Setting the Record Straight - A Local Government's Power to Set Rates

It has been decided by the Courts that local governments can set higher rates and charges on landowners according to whether their residential property is occupied by tourists or renters.

Background

The case of Island Resorts (Apartments) Pty Ltd v Gold Coast City Council [2021] QCA 19 (“Island Resorts Case”) was decided late last year. The facts of the case were as follows:

  1. The applicant owned more than 70 properties within the local government area.
  1. One of the local government’s functions is to levy general rates on all rateable land within its local government area.
  1. Between the years 2014 and 2019, the local government had passed annual resolutions providing for differential general rates within certain categories and fixing a minimum general rate within those categories. In each of those years, the local government explained its approach to levying differential general rates in its revenue statement. For example, in the 2014/15 year, the local government explained:

‘A differential system of general rates provides equity through recognising different uses made of different rateable lands (both generally and with respect to revenue-producing potential) and different service levels generated or potentially generated by different ratepayer land.’

In this year, rateable land was differentiated into 87 rating categories.

  1. In each relevant financial year, the local government adopted a revenue statement which specified that it considered land used for tourism or tourism-related business and industry should generate a greater contribution to the demand for the provision of local government services across the local government area than land that is not used for a commercial purpose.
  1. Among the rating categories that the local government had adopted for residential lots was a Category 2T and a Category 3T. The local government resolved each year to levy minimum general rates for Categories 2T and 3T and each category depending on whether the lot was used to provide rental accommodation to “permanent residents” (2T) or to “itinerants” (3T).
  1. The local government decided to levy a higher differential rate on residential lots in Category 3T (itinerants) than the same types of residential lots in Category 2T (permanent residents).

The applicant relied on the premise of Xstrata Coal Qld Pty Ltd v Council of the Shire of Bowen [2010] QCA 170 (“Xstrata Case”) to support its argument that the subject rating categories turned on the ‘personal characteristics’ of the occupier and not on any inherent attribute or quality of the rateable land or its improvements.

In the Xstrata Case, it was held that a general rate must be set to some attribute of the land and that the primary judge was mistaken for concluding that personal capacity to pay was relevant when setting the differential general rates. This case had reiterated the point that a ratepayer’s wealth is in fact irrelevant to the process of deciding what rates should be levied on the property.

The Island Resorts Case analyzed the decision in Xstrata but took a different approach, finding that the Xstrata Case was not a ‘binding authority requiring that a rating category must be decided by reference only to an attribute of land.’[1]

[1] Paragraph 65 of the case, Island Resorts (Apartments) Pty Ltd v Gold Coast City Council [2021] QCA 19.

Key Takeaways

This case affirms and signifies the vast discretionary power vested in a local government to make and implement rating decisions.

It also confirms that the scope of the meaning of an “attribute of the land” includes the use of land and that section 94(1)(A) of the Act strongly indicates that a rating category may turn on the nature of the occupation of residential land. The decision also clarifies that the Xstrata Case cannot be exaggerated into placing restrictions upon such discretionary power vested into local governments.

Our team at Preston Law are experts in assisting local governments with disputes concerning rating decisions. If you would like to know how we may be able to assist, please contact our team on (07) 4052 0700.

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