in full on the first bill which, in Auckland City's case, amounts to about $180 million.

If that happens this time, then the 2.5 per cent increase would cost ratepayers paying by instalment an extra $7 million in total.

A call for rates to be exempt from GST was thrown out at the Local Government Association conference three years ago.

Association president Lawrence Yule said rates were for services supplied, such as water, sewerage and rubbish collection and GST was a tax on goods and services.

The new Auckland Council, combining the eight councils, will set its first rates from July 1 next year.

AVERAGE RATES 2010-11

Incl GST, paid by instalment
* Auckland City: $1661; early pay discount 1.13 per cent available;
* Manukau: $1389, discount 3.6 per cent;
* North Shore: $2053, no discount;
* Rodney: $1872, discount 5 per cent;
* Papakura:$1450, discount 5 per cent;
* Franklin: $1974, no discount;
* Auckland Regional Council: $367, discount 2.5 per cent