Understanding property rates

The formula for calculating property rates is: property valuation X the rate-in-the-dollar.

The valuation is determined externally by the Valuer General, using either:

• Unimproved Value: Established by reference to the land market and is generally only used in rural and semi-rural fringe urban areas; or
• Gross Rental Value (GRV): Refers to the gross annual rental that the land might reasonably be expected to raise if the property was rented. For vacant land, where no rental value can be determined, the GRV is calculated on the basis of 3 per cent of its capital (or resale value) for residential properties and 5 per cent for commercial and industrial properties.

In the City of Joondalup, most properties are assessed on their GRV, which is indicated on the annual Rates Notice.

The rate-in-the-dollar is set by each local government and is determined by the rates revenue required in the Annual Budget. Local governments can choose to set these rates either:

• Uniformly: the same rate for all properties; or
• Differentially: varying rates based on defined property categories.

Rating can be differentiated by:

• The purpose for which the land is zoned.
• The purpose for which the land is held or used.
• Whether or not the land is vacant.
• A combination of the above.

Local governments can also set a differential minimum payment each year. The purpose of a minimum payment is to ensure that all ratepayers contribute a base or minimum amount as rates.

The City of Joondalup has adopted a differential rating system since 2008-09.

A differential rate-in-the-dollar has been adopted for all rateable land within the City according to the predominant purpose for which that land is being held or used, and whether or not the land has any improvements. Properties valued using GRV have been categorised as either:

• Residential: Covering all properties used predominantly as single or multiple dwellings
• Commercial: Covering all properties used for business and commercial purposes; or
• Industrial: Covering all properties engaged in light industrial and/or manufacturing activities.

Properties have then been further categorised as either:

• Improved e.g. a building has been added; or
• Vacant. 

The difference in rate charges for vacant land is to ensure that income is obtained fairly from vacant land, to incentivise development of the land and to discourage land banking for future sale.

Commercial and industrial sectors generate higher traffic volumes and heavier loads, which is recognised in the differential rate applied.

Rural areas have much lower rates than residential or commercial properties because these rates are calculated using the unimproved values.

Table 1: General Rate - Gross Rental Value (GRV)

Table 2: General Rate - Unimproved Value