Rates set to rise next year after 'cap' limit is doubled

The state government has agreed to lift the rate cap to 3.5 per cent, from 1.75pc this year.

This means the average property rate amount will increase by 1.75pc.

The cap applies to council's overall rates income, not individual assessments which can be higher or lower.

This rates rise will come on top of council land valuations adjusted to include the rural property bonanza in their rating strategies.

Property analysts say agricultural land prices rose another 25 per cent this year on the back of a 27pc rise the year before.

Victorian councils revalue land each year so they can figure out their rates formula.

The differential rating system adopted by most councils applies different rates in the dollar for different land uses.

So the council's overall budget can only rise by a small amount, but how they tax each resident to fund the budget is up to them.

MORE READING: Farm windfall triggers council rates grab.

Local Government Minister Melissa Horne said the new rate cap of 3.5pc would protect residents from uncontrolled rate hikes while ensuring local governments remain financially sustainable.

She said in the decade before the capping system was introduced, council rates increased by an average of six per cent every year.

Ms Horne said independent advice from the Essential Services Commission had recommended a cap of 4pc - in line with the Consumer Price Index.

"The government set the rate cap 0.5pc below the ESC's recommendation, taking into account cost of living pressures facing rate payers," she said.

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