The Department of Internal Affairs

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Local Government in New Zealand - Local Councils


Local Government (Rating) Act 2002

The Local Government (Rating) Act 2002 (LGRA) provides councils with powers to set, assess and collect “rates” to fund local government activities. These rates are locally-set property-based taxes.

Purpose of the Act

The Local Government (Rating) Act 2002 (LGRA) provides councils with powers to set, assess and collect rates to fund local government activities. There are three main purposes of the LGRA –

  • To provide local authorities with flexible powers to set, assess, and collect rates.
  • To ensure rates reflect decisions made in a transparent and consultative manner.
  • To provide for processes and information to ensure ratepayers can identify and understand their liability for rates.

One of the prime objectives of the LGRA is to establish clarity, certainty, and stability in rating matters.

Mechanisms are set out in the LGRA to allow local authorities to raise revenue from the community generally, specified groups or categories of ratepayers, and those who use or generate the need for particular services or amenities.

Constitutional Principles

The rating of land is a non-arbitrary coercive tax. Ultimately, defaulting ratepayers can lose their property. It is important, therefore, that policies and processes associated with all aspects of rating are subject to transparency and accountability.

Key Elements of the Act

The unit of liability for rates is the rating unit. It is based on the concept of ownership – where, in particular, 1 certificate of title = 1 rating unit. Valuation rules allow for exceptions and oddities, as not all land in New Zealand has a certificate of title. There may, for example, be some other form of instrument that establishes ownership. The framework for the Valuer-General’s rules is spelled out in legislation.

Liability for rates rests primarily with the owner. Bearing in mind that the rating unit is based on the concept of ownership, there is a direct link to the owner. There are, however, a few exceptions and transition provisions related to some leases. There are also variations in relation to multiply-owned Māori freehold land.

How properties are rated is a local authority policy matter. Decisions on which rating tools are selected, and how they are applied, are left up to individual councils.

General rates can be based on land value, capital value, or annual value – with or without differentials. The Uniform Annual General Charge (UAGC) can be applied per rating unit or per separately used or inhabited part of a rating unit.

Differentials can be based on –

  • Property value.
  • Location.
  • Area.
  • Use.
  • Activities allowed for under the Resource Management Act.

Targeted rates are designed to fund a function or group of functions. The funding can be from a specified group of ratepayers, and can be set on all rating units or on particular categories. They are very flexible tools. Factors which can be used for calculating targeted rates are –

  • Land value.
  • Improvement value.
  • Capital value.
  • Annual value.
  • Total land area.
  • Area of land, paved, sealed or built on.
  • Area of land protected.
  • Area of floor space of buildings.
  • Number of connections.
  • Number of water closets and urinals.
  • Number of separately used/inhabited parts.
  • Extent of provision of services.

There is special provision for targeted rates for water supply based on metered consumption.

Remissions and postponements can be on any property, to any extent, and for any reason – provided the local authority has adopted policies following consultation. A rates remission policy, under the LGA, must state the objectives to be achieved and the conditions and criteria for remissions.

There is a clear link between processes for assessing and invoicing rates, with the objective of transparency and accountability – particularly the need for ratepayers to understand their liability for rates.

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