Rate capping applies to the total amount of money a Council can collect (not to each individual property).
To make the maths easy, let’s say Council set a total budget of $10 million last year for rates. If the rate cap is 3% this year and Council decides to utilise the full 3%, then the total amount Council can collect would be $10.3 million.
But how much you pay depends on your share of the total value of all properties in the City of Greater Dandenong. If your property value goes up more than others, your share increases. Therefore, you pay more.
Still a bit confusing?
Think of the budget like a cake. Each year, the cake only gets a little bigger depending on the rate cap. You’re paying for a slice of that cake through your rates. But how big your slice is depends on how valuable your property is compared to everyone else’s
Every year, all properties are revalued by an independent valuer (Valuer-General Victoria, not Council!) The average increase is then overall change in property values across our city. For example, if the average increase was 5%, that means the total value of all properties went up by 5% on average.
Now let’s compare your property to that average:
If your property’s value went up more than 5%, it increased more than that average. That means your property makes up a larger share of the city’s total property value, so you pay a larger share of the total rates.
On the other hand, if your property’s value went up less than 5%, or didn’t go up at all, it increased less than the average. That means your property makes up a smaller share of the total value. Therefore, you end up paying a smaller share of the total rates.
Here’s an example:
- Last year, your house was worth $500,000.
- This year, it’s worth $550,000 –> a 10% increase.
- But the average increase across the city was 5%.
Your property increased more than average, so your share of the total rates pie is now larger, even though the total pie only grew by 3% due to rate capping.