NSW Government rejects IPART recommendation to change the Council rating system

Urban Taskforce CEO, Tom Forrest, today welcomed the NSW Government response to the Independent Pricing and Regulatory Tribunal (IPART) Review of the Local Government Rating System. The Government has, somewhat belatedly, decided to reject IPART’s core recommendation that the base for setting rates should be changed from the unimproved value of land to the Capital Improved Value of land.

“The tax system should not punish those willing to invest in construction and improvement. It is the land that is the most valuable component of a property and the tax system should encourage investment which best utilises that land. Mr Forrest said.;

“The last thing we need during the COVID-19 recession is a disincentive for investment in property and employment.

“IPART’s recommendation for change would have resulted in a manifest disincentive for and owners to invest in the improvement of their property. IPART completed its Review in December 2016. The Government response has been a long time coming – but on this occasion, it was worth waiting for”, Mr Forrest said.

Mr Forrest said he was disappointed that more had not been done to scrap rate pegging. The rate pegging system means that Councils with growing populations have been strapped for cash and have progressively pushed more and more costs onto developers and new home buyers.

“These additional costs are passed onto new home buyers – often those young people who can least afford the extra costs. The current system works to actively discourage Councils from agreeing to increasing urban density, even around major infrastructure upgrades”, Mr Forrest said.

Mr Forrest said that the Minister for Local Government, Hon Shelly Hancock MLA, has announced some changes to allow Councils to increase their rates as the population grows and this is very welcome.

The rate pegging system has actually worked to limit growth. Many Councils have complained that the onerous burden of applying to IPART for special variations was just not worth the hassle.

Urban Taskforce has called on the Government to scrap rate pegging and completely review the role of IPART. Urban Taskforce supports the role of the NSW Productivity Commissioner, Peter Achterstraat, who is now reviewing all aspects of state and local infrastructure levies, taxes and fees.

“We urge the Government to revisit the issue of Council rates and consider removing or relaxing the pegs on rates in the course of the Productivity Commissioner’s review,” Mr Forrest said.

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