How rates are calculated
We use the Net Annual Value (NAV) method for calculating rates. For residential properties this is five per cent of the property’s value.
NAV for non-residential properties is approximately the annual market net rental of the property less all necessary expenses required to maintain that property, except Council rates.
NAV cannot be less than five per cent of Capital Improved Value (CIV).
Rates are calculated based on the combination of two variables: the rate in the dollar and the valuation.
The formula for calculating rates is:
Net Annual Value (NAV) x rate in the dollar = rate payable
For example, in 2023-24 the City of Melbourne required revenue of $851 million of which rates contribute $376 million to cover its expected costs. To raise this sum, using NAV as the basis, it was calculated that residential properties pay 3.78 cents for every dollar of their NAV, while non-residential properties pay 4.22 cents in the dollar on their NAV.
Find out more about local government council rates and rate capping.