The Local Government Association of New South Wales (LGNSW) has welcomed the newly set rate pegs for the 2025-26 financial year.
The Independent Pricing and Regulatory Tribunal NSW (IPART) has set the new rate pegs, ranging from 3.6 per cent to 5.1 per cent. There is a separate rate peg for each of New South Wales’s 128 councils.
IPART Chair, Carmel Donnelly, said that the rate pegs limit the amount by which councils can increase their rates income, while allowing them to meet changes in the cost of providing services.
“The rate pegs allow the councils to cover the increasing costs of continuing to provide their services,” Ms Donnelly said.
“The Tribunal understands that the community has been facing significant cost-of-living pressures and we have taken this into account in our decision making. We continue to make some adjustments to the rate peg over several years to limit the impact on ratepayers. We encourage anyone that is having difficulty paying their rates bill to get in touch with their council to access pensioner concessions and other hardship support.”
Ms Donnelly said that each council’s rate peg is the maximum percentage by which the council can increase their general income. It is open to councils to decide not to implement the increase or to delay it.
“Ultimately, elected councillors decide whether to increase rates and by how much,” Ms Donnelly said.
“And the rate pegs do not apply directly to individual ratepayers’ rates. Councils may increase categories of rates by more or less than the rate peg, provided the total increase in general income remains within the rate peg.”
IPART applied a population factor to 72 of the 128 councils’ rate pegs to reflect population growth. This population growth factor is not expected to drive increases in individual rates because any increase from the population factor is spread among the increased number of ratepayers.
“The population factor allows councils in growth areas to collect the additional rates revenue required to provide services to a growing population, from a larger number of ratepayers,” Ms Donnelly said.
“We also made a special adjustment to the population factor for 13 councils to ensure that ratepayers do not pay more than they should. This was for councils with recent population growth, but where we found this to be the population returning to 2019 levels after falling during the COVID-19 pandemic.”
Councils receive income from various sources including grants and user fees and charges. The rate pegs apply only to council ‘general income’ revenue received mostly from rates, which constitutes on average about one third of councils’ total income.
LGNSW response
LGNSW President, Darriea Turley, said that the latest rate peg determination reflects further improvements to the new forward-looking methodology introduced for the 2024-25 financial year.
“We thank IPART for actively engaging with local government in reviewing and refining the new methodology, particularly through the establishment of the Council Reference Group,” Cr Turley said.
“We acknowledge that times are tough for everyone right across our community, but the reality is that costs increase for councils just as they do for other businesses and services – the cost of bitumen increases, construction costs only go up and salaries quite rightly increase every year.
“Councils need to be able to lift their rates fairly and in accordance with the wishes – and needs – of their community; otherwise they go without, especially since we know councils continue to have more than $1.3 billion of State and Federal government costs shifted onto our communities each year amounting to about $460 per ratepayer across the state.
“IPART has made its determination. It will now be over to the newly elected councils to have those important discussions with their communities about what functions and levels of service they expect to see in councils’ 2025-26 Operational Plans and budgets and beyond.
“It’s worthwhile reminding the public that councils do have hardship provisions and pensioner concessions. Anyone who feels they may experience difficulties in paying their rates should always contact their council to discuss their situation.”
Some key outcomes from the 2025-26 determination include:
- The increases exceed the current inflation rate (CPI) and also exceed forward CPI estimates expected to be in the 2-3 per cent (RBA target range)
- The inclusion of an election factor to assist councils with the cost of the recent local government elections
- Recognition of the additional cost pressures facing rural councils with a higher range compared to metropolitan and regional councils
- The continuation of the Emergency Services Levy (ESL) factor to cover increases for councils and, in particular, the additional council-specific adjustment factor that reflects increases in ESL costs and to provide a catch-up on the loss of the government subsidy on transition to the new methodology
The rate peg for each individual council area is included in the IPART information paper here.
