Better Budget: Council Rates

Council rates are one of the largest recurring costs of home ownership, often running into thousands of dollars per year. Unlike many expenses, rates are not negotiable in the usual sense. However, understanding how they work, when objections are valid, and how to optimise payment can help you manage this cost more effectively.

How Rates Are Calculated

Council rates are based on your property's rating valuation, which includes capital value, land value, and improvements value. Capital value is typically the main factor in calculating your rates.

Rating valuations are conducted by qualified valuers (usually Quotable Value or similar providers) on behalf of councils. Valuations are updated every three years in most areas, though some councils have moved to annual updates.

Your rates are calculated by multiplying your capital value by the council's rate per dollar of value, plus any fixed charges that apply regardless of property value. Different property categories (residential, commercial, rural) have different rates.

The important point is that your rates depend on both your property's value and the council's total rates requirement. Even if your property value stays the same, rates can increase if the council needs more revenue.

Understanding Your Rates Notice

Your annual rates notice breaks down charges into several categories:

General rates fund council operations and services.

Targeted rates fund specific services like water supply, wastewater, stormwater, and rubbish collection.

Regional council rates fund regional services like public transport, flood protection, and environmental management.

Fixed charges apply equally to all properties regardless of value.

Examining your rates notice helps you understand what you are paying for and whether you are being charged correctly for services you receive.

When to Object to Your Valuation

You can object to your rating valuation if you believe it does not accurately reflect your property's value. Common grounds for objection include:

Recent sales of comparable properties in your area suggest a different value.

Physical changes to your property (damage, deterioration) that reduce its value.

Errors in the property description, such as incorrect land area or building size.

You cannot object simply because you do not like the rates amount or because rates have increased. The objection must relate to the accuracy of the valuation itself.

In Auckland during the 2024 valuation cycle, over 10,500 property owners lodged objections. Each objection requires a full review including a site visit by a registered valuer, which can take many months to process.

Importantly, an objection can result in an increase or decrease in value. If the valuer determines your property was undervalued, your rates will increase.

The Objection Process

To lodge an objection:

Check the deadline on your valuation notice. You typically have 30 to 60 days from when valuations are issued.

Gather evidence including recent sales of comparable properties, building reports, or photos showing condition issues.

Submit your objection online through your council's portal or the valuation provider's website.

Wait for review. This can take several months as each objection requires individual assessment.

If your objection is declined and you still disagree, you can appeal to the Land Valuation Tribunal, though this involves hearing fees.

Payment Options

Most councils offer multiple payment frequencies:

Annual payment in full, sometimes with a small discount for early payment.

Quarterly instalments spread throughout the year.

Monthly payments through direct debit, making rates more manageable as a regular budget item.

Weekly or fortnightly payments through direct debit in some councils.

Late payment attracts a 10% penalty added to the overdue amount, so setting up automatic payments protects against accidental late fees.

Rates Rebates

The rates rebate scheme provides relief for low income homeowners. Since July 2025, income thresholds increased significantly, with Auckland raising eligibility from $31,510 to $45,000.

To qualify, you must own and live in the property as your primary residence. The rebate amount depends on your income and your total rates amount.

Application is straightforward. Complete the application form at your council office or online if available. You will need to provide income information from the previous tax year.

Rates Postponement

Some councils offer rates postponement for elderly homeowners. This allows you to defer paying rates until you sell the property or pass away, at which point the accumulated rates plus interest are paid from the sale proceeds.

This option suits asset rich but income poor homeowners who own their home but have limited income to pay rates. The downside is that interest accrues on postponed rates, reducing the equity eventually available.

Budgeting for Rate Increases

Rates typically increase each year, often by more than inflation. Auckland rates increased by 7.5% in 2024/25, following increases in previous years.

When budgeting for rates, assume annual increases of 5 to 8% rather than the headline inflation rate. Over a ten year period, rates that start at $3,000 could grow to $5,000 or more.

This makes rates a significant consideration when assessing long term housing affordability, particularly for retirees on fixed incomes.

A Fixed Cost You Can Partially Manage

Council rates are largely non negotiable, but understanding the system gives you limited tools for management:

Check your valuation carefully and object if genuinely incorrect.

Set up automatic payments to avoid late penalties.

Apply for rates rebates if eligible.

Budget for annual increases above inflation.

Consider rates postponement if you are elderly and income constrained.

While you cannot negotiate rates like other household expenses, ensuring you are correctly assessed and taking advantage of available assistance helps minimise this significant cost of home ownership.