With home owners receiving their annual rates bills right about now, there is a lot of attention being paid to council valuations and how much the bill itself has changed.
The most common misconception is that the rates bill should not go up by more than the increase in the value of the property. The fact is that the two issues are not really related: your council valuation could fall yet your rates may still increase.
This is because the council valuation is used only to apportion your share of the council’s desired rates income for the year.
Council first decides how much money it wants to raise from rates then divides that bill based on property values. The higher your share of the total value of all ratable properties, the more you will be charged in rates.
The important issue is how your council valuation compares to others in the municipality.
If one suburb’s values go up while another’s are reduced then the former will pay an even greater share of the council’s rates income. This makes it possible for council to decide to increase its rates by five per cent while at the same time some property owners receive an increase of 10 per cent or even more.
Some owners will and can choose to contest the valuation of their property but, even if successful, it may not change the value of your home relative to others to any great degree.