IN NSW, the pensioner council rate rebate is legislated in the Local Government Act 1993 (NSW). It has been the same for more than thirty years.
The legislation says that eligible pensioners should receive a concession rate that is “one-half of the rate or charge” but that this reduction should be no more than $250.
At this point in time, very few ratepayers can expect to pay less than $500 per annum in rates. The 50% discount has become largely obsolete, resulting in a concession that offers only a fraction of the value that was initially intended in 1993.
In August last year CPSA was perplexed to receive a media release from the Office of Local Government, which was titled ‘Concessions now available to pensioners for council rates’.
This release boasted that eligible pensioners across NSW “can now apply for a rebate on their council rates to help with the rising cost of living”, before going on to say that “the NSW Government understands people are doing it tough right now, with pensioners especially vulnerable to rising cost of living”.
Good to know that the NSW Government knows that times are hard, but it’s more than a bit cheeky to present a thirty-year-old rebate as something new.
Changes to ‘rate peg’ heralds further increases
Each year, the Independent Pricing and Regulatory Tribunal (IPART) set a ‘rate peg’, which determines the maximum percentage of income that NSW local councils can generate through rates.
Most councils generate about a third of their income from rates, which are a form of property tax.
It’s a complicated system. If the rate peg is set at 4.2%, that means that councils can choose to increase their overall income from rates by 4.2%. This doesn’t mean that individual rates will increase by that much. Councils can divvy up that increase using their own methods. For instance, rates may be calculated differently for residential properties than farmland or businesses.
Last year, IPART changed the methodology they use to set the rate peg. As a result, many councils will increase their rates more than usual from later this year. In addition, 9 NSW councils have applied for a ‘special rate variation’ that will allow them to increase their rates even more.
Local councils provide a range of essential services and facilities that communities need to function. However, many submissions made to IPART highlighted that local community members feel uncertain about the efficiency of their local council.
Others expressed further concern that substantial increases to rates will cause increased pressure on households and businesses that are already struggling to pay the bills.
IPART has recommended “a comprehensive state-wide evaluation of existing pensioner concessions”. Currently, an investigation of council financial models in NSW is underway, but there is only a small mention of “the interests of current and future ratepayers”. CPSA will make a submission calling for a more in-depth review of the available concessions.
What next?
CPSA has been a champion for regular indexation of the pensioner council rate rebate.
With last week’s news that the March 2024 pension increase will amount to less than $10 a week, as well as our forecast that council rates will only continue to climb rapidly, an investigation into the adequacy of rebates can’t come soon enough.
In a recent letter to the NSW Minster for Local Government, CPSA raised these concerns. In response, we were told that it is up to individual local councils to offer higher concessions and to support ratepayers who are facing hardship.
Currently, the NSW Government funds 55% of the pensioner council rate rebate, and local councils fund the remaining 45%. Councils may offer a higher discount at their own discretion.
It is CPSA’s view that it is not reasonable to leave it entirely to councils to provide further rate relief, which comes at the expense of other ratepayers in a concentrated area. The City of Sydney offers a 100% concession rate for pensioners, but only 3% of its residential ratepayers are eligible. By contrast, 20% of ratepayers on the Central Coast are pensioners. It doesn’t add up.
Whilst there are hardship provisions in the Act, these aren’t designed to address long-term financial hardship caused by ongoing unaffordability. Hardship policies are inconsistent between different LGAs and there is limited transparency around outcomes.
Should pensioners repeatedly apply for hardship provisions with no certainty of the outcome, or be put in a position where they determine that their property is no longer affordable and it’s time to sell up?
If rates increase by more than people can afford to pay, that isn’t financial hardship, it’s bad policy.
CPSA strongly recommends that the best way forward is to put measures in place to prevent hardship and urges Treasury to make provisions for increased pensioner council rate rebates in the 2024-25 budget.
