So you’ve received your first rates notice from your local council in Sydney – now what? If you’re confused about who sets these rates, what they mean and how they calculate all of those obscure numbers, read on and wonder no more.
What are council rates?
When you buy a house in Sydney, you pay council rates. These rates are part of your local council’s income. They use these fees to fund the community’s infrastructure and services, such as garbage collection and road works. You’re essentially paying for the day-to-day running of your local community.
Who pays council rates?
If you’re buying a home in Sydney, it’s important that you factor in the cost of council rates in your yearly budget. It’s up to you as the homeowner to pay them, even if you’re renting out your property. You’ll receive one bill every year, but you’re able to pay these in installments throughout the year.
How are rates calculated?
Much like with your stamp duty, the way council rates are calculated varies from state-to-state. But as a general rule, Sydney’s council rates – and I mean the entire city, not the City of Sydney Council – factor in your property value and/or your land value in their calculations, amongst a few other factors.
Some councils will value just your land – the cost of the land if your property was ripped up and just the ground remained. Other councils will also take into account potential rental value, depending on what the current rental market is like in your suburb. Some will do a combination of land value and rental value, and also include the value of your property and whatever else you have on your land, such as a pool. So if you have the best house on the worst street, you could likely be paying more than your neighbour. And vice versa too.
How much you pay also depends on one other very important factor – how much your council needs to operate day-to-day. Each year your council will set an annual budget. They’ll then take into consideration the total amount of residential and business properties in the area to calculate a rate in dollar value, and then multiply this by your property’s value.
But whichever way your property is valued, here’s a bonus for you – all council rates are GST free. Awesome!
How to understand your rates notice
Depending on how your rates are calculated, you might see a few technical terms on your rates notice. Each council’s rates notice is different, so you might see some of these, or none of these on your own rates notice.
Capital Improved Value
CIV refers to the value of your land, and any improvements to it. In other words, your property, your garden, your pool and potentially your driveway could all form the basis of your rates calculations.
Net Annual Value
If you see this term on your rates notice, it means your council factors in the annual rental value of your home.
Other fees
On top of your general council rates, you’ll also have garbage, sewer and storm water fees tacked on to your rates notice.
Each rates notice varies from council to council. One rates notice could look completely different to another rates notice from a different council, so its important to familiarise yourself with your local council website for specific information.