Federated Farmers: Rating system overhaul is overdue

Dr Lisa Harper

It's safe to say that most people care about their rates bills. But how are rates calculated and why?

Your rates bill is made up of different parts. The 'general rate' is the foundation of the rating system. There may also be targeted rates, where ratepayers are charged for their use of things such as kerbside rubbish collection, town water or sewerage. Fees and charges for specific services also apply.

The rating system is based on property valuations; your general rates (and sometimes other parts of your rates bill) are calculated on either the value of your land only ('land value'), or land and buildings ('capital value').

In centuries past, there was a good correlation between land held and earnings, so it was safe to use ownership of land (or better still, land and buildings) as a proxy for income. But in the modern world, that's no longer necessarily true.

Most modern economies revolve around the sale of services, which are not as tied to use of land. Professional offices will generate far more income per hectare than your average farm, for example. Some IT-based businesses may not need real estate at all. But rates are still calculated on property value, causing some anomalies.

Because rates are based on property valuations and farming depends on land, your average farmer pays far more than your average householder, regardless of their income. To add insult to injury, rural residents miss out on some council services; living out of town, it's harder to access things like sports facilities and libraries.

The rating system affects others too; the pensioner on the fixed income can be forced to sell up because their suburb is now fashionable and they can't afford their rates - though hopefully they walk away with some cash.

The Government is looking at funding of local government, announcing that the Productivity Commission will investigate funding mechanisms. Modernisation of the rating system is well overdue.

In the meantime, Federated Farmers submits on council budgets every year, doing our best to ensure farmers pay their fair share and get the services they need.