Australian Local Government Association

Senate Economics References Committee

Appendix 3: Local government property rates

Traditionally local government provided a limited range of property related services, as a result, the allocation of local property taxes (property rates) to local government provided a strong nexus between revenue and expenditures.

Local property rates are a relatively efficient tax base for local government, particularly because:

• the tax base is easily attributable to each local government area
• the taxation of the consumption of housing services is relatively low in Australia (some states do tax on property as well)
• the tax base cannot readily migrate in response to competing tax rates among local governing bodies

Despite the enormous changes to local government services the major (and only) taxation source available to local government remains property rates. Property rates as a proportion of local government expenditure have become less significant. In 1961-62 the figure was 57%, in 2002-03 this figure stood at 41%, (mainly because of increased expenditure activity). As a result, local government has had to pursue other forms of own source revenue, and seek increased assistance from other spheres of government to finance the increasing funding gap.

Since federation, property rates have become a less significant proportion of total taxes (and the economy), this is clearly illustrated in Table 1.

Total revenue from local government rates on property as a proportion of gross domestic product (GDP) is now below 1.0%², these are the lowest levels experienced since World War II.