Property revaluations are essential to local government operations, ensuring that rates are distributed fairly and equitably among ratepayers. While many assume revaluations are based solely on market value, the reality is more complex. In New Zealand and Australia, councils can base their rates on different property values depending on legislative frameworks and policy decisions. Understanding how these values are assessed and used is key to grasping the impact of revaluations on council rates.
Councils may use several valuation bases to calculate rates:
- Land Value: This represents the value of the land alone, excluding any improvements such as buildings. Councils using land value as a basis focus on the potential or underlying worth of the property.
- Capital Improved Value (CIV): This includes the total value of the land and any buildings or improvements on it. This method reflects the full market value of the property as it stands, often considered a more comprehensive indicator of a property’s value.
- Site Value: Similar to land value but may include limited improvements like clearing or drainage.
- Annual Value (or Net Annual Value): This approach, commonly used for commercial properties, is based on the property’s annual rental value.
The choice of valuation method varies across councils, depending on state or regional legislation. For instance, in New Zealand, most councils use capital value (similar to CIV) but can use Land Value, while in Australia, land value or CIV is often the norm, determined by specific state requirements. Each method impacts rates’ distribution, as higher-value properties typically bear a more significant share of the rates burden.
Importantly, a property revaluation does not increase the total amount of rates collected by a council. Instead, it redistributes the rates burden across the community based on updated property values. For example, if your property’s value has increased more than the average in your area, you may see your rates increase. Conversely, your rates may decrease if your property’s value has increased less than the average.
This system ensures equity, aligning a property’s contribution to council revenue with its relative value in the community. However, it also highlights the need for clear communication and transparency from councils to help ratepayers understand why changes occur.
Revaluations are vital for councils to ensure fairness and maintain revenue stability. By using accurate and up-to-date valuation methods, councils can distribute the financial responsibilities of community services and infrastructure in a way that reflects ratepayers’ needs and capacities.
If your council needs expert guidance in navigating property revaluations and understanding their impact on rates, contact Ibis Information Systems. We provide tailored tools and insights to help councils ensure equitable and transparent outcomes for their communities.
