Struggling to pay rates? Here’s what you can do.
If you’re feeling the financial pinch from rising rates, you may qualify for a subsidy. Postponing your rate payments is another option.
The Rates Rebate Scheme helps low-income homeowners by providing a subsidy to help cover the cost of rates. The maximum subsidy is $655 and the income threshold is $26,150.
Even if a ratepayer’s income exceeds the threshold, they could still qualify depending on the rates amount and how many dependents they have. There’s an additional income allowance of $500 per dependent.
If you live in a retirement village unit with a “licence to occupy”, you’re also eligible to apply for a rebate.
The Department of Internal Affairs website has a rebate calculator. Homeowners can apply for the 2020/21 rating rebate up until 30 June 2021.
From August 2020, applications no longer need a statutory declaration, meaning you don’t have to have your application witnessed by a Justice of the Peace or council staff.
The other option is rates postponement, which lets you stop paying rates. The council gets the accrued amount owed from the ratepayer’s estate or, if they move or sell, when they leave their home.
There are two types of rates postponement.
Financial hardship postponement requires an applicant to show the council they’d have insufficient funds, after the payment of rates, for normal health care, day-to-day living expenses and home maintenance. There may be a requirement to pay some of the rates for that year and set-up a system of regular payments for future rates.
“Optional” postponement is the other type, usually available to those 65 or over. Evidence of hardship isn’t needed but some councils require applicants to meet with an independent adviser to discuss their options. There’s flexibility to postpone all or a portion of the rates, and for a fixed or indefinite period. Repayments can be made at any time without penalty.
It's also available if the home is owned by a family trust, you live in a retirement village, it’s Māori freehold or undeveloped land, or the land has changed its use (for example, from farmland to a residential property).
While a holiday from paying rates might sound appealing, interest is charged on the outstanding amount, and annual fees and levies may also be added.
That said, you won’t end up owing more than the property is worth as total charges can’t go over a set percentage of the value of, or the equity in, the property. If property prices drop and there’s a shortfall for the council when the property is sold, this is covered by a reserve fund levy that’s charged annually and added to the amount owed.
The property must be insured and the ratepayer may have to provide evidence of this annually. If there’s still a mortgage on the property, the mortgage provider has to be advised and agree to a notification on the property title. There may also be a requirement to have owned the property for a minimum number of years or have a certain level of equity.
Not all councils offer rates postponement and those that do may not offer both types. Check with your council to see what it offers.