Posted on February 25, 2021 by Megan Hawley and 38

Proposed Changes to Rating: New Environmental Land Category

In December 2020, the State Government released for public consultation, an Exposure Draft of the Local Government Amendment (Rates) Bill 2021 (Rates Amendment Bill), and a consultation guide entitled Towards a Fairer Rating System (Consultation Guide).

The Rates Amendment Bill aims to amend the Local Government Act 1993 (LG Act) to increase the flexibility, fairness and efficiency of the rating system in New South Wales, and to give effect to certain recommendations made by the Independent Pricing and Regulatory Tribunal (IPART),

New ‘environmental land‘ rating category

The Rates Amendment Bill proposes to add an additional category for rating purposes of  ‘environmental land‘ which is land that cannot be developed due to geographic or regulatory restrictions.

The proposed introduction of this category aims to ensure that land that is unable to be developed is rated at a more appropriate level in future. Currently, the categorisation of such land can be complicated, and depend on factors such as whether it is vacant, whether its conservation is part of or required in connection with development (such as mining) on the same land, and the dominant use of the remainder of a parcel of which the land forms a part.

Currently land subject to a conservation agreement under the National Parks and Wildlife Act 1974 (NPW Act) is exempt from rates. However that exemption does not apply to other land reserved for environmental purposes, including land subject to other agreements such as biodiversity stewardship agreements under the Biodiversity Conservation Act 2016 (BC Act). The Rates Amendment Bill proposes to remove the exemption given the new category.

Proposed s 515A provides that a parcel of rateable land valued as one assessment is to be categorised as environmental land if the land is subject to regulatory restrictions or geographical restrictions and, in addition, if its use is constrained due to one or more of the following:

• the land has limited value relative to its size and location,
• development cannot be carried out on the land, and
• the land has low development potential for business, residential or farming activity .

In determining whether the land has no or low development potential, the zoning of the land, and matters to be prescribed in the regulations are relevant.

Geographic restrictions are defined to include water areas, mudflats or steep slopes or terrain with physical limitations which prevents all or almost all development. However there is no definition of ‘regulatory restrictions’.

It is proposed that councils will be able to create subcategories for environmental land, based on matters such as geographic location or whether or not there is a conservation agreement within the meaning of the NPW Act in place, or similar other agreements in place as prescribed by the regulations.

A consultation note sought input on how the apportionment of rates is to be determined if part of the parcel could properly be categorised as environmental land, and the remainder could be categorised under one or more of the other existing categories. This is particularly important as the other categories rely on the dominant use of the land. If part of land is not used at all as it is prevented from being developed or used, and part is used for residential purposes, if the whole of the land is considered as one, the residential use will clearly be dominant.

Broader Scope for Sub-categories 

 The Rates Amendment Bill also proposes more flexible rating subcategories, which are intended to set fairer rates that better reflect access to services and infrastructure. For all categories the location of the land is proposed to be included as a factor in determining subcategories.

For the business category the Rates Amendment Bill proposes that sub categories can be determined based on whether land is industrial which is determined based on whether the ‘predominant’ activities taking place on the land fall within the list of ‘industrial activities’ to be prescribed by the regulations.

The Rates Amendment Bill proposes to allow councils to create different rating subcategories for residential land according to whether the land is in a residential area or in part of a residential area, if the council is satisfied that it is necessary to identify residential areas because of significant differences between the areas in relation to access to or demand for or costs of services or infrastructure.

A new s530 is proposed to limit the extent of variation in rates for different residential subcategories. It provides that the highest ordinary rate for rateable land in a contiguous urban locality cannot be more than 1.5 times (or such other factor prescribed by the regulations or set by the Minister ) the average ordinary rate payable for other rateable land in the contiguous urban locality. ‘Contiguous urban localities‘  are defined as urban land that falls within the residential rating category, no part of which is completely separated from the rest of the land by land that is not in the residential category

The Rates Amendment Bill also proposes to allow councils to create rating subcategories for vacant land within the residential, business or mining categories (but not for the farmland or environmental land categories), having regard to proposed factors including whether the land has a ‘substantial and permanent‘ structure on it (see proposed s 529(2C) and (2D)).

Other proposed changes 

The Rates Amendment Bill also proposes to:

• allow councils to levy special rates, above the council rate peg and which do not require IPART’s approval (but which do require prior community consultation), to help them undertake joint infrastructure projects with other levels of government (defined as ‘intergovernmental projects‘);
• allow rate pegging to be applied differently across different areas, and possibly by reference to a formula rather than specified percentages
• allow councils to choose to exempt certain land from special rates for water and sewerage;
• require councils to publicly report the value of any rating exemptions they choose to grant;
• limit the postponement of rates on rezoned land and let councils decide whether to write off any debts;
• allow councils to sell properties for unpaid rates after 3 years; and
• allow for the gradual harmonisation, over 4 years, of residential and farmland rates across former council areas, for 17 new councils that were formed in 2016 following various council amalgamations, to protect ratepayers from excessive and sudden rate increases.

The Rates Amendment Bill can be viewed here.

The State Government’s response to IPART’s review of the local government rating system can be viewed here.

To discuss this blog, please contact Megan Hawley, Partner on 02 8235 9703 or Sophia Urlich, Lawyer on 02 8235 9708.