In this Alert, David Nicholls considers the recent urgent amendments made to the Local Government Act 2009 and the City of Brisbane Act 2010 validating retrospectively differential rating applied to “investor categorised” residential property, in the context of the Supreme Court’s decision in Paton & Ors v Mackay Regional Council.

Key Points:

  • the amendments reverse the effect of the Supreme Court’s decision and validate both prospectively and retrospectively differential rating which discriminates between identical residential properties based upon whether the property is the principal place of residence of its owner;
  • the Supreme Court found that the practice of differential rating based upon the characteristics of the owner rather than the property was impermissible under the Local Government Act 2009 and an invalid exercise of power by the Council;
  • to the extent that the amendments are prospective they do not seek to differentiate between properties which although occupied by their owners do not earn any income, and those which are income producing;
  • the differential rating practice involves social equity and discrimination aspects which should be addressed.

The Sustainable Planning (Infrastructure Charges) and Other Legislation Amendment Act 2014 which is due to commence on 1 July 2014 retrospectively amends the Local Government Act 2009 and the City of Brisbane Act 2010 to make it clear that local governments may differentially rate land by reference to the identity of its occupier.  The amendments validate retrospectively the practice adopted by the Brisbane City Council and other local governments of rating residential properties which are owner occupied at a lower rate in the dollar than those which are not owner occupied.  The latter is often referred to as the “investor category” implying that the owners of such properties are deriving income from them and therefore have the capacity to contribute more to the general rates income of the community than owners who are also residents. 

The amendments were made urgently during the Parliament’s consideration of the Sustainable Planning (Infrastructure Charges) and Other Legislation Bill 2014 because the Queensland Supreme Court had handed down a judgment declaring invalid a budget resolution of the Mackay Regional Council applying higher differential rates to residential properties not occupied by their owners.  Justice McMeekin of the Supreme Court found in Paton & Ors v Mackay Regional Council (2014) QSC 75 that this type of differential rate had nothing to do with characteristics of the land in question, but would rate identical properties occupied by identical families differently depending upon whether the families owned or tenanted the properties.  His Honour said:

“In fact the “use”, properly understood, and the potential of the land to earn income in each of the examples that I have postulated above is precisely the same.  It is only the characteristics of the owner which varies.  A rational exercise of the power vested in the Council should not have the result that the amount of rates paid in respect of a given parcel of land should vary dependent upon its owner from time to time.  That suggests that the decision reached was arrived at in an impermissible way.”


“To justify the categorisation the Council impermissibly took into account characteristics personal to the owners of the land and failed to restrict itself to characteristics of the subject land itself.  It is simply a misuse of language to claim that the owner’s decision to reside on land, or not, is in some way a characteristic of the land.  No provision of the LGA was shown to support that approach.”

The retrospective amendments to the City of Brisbane Act 2010 and the Local Government Act 2009 state that Councils may “categorise rateable land, and decide differential rates for rateable land, according to whether or not the land is the principal place of residence of the owner”.  So it is the fact of ownership of a property in which a person does not reside that attracts the higher rates.  That property may simply be a holiday home which is not made available for rental, or it may be a property purchased by a family for use by one of its members to reside closer to a place of work or education, for example.  It also places a higher rate’s burden on persons who make such properties available for rental for long term occupation by tenants at a rent that is affordable.  There are social equity and discrimination aspects inherent in this form of revenue raising.  The legislative response which validates this form of differential rating both retrospectively and prospectively has not addressed these issues.  If capacity to pay is the true basis of such differential rating it plainly discriminates against the owners of properties from which income is not derived.

The Supreme Court’s analysis in Paton should be the catalyst for review and refinement of this particular form of differential rating.