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Rate Capping

Radio Broadcast

Stephan Knoll, Local Government Minister (5AA 11.37-11.45) Marshall Government’s policy on rate capping

(Byner: Let’s talk to … Stephan Knoll … how do you react when you’ve got a council that says … before we get this capping, which by the way doesn’t mean that you can’t increase the rates it means that if you want to do it past a certain level you’ve got to justify it. So they’re turning around and saying, look one of our options is to go to the business sector and say, pay up. How do you feel about that?) Well I can’t see where in any conversation or the press reports that have been had about why the justification is fair. On the numbers Burnside Council over the last decade has increased their rates by 51% when inflation ran at basically half of that rate. And the rate of growth and the number of properties in Burnside Council is also extremely low. So there is no justification for this that’s been put forward. But more than that I’d really just urge council to see sense on this issue. There are options for us to be able to take this into account when setting the rate capping scheme and we’re already looking at how we give some flexibility to councils around other fees and charges that they charge, but we’re also keen to keep an eye on what that’s going to look like, not that we impose and rate cap and then councils are able to essentially just get extra revenue through the back door over and above what they really should. But in the end of the day … councils across South Australia are fiscally prudent and I think that they need to act in the best interest of their ratepayers and there’s a council meeting tonight and I really urge councillors to think long and hard about the people they’re asking to front up the cash for this proposal and what this will mean for their businesses (Byner: … stay on the line)

David Parkin, Mayor, Burnside Council (5AA 11.39-11.42) Marshall Government’s policy on rate capping

(Byner: I’ve got … David Parkin … would you be comfortable with your council doing this?) My personal view is no at this stage at least. But that’s … subject to being persuaded by debate in the chamber, which is what we always do … I haven’t heard what you’ve been speaking about but my understanding is you were speaking about our proposal to introduce differential rates for Burnside, as all other councils do actually. We never have. We asked our administration for a report on this matter and so they have presented the report. We will debate in chamber its implications and we are still at this stage only talking about what we put out for public consultation leading up to a formal budget decision in June. Again what we’re talking about is not an increase in rates per se, it’s how our mix of rates is collected (Byner: Hang on, I don’t think that’s quite right. If you’re going to raise $541,000 and $2.2 million for the council in the ’18-’19 financial year, the money has got to come from somewhere doesn’t it?) Well our proposal is for an overall rate increase, the one before us, is of 2.7% which is roughly what LGPI is. Again, only a proposal subject for open debate. The proposal before us is a change to the mix of how it’s collected. And there are arguments for and against that (Byner: So what’s going to happen is … this will go to council for debate and your members will decide whether you go for increasing the commercial value of what you collect) It will go tonight for a conclusion on what we will put out for public consultation for the next couple of months leading into a final decision in June. All this is made in open session … the theoretical argument which supports a differential rate for business as distinct from residential is that any rates that businesses pay are a tax deduction and so come out of pre-tax business expense. Any rates that residents pay are not, it’s out of their after tax income. So … commercial properties have an inherent advantage in that respect. But there are other arguments for and against … but that’s only one. My personal view is it’s something which is worthy of consideration but at this stage not appropriate. But that’s what we’ll debate tonight.

Back to Stephan Knoll

(Byner: Stephan Knoll, what do you think of that?) Well I’m heartened by Mayor Parkin’s comments there. What I would say is that the new incoming Government has staked its claim very much about helping to reduce the cost of doing business in South Australia and we’ve put our money on the table around the ESL, payroll tax, electricity prices and a whole host of other things. And councils I think need to come on board and do their bit because all of South Australia will benefit when we’re able to turbocharge the growth in our economy and create jobs and that’s something that’s going to have positive spinoffs for all levels of government. But if we send signals that we are here to increase the cost of doing business, no matter what tier of government does that, it does hurt confidence in our economy and it will have ramifications going forward (Byner: … just for the record, isn’t rate capping a situation where you’re saying broadly to councils, this is the policy as I understand it, look you can increase your rates but once you go beyond a certain level which … might be CPI or any other benchmark, you’ll have to justify … is that not the way this is?) That’s right, there is an exemption process. And we were extremely clear in our policy around [unclear] where councils can seek exemption and we’re working through the practicalities of that in the legislation … but this idea that we’re going to see reduction in services or destitute councils isn’t true. There are mechanisms. But what we want to get to is the true cost increase that councils face and when we look in reports that council rate increases over the past decade have been almost three times the rate of inflation; nobody anywhere has been able to justify why that increase is necessary. And it’s why we need to get back to a more level playing field, an even keel about how these increases are worked out (Byner: Alright. Look, thanks for coming on this morning … I just make a point, you can argue about the mix of your rates but when you’re doing business, whether you can tax deduct or not, and that presumes that you’re making a profit because sometimes if you’re not you can’t deduct from that which you’re not making, somebody pays. That somebody normally is you)

John Darley, Advance SA MLC (5AA 11.53-11.55) Marshall Government’s policy on rate capping

(Byner: Let’s talk to John Darley …) … one thing missing in this argument is one of the state’s biggest problems is employment. Now who provides employment? Commercial and industrial property. There is absolutely no justification for councils to charge double rates to commercial industrial properties because it’s the tenant who pays the rates and taxes. Now I take exception to what the mayor said about, oh yeah but they can claim a taxation benefit for that. Listen, it’s not difficult to make that allowance in the calculation but … the councils have absolutely no justification for charging commercial industrial properties additional money in rates (Byner: … if a council says to somebody you can afford it, they shouldn’t be on council … that’s not the benchmark for charging rates. The rates are supposed to be for charges that the council endure) And how many services do the industrial commercial people use? Virtually none (Byner: Yeah. Well John, thank you for calling in. I half expected you would call … I tell you what, he’s been a very effective Member of Parliament and as a former Valuer-General he’s got his head screwed on the right way)