Amendments to the Victorian Local Government Acts: Impacts on Councils’ Rating and Debt Recovery Powers
Local Government Legislation Amendments set to change local council rate collection methods.
The Victorian Government has passed the Local Government Legislation Amendment (Rating and Other Matters) Act 2022 (Act), making a number of amendments including a particular focus on ratepayers experiencing hardship and improving the way rates are collected.
The Act amends both the Local Government Act 1989 and the Local Government Act 2020. This article highlights some of the key amendments which will impact councils, such as changes to:
- declaration and collection of rates and charges
- service rates and charges
- rebates and concessions
- hardship and payment plans.
The Act implements a range of recommendations from the 2020 Local Government Rating System Review and the 2021 Ombudsman’s Investigation into How Local Councils Respond to Ratepayers in Financial Hardship. A second stage of related reforms will be explored in consultation with ratepayers and the local government sector in 2023, focusing on structural improvements to the way the rating system operates.
Local Government Act 1989 amendments
The amendments to the Local Government Act 1989 will commence operation on 20 June 2023, or an earlier day to be proclaimed. Councils should be aware some of the amendments will impact their day-to-day operations and budgetary position from the 2023-2024 financial year onwards.
Service rates and service charges
The Act makes long-awaited changes to service rates and service charges on waste, recycling and resource recovery services. These expand on the criteria in s 162(1), which currently limit a service rate and charge to ‘the collection and disposal of refuse’. The amendments will ensure all contemporary waste and recycling management costs for councils can be recovered through service charges.
This new legislation complements the implementation of the Circular Economy (Waste Reduction and Recycling) Act 2021 and the Supreme Court’s decision in Mornington Peninsula Beach Box Association Inc v Mornington Peninsula Shire Council  VSC 455, which validated a service charge for public waste collection.
Special rates and special charges
The Act amends the ‘special rate and special charge’ schemes declared by councils to ensure affected ratepayers enjoy the benefits of such schemes without extended delays.
Under the new legislation, any special rates and charges declared by councils must be levied within 12 months of the declaration, otherwise they will expire. This change is designed to prevent an unreasonably delayed collection of rates and charges. A council must levy a special rate or charge by sending a notice to each person liable to pay.
Rebates and concessions
The Act also makes a substantive change to rebates and concessions for properties providing a ‘public benefit’. While this term is not defined, the Act provides examples of what constitutes a ‘public benefit’, including charitable, religious, educational and social support services.
First proposed in the 2020 Local Government Rating System Review, the introduction of this amendment was delayed due to the COVID-19 pandemic.
The new criteria will allow councils to use their discretion to offer rate rebates and concessions for properties offering a public benefit which directly provide goods or services to the community.
To meet the criteria, the land must:
- be used for a public benefit
- be used for the direct provision of goods and services to the public, or a substantial portion of the public, free of charge or for a nominal charge
- not be used primarily for the purposes of the distribution of profit to an owner, member or shareholder of an entity.
In one of the more significant changes for councils, the alternative means of paying rates via a payment plan has been formalised in legislation. While this is already a common practice, the amendments will ensure consistency between all councils through mandatory guidelines. There is a particular focus in these provisions on those experiencing financial hardship or family violence.
The Act also imposes restrictions on when a council may commence recovery proceedings for unpaid debts. Recovery proceedings will be deferred (but not prohibited) in favour of more lenient arrangements for ratepayers.
Councils, or their agents, will be required to ensure ratepayers have written notice of any amount owed before taking any steps to recover outstanding amounts. It will then be open to councils to enter into payment plans with ratepayers but, if no payment plan is entered into, or no deferral of the amount due is granted, no recovery proceedings can be commenced for at least two years from the date of the written notice.
Where a ratepayer enters into a payment plan, a council cannot sell or transfer land to recover unpaid rates and charges if the payment plan is being complied with. If the ratepayer fails to adhere to the payment plan, then the council may cancel it. However, a council cannot issue legal proceedings for recovery of amounts outstanding until two years have elapsed from the date of the payment plan being cancelled.
Consequently, recovery of unpaid rates and charges via legal proceedings will now involve a significantly longer time period. Where proceedings are necessary, it could take well in excess of two years for councils to complete those actions.
Councils are able to continue to commence proceedings for recovery, provided they comply with the new conditions.
The Minister for Local Government will have the power to issue guidelines relating to the payment of rates and charges, including:
- the meaning of hardship and financial hardship
- the content of hardship policies
- the circumstances in which a council may apply the hardship policies
- the process for applying for a payment plan.
The Minister will be required to consult with the Essential Services Commission before issuing these Guidelines. Councils will be required to comply with the Guidelines and enter into a payment plan if the pre-conditions defining hardship are met.
It is anticipated that the Guidelines will require councils to proactively work with ratepayers experiencing financial hardship to explore different arrangements and solutions. More punitive actions, such as the commencement of legal proceedings and the application of penalty interest, will only be available when ratepayers refuse to engage and all other approaches are exhausted.
Fixing maximum interest rate chargeable on unpaid rates and charges
The Act provides a new requirement for the Minister for Local Government, in consultation with the Essential Services Commission, to set the maximum rate of interest which can be levied by councils on unpaid rates and charges. Currently the rate is set by reference to the Penalty Interest Rates Act 1983. These amendments ensure the maximum interest rate, which is currently 10
percent, does not place more financial strain on those already experiencing financial hardship.
Maddocks will review the Ministerial Guidelines once issued and comment on any particular issues arising for councils.
As noted at the outset, a second stage of reforms is anticipated in 2023 regarding structural improvements to the way the rating system operates. We will update our clients in relation to those future amendments once known.
If you have questions or queries around how the Act is likely to impact your organisation, please contact our Local Government VIC Team.
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