The Victorian State Government is introducing a council rate cap of 3.5 per cent for the 2023/24 financial year, encouraging local governments to exercise sound financial management.

The rate cap limits the amount a council can increase its total revenue from general rates and municipal charges for that year.

State Minister for Local Government, Melissa Horne, announced the cap on 29 December 2022 under the Victorian Government’s Fair Go Rates system.

The Fair Go Rates system was introduced in 2016 to ease cost of living pressures on Victorians and ensure good financial management by local governments.

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

The decision on the rate cap for the next financial year was guided by independent advice from the Essential Services Commission (ESC) recommending a cap of four per cent – in line with the Consumer Price Index.

The State Government set the rate cap 0.5 per cent below the ESC’s recommendation, taking into account cost of living pressures facing rate payers.

Ms Horne, said, “The rate cap for the next financial year takes into account higher inflation and the need to protect Victorians from uncontrolled rate hikes, while ensuring councils can continue to deliver vital community services.”

Councils set rates for their residents and use the revenue to fund essential community services and infrastructure like local parks, libraries, community centres, roads, kindergartens, waste collection and sports grounds.

Rates are set individually by councils for their municipalities every year through their budget process and must consult with their communities on decisions relating to budgets, rates and other charges.

Under the Local Government Legislative Amendment (Rating and Other Matters) Act 2022, Victorian councils have the power to defer or waive rates, charges and interest to ratepayers experiencing financial hardship.

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