6.2 Residential rates postponement

Local government: Results of the 2005/06 audits.

Since the Local Government Act 2002 (the Act) was introduced, local authorities have adopted a variety of rates postponement policies. The Act allows local authorities to determine their own rates postponement policies – unlike previous legislation, which specified the grounds on which postponement could be offered. Under rates postponement policies, local authorities allow ratepayers to defer paying their annual rates until a future date.

In June 2006, we published Residential rates postponement,1 which examined two kinds of rates postponement policies – optional rates postponement and postponement on the grounds of hardship. Both these policies apply only to residential ratepayers. Postponement on the grounds of hardship was allowed under previous legislation. However, optional rates postponement is a new development, enabled by the Act.

A group of local authorities and a private management company have formed a consortium to offer optional rates postponement. At the time we published our report, the consortium had 14 member local authorities. All local authorities offering optional rates postponement are part of the rates postponement consortium.

The concept of rates postponement is straightforward, but designing and implementing a rates postponement policy requires local authorities to consider complex legal, ethical, and financial issues. Local authorities need to take into account the interests of ratepayers who may wish to postpone their rates and the interests of other residents.

Why we did the audit

At the moment, the total number of ratepayers postponing their rates under either policy is very small. However, optional rates postponement is being promoted to local authorities around the country, and the number of ratepayers postponing their rates is expected to increase. For this reason, we considered an audit on rates postponement was timely.

Our findings

Local authorities' rates postponement policies are generally well designed, and local authorities are administering them in the interests of ratepayers.

Optional rates postponement allows ratepayers who are asset rich but income poor to use the equity in their properties to guarantee the future payment of rates. These ratepayers can then use the income they would have spent on rates for other purposes.

1: ISBN 0-478-18169-8.

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