Financing facts
Local government revenue sources
Municipal rates are the sole source of taxation revenue for local government and factors for $7.7 billion or 37.8% of total revenue. Unlike consumption or income tax, municipal rates (which are calculated using land values) are a slow growth tax. Constraints by other spheres of government, such as rate pegging in New South Wales, exacerbate the situation.
The restricted taxation base has led to an increased reliance by local government on fees and user charges, the second major revenue source for local government. In the 1970s, fees and user charges comprised 13% of total revenue. This has now increased to $6.2 billion or 30.5% of total local government revenue.
The third major source of revenue is grants and subsides from the Australian and state and territory governments. It accounts for $2.4 billion or 12% of total local government revenue. However, some rural and remote councils where own-source revenue raising capacity is limited, grants can account for more than 50% of council revenue.
The major source for grants to local government comes from the Australian Government in the form of Financial Assistance Grants (FAGs). The Australian Government pays FAGs to state governments for distribution to local government via State Grants Commissions. In 2004-05 local government received $1.6 billion in FAGs.
Other sources of revenue include interest income, dividends, interest on grants and subsidies and fines. Aggregated, these categories amount to 4 billion or 20% of local government's total revenue.
In 2003-04, local government's total revenue was $20.3 billion.
