In Queensland, councils can implement rates capping, a policy designed to limit the percentage increase in rates for individual properties. While rates capping is often seen as a tool to protect ratepayers from sudden financial strain due to revaluations, its implications on equity and fairness in the rating system warrant careful consideration.
Rates capping does not reduce council revenue. Instead, it adjusts how the total rates burden is distributed. Properties with capped rates contribute less than they would under a standard system, causing the rate in the dollar to increase for all ratepayers. This results in uncapped properties bearing a greater share of the overall rates burden, effectively subsidising those benefiting from the cap.
This redistribution can create significant equity concerns. Properties with substantial value increases—reflecting higher wealth or greater service demand—are shielded from paying their proportional share, while uncapped ratepayers, often with smaller or less valuable properties, may feel unfairly treated. For example, a homeowner of a modest property could see their rates rise disproportionately to cover shortfalls from capped properties, even though their property’s valuation has remained relatively stable.
Beyond equity, rates capping also complicates the rating system. Councils must manage the administrative burden of identifying capped properties, recalculating rates, and communicating these changes to ratepayers. Ratepayers may struggle to understand why similar properties have differing rates, leading to perceptions of opacity and unfairness in the system.
For councils, these challenges highlight the importance of transparency and community engagement. Clear communication is essential to explain why rates capping is applied, how it works, and its implications for all ratepayers. Councils should also use robust modelling to analyse the distributional impacts of rates capping, ensuring the policy aligns with long-term financial sustainability and fairness.
While rates capping provides short-term relief for some ratepayers, it does so at the expense of system equity. Councils must carefully weigh its benefits against its drawbacks, ensuring that their rating policies uphold principles of fairness, transparency, and efficiency for the entire community.
If your council is navigating the complexities of rates capping, Ibis Information Systems offers expertise in rates modelling and strategic planning to help ensure equitable and sustainable outcomes. Contact us today to learn more.
