Navigating the property market in Aotearoa can be a bit daunting, especially when it comes to understanding property taxes, or as we Kiwis refer to them, 'rates'. This guide delves into the intricacies of rates, offering you a thorough understanding of what they are, how they're calculated, and their impact on property owners and tenants alike.

What Exactly Are "Property Taxes" / "Rates"?

The term 'rates' refers to specific levies imposed by local councils. These are financial contributions that property owners are required to make, and they serve as a key source of funding for councils across the country.

These funds are crucial for maintaining and developing local infrastructure and services that not only enhance our daily lives but also ensure that our communities remain safe and liveable. It's important to realise that rates play a far more significant role in our day-to-day life than we often acknowledge.

• Roads and Public Transport: The roads we drive on every day, the footpaths we walk on, the cycle lanes we bike on, and even public transport services all benefit from rates. They contribute towards everything from road repairs to traffic management systems.

• Parks and Recreation Areas: The parks where our tamariki (children) play, the sports fields where we cheer on our local teams, and the community centres where we gather - these spaces require upkeep. Rates help maintain these areas so everyone can enjoy them.

• Waste Management: From rubbish collection to recycling facilities, rates fund crucial waste management services. This keeps our neighbourhoods clean while promoting sustainability.

• Emergency Services: Rates also help ensure our safety by contributing to emergency services like fire stations, flood defences and civil defence readiness.

In summary, rates provide fundamental support to a wide range of amenities and services that make New Zealand's communities more liveable. As a part of this team effort, every property owner contributes their fair share towards building stronger, safer, and more vibrant communities across Aotearoa.

Understanding Rates Calculation: Capital Value and Land Value

When it comes to the calculation of rates, two key factors play a dominant role: the capital value and the land value of your property.

• The capital value (CV) represents the probable price that would have been paid for the property if it had been sold at the date of valuation. This includes both the land and any improvements on it, like buildings or other structures. This valuation is provided by the local council, usually directly from Core Logic data which a property data company that specifises in model driven valuation estimations.

• The land value (LV), on the other hand, refers to the probable price that would be paid for the bare land, as if there were no improvements.

Sometimes, councils might use a mix of both CV and LV in their calculations.

Each council has its own methodology for calculating rates, which is why there can be significant variability across different regions. Essentially, the assessed value of your property determines your share of the council's required revenue.

Variability Across Regions: Local Policy Decisions and Service Levels

It's crucial to understand that rates are not uniform across New Zealand. Several factors can influence these differences:

• Local Policy Decisions: Each council makes decisions about policy and funding based on local needs and priorities. These decisions impact how much revenue is needed from rates.

• Level of Services Provided: The number and quality of services a council provides also plays a significant role in determining rates. For instance, areas with more extensive community facilities or infrastructure may have higher rates.

Consequently, homeowners in different regions might see significant differences in their rates bills. By understanding these factors, you can better anticipate any changes to your rates and budget accordingly.

When Do You Pay Rates?

Typically, you'll receive your rates bill quarterly. However, payment plans can differ from one council to another, so it's worth checking with your local authority to understand your options.

Where Does Your Rates Money Go?

The revenue collected from rates is channelled back into the community. It helps fund essential amenities such as waste management systems, community projects, libraries—and yes, even those weekend rugby games at the local park!

Rates Rebates for Low-Income Homeowners

Property ownership, while a rewarding experience, can also present financial challenges. One of these challenges is the regular payment of rates. Understanding that rates can be a financial strain for some households, the government and local councils have put in place certain measures to alleviate this burden. These include rebates and subsidies available for low-income earners.

Understanding Rates Rebates

Rates rebates are partial refunds given to homeowners who may struggle with rates payments due to their income level. They work to reduce the amount of rates you're obliged to pay, easing your financial responsibilities.

Eligibility Criteria

To qualify for a rates rebate, there are certain criteria you must meet:

• • You must be the legal owner of the property or live in it as part of a family trust.
  • The property on which you are paying rates must be your primary place of residence.
  • Your income falls within a specific threshold set by the government.

It's important to note that these criteria may vary slightly between different council areas, so it's always a good idea to check with your local authority.

How to Apply

Applying for a rates rebate is generally straightforward:

1. Check your eligibility: Review the criteria set by your local council or the Department of Internal Affairs.

1. Complete an application form: These are usually available online on your council's website or at their physical offices.

1. Submit your application: This can typically be done online, by mail or in person at your local council office.

Remember, it's crucial to apply within the specified time frames in order not to miss out on these benefits.

Regular Reassessment of Property Values

Councils regularly reassess property values which can influence the amount you pay in rates. Keep an eye out for these assessments as they might affect your budgeting.

Late Payment Penalties

Paying your rates on time is not just a matter of duty, but also a smart strategy to avoid any financial burdens. Late payments can, unfortunately, attract penalties. These typically come in the form of additional fees or interest charges that can add up over time, creating an unwelcome financial burden.

