Queensland Supreme Court confirms local government power to determine differential rates

In Island Resorts (Apartments) Pty Ltd v Gold Coast City Council [2020] QSC 145, the Supreme Court of Queensland recently dismissed an application for judicial review of Council’s decision to set differential rating categories.   

The Court confirmed that local governments have a broad discretion to set differential rating categories of land and to levy differential general rates. The case raised the following issues:

• whether a type of tenant was a personal characteristic that was an ‘irrelevant consideration’?
  
  
• whether the unimproved value of the land, the services the applicant provided to the land and the services Council did not provide to the land were ‘relevant considerations’?
  
  
• whether the land rating categories and minimum differential general rate were ‘unreasonable’?

Background

The applicants owned 70 properties at Couran Cove on South Stradbroke Island within the Gold Coast City Council (Council) area. The Council passed annual resolutions for differential rating categories and fixed minimum differential general rates in those categories , which affected the applicant’s properties.

The relevant differential rating categories differentiated between land that provided rental accommodation to a ’permanent resident’ or to ’itinerants’ (meaning a visitor or tourist). Council’s revenue statement and resolution of rates noted that land used for tourism, including the ’itinerant’ category, placed demand on Council services and should generate a higher contribution to the general rate.

The unimproved value of each of the applicant’s properties was only $12,500 and the rates were about 20% of the value of the land. The applicant provided services to its properties such as water and electricity supply, refuse disposal, transport and pest suppression, under an agreement with the Council and the developer of the land. The applicant argued that the Council did not provide any services to its properties within the definition of ’general rates’ under section 92 of the Local Government Act 2009 (Qld).

The applicant applied for judicial review claiming that the Council took into account irrelevant considerations, failed to take into account relevant considerations and exercised their power unreasonably when resolving the relevant rating categories and minimum differential rates.

Supreme Court decision

The Supreme Court dismissed the application for judicial review, finding that the Council’s decisions fell within the Council’s power to determine differential rating categories and levy differential general rates.

In reaching this decision the Court considered the findings in Xstrata Coal Qld Pty Ltd v Council of the Shire of Bowen [2010] QCA 170, noting that (for deciding rating categories and differential rates):

• personal characteristics of the landowner, if unrelated to the land, are irrelevant considerations; and
• characteristics of the land are relevant considerations, such as the use to which the land might be put, the burden the land has on Council’s budget, and the value of the land.

The Court also considered Ostwald Accommodation Pty Ltd v Western Downs Regional Council [2015] QSC 10, noting its finding that the use of land for a major income earning activity was a relevant consideration.

The Court confirmed the broad discretion of local governments to determine differential general rates, which are essentially political decisions of an elected body. Imposing rates is a function that is considered ’quasi-legislative’ and involves an express permission for differentiation with no relevant express statutory constraints.  

Although the Court has guiding notions of equity and fairness, these do not justify reading limits into the local government’s broad powers.  

Firstly, the Court held that the distinction between renting to a ’permanent resident’ or ’itinerant’ related to an attribute of the land, being the use to which it was put, which was a relevant consideration.  

It was also permissible for the Council to have regard to the burden the use of land may place on Council’s budget, being the perceived demand tourism places on Council services.  

The Court noted that although renting a property is always ’owner dependant’ in that the owner has chosen to use their land for that rental use, that does not mean the different uses that land are put to by their owners cannot be a relevant consideration when deciding rating categories and rates.

Secondly, the Court found that the Council had not failed to take into account relevant considerations. Although the rates imposed were significant in comparison to the unimproved value of the land and it was open to the Council to consider this, the Court held that the Council was not bound to do so. In any case, the value of the land did not necessarily relate to its burden on Council services for the community benefit.   

The Court considered the services the applicant provided to the property were only relevant to utility charges and not differential general rates. The applicant failed to establish that the Council had not provided any ’general rates’ services, as the provision of services by Council is for the community generally and does not necessarily need to be provided directly to the applicant or connected with their land.  

The Court noted that tourists travelling to the applicant’s resort may benefit from the Council’s mainland roads and medical treatment.

Finally, the Court held that the Council’s decisions were not an unreasonable exercise of power. The Court noted that the Council must be allowed substantial latitude in establishing the criteria for differential rating categories. There was a rational basis for the Council’s decisions, which involved an assessment of the burden to be imposed on the landowners in the ’itinerant’ category and the amount to be raised by the general rate for the community’s benefit.  

Implications for local governments

This decision has confirmed the broad power local governments have to impose differential rating categories. The Court has shown reluctance to question the unconstrained discretion of a politically elected body in determining differential general rates.   

This case reinforces that local government distinctions between land rating categories should relate to attributes of land, but that local governments are not bound to consider every attribute of the land, including the land’s value.

In light of the recent Justice and Other Legislation (COVID-19 Emergency Response) Amendment Bill 2020 (Qld) that came into force on 25 May 2020, a regulation may provide for Queensland local governments to continue to exercise their broad powers to decide land rating categories and rates by a resolution outside of its budget meeting process, throughout the 2020-2021 financial year. Although there is currently no regulation to that effect, we anticipate it will be put in place soon so that Councils can respond to the impacts of COVID-19 on their budget for the next financial year.