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IPART Review of Council Rates in NSW

Published on September 27, 2016 by Josephine Heesh and Nathan Gately

In December of last year, Premier Mike Baird issued the Independent Pricing and Regulatory Tribunal (“IPART”) with Terms of Reference to undertake a review of the Local Government rating system including:

“…consideration of the appropriateness and impact of current rating categories and exemption, mandatory concessions and rebates

IPART issued a draft report in August 2016 that included the draft recommendation that rate exemptions be modified so they are better targeted:

General exemptions should be based on land use not land ownership, and land used for commercial or residential purposes should not be exempt, regardless of who owns it”.

Should this draft recommendation be finalised and accepted, the full or partial rate exemptions currently provided to organisations on the basis of their charitable, religious, educational or public benefit purpose would appear likely to be reviewed, and in some instances be in serious jeopardy.

Particularly, under this draft reform, land classified as being used for either “commercial activities” or “residential purposes” may be automatically and strictly excluded from any exemption.

IPART currently considers activity to be “commercial activity” if it:

  • involves the selling of goods and/or services
  • is provided at more than a nominal consideration*
  • is undertaken on an ongoing basis
  • is not the provision of a public service

*Nominal consideration is defined by IPART as below 50% of market value (75% for supply of accommodation).

IPART currently considers “residential purposes” to include situations where a property is:

  • predominantly used as a place to live
  • occupied by the same resident continuously for periods of three months or greater

and would include residences such as Community Housing developments, retirement villages and student accommodation provided on University campuses.

Further, IPART is specifically considering a recommendation that the exemption from paying rates on land owned by Public Benevolent Institutions (“PBIs”) used for residential purposes or commercial activities be scrapped since:

“an exemption provides PBIs with a cost advantage over private providers of social or low cost housing……In areas where social housing is growing, it leads to councils trying to deliver more services with a smaller rate base. This is unsustainable”.

Organisations dedicated to charitable, religious, educational or benevolent work are engaged in the provision of vital public services to the NSW community, and the loss of full or partial rate exemptions on land they own that is used in connection with their exempt purpose could reduce their ability to provide these services in the future.

Submissions to IPART in relation to this draft report are due by 14 October 2016.

IPART’s draft report can be found here: Local Government – Draft Report August 2016

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