The exact amount and nature of these penalties can vary depending on your local council's policies. As such, it's advisable to familiarise yourself with these specifics to avoid any unpleasant surprises. Some councils might charge a flat late fee, while others could apply an interest rate to the outstanding amount.

Leasehold Properties and Rates

If you're living in a leasehold property, you might be wondering who's responsible for handling the rates payments. In most cases, it falls to the lessee (that's you!) to manage these payments. However, it's important to note that this isn't a hard-and-fast rule.

This responsibility can vary based on individual lease agreements. Therefore, it's crucial to thoroughly review your lease agreement and clarify any doubts with your lessor (the property owner) before signing on the dotted line.

Impact on Rental Properties

Rates can have a significant impact on rental properties as well. If you're a tenant, you might not be directly paying your property's rates bill, but you're likely contributing towards it indirectly.

Here's how: landlords often factor in the cost of rates when setting rent prices for their tenants. So while this expense isn't listed as a separate item in your rent breakdown, it's usually tucked away into your overall rent payment.

Therefore, fluctuations in rates may lead to changes in rent prices over time. As a tenant, keeping an eye on local rates trends could provide insight into potential future changes in your rent.

Online Resources for Rates Information

Most councils offer online tools allowing you to estimate your rates and access valuation information for properties—making it easier than ever to stay informed.

Unpaid Rates: A Lien On Your Property

If you own a property, one of your key responsibilities is staying on top of your rates payments. Regrettably, some homeowners might find themselves behind on these payments due to various circumstances. This can lead to significant implications - one being the creation of a legal charge against your property, or a lien.

What is a Lien? In simple terms, a lien is a legal claim over an asset that allows the lien holder (in this case, the local council) to take possession or sell the asset (your property) if the debt goes unpaid. It's important to note that this isn't an immediate action taken by councils. It usually happens after multiple missed payments and fair warning.

Implications of a Lien on Your Property When there's a lien on your property, selling it becomes more complicated. Before you can finalise the sale, you'll need to clear the outstanding rates bill. This might involve:

• Paying the owed amount in full

• Negotiating a payment plan with the council

• Deducting the owed amount from the sale proceeds

What Can You Do?

If you're struggling with rates payments, it's crucial not to ignore your situation. The best course of action is:

1. Reach out to your local council: Most councils are willing to work with homeowners who are struggling financially. They may be able to offer flexible payment options or even temporary relief.

1. Seek financial advice: Professional advisors can provide guidance on managing your finances and dealing with debt.

1. Consider refinancing: If you have equity in your home, refinancing could help consolidate debts and lower monthly repayments.

Remember: keeping communication lines open with your local council is essential when facing difficulties in meeting your rates obligations.

Unpaid rates can add unnecessary stress to homeownership. By understanding how liens work and the implications they carry, you can better navigate your financial responsibilities and make informed decisions.

Components Making Up Your Rates Bill

Your total rates may consist of a general rate based on your property value and targeted rates earmarked for specific projects or services within your community.

Caps on Rates Increases

To protect homeowners from substantial hikes in their rates bills, some councils have implemented caps on how much rates can increase each year.

Appealing Your Property Valuation: An Empowering Step Towards Financial Management

As a property owner in New Zealand, you have every right to ensure that the assessed value of your property mirrors its actual market worth. If you feel that there's a discrepancy between these two figures, it's within your rights—and indeed, in your best interest—to appeal this valuation.

A successful appeal doesn't just ensure accuracy; it could also potentially lower your rates bill. But how exactly do you go about this? Let's break it down into manageable steps.

Step 1: Understand the Valuation Process

Before lodging an appeal, it's important to understand how property valuations are calculated in the first place. This process typically involves:

• An assessment of the land and improvements (e.g., buildings)

• Considering factors such as location, size, and use of the property

• Comparisons to recent sales of similar properties

Step 2: Gather Evidence

To support your appeal, gather evidence that supports your belief that the assessed value doesn't reflect the true worth of your property. This could include:

• Professional appraisals

• Sale prices of similar properties

• Photographs showing any damages or defects that could lower your property's value

Step 3: Submit Your Appeal

Once you've gathered all necessary evidence, submit your appeal to the local council or valuation provider. Ensure to include all relevant documents and clearly state why you believe the assessed value is incorrect.

"Remember: It's important to act quickly, as there often is a deadline for submitting appeals after receiving your rates notice."

Step 4: Await Decision

Finally, await the decision on your appeal from either an independent board or a hearings officer. During this period, continue paying your current rates bill until a decision has been made.

By appealing an inaccurate property valuation, you're taking an active role in managing your financial responsibilities as a property owner. It's yet another way we, as Kiwis, can empower ourselves with knowledge and make informed decisions that positively impact our lives.

By understanding how rates work—from how they're calculated and used by local councils to what relief options are available—you'll be better equipped to manage this aspect of property ownership. Whether you're taking your first step onto the property ladder or are a seasoned investor in the housing market, staying informed about rates ensures that you're prepared for this ongoing responsibility. Join us as we endeavour to simplify these processes and empower Kiwis with knowledge for successful property transactions.