Urgent report: Landlords lose big time with inflated ‘investor’ rates

A legal stoush has developed between landlords and the Council in Mackay, over the council’s decision to charge investors’ higher rates, simply for being landlords.

The case has gone all the way to the Supreme Court, where the judge found that landlords are indeed being ripped off! However, despite this legal win in the state’s highest court, we’re not out of the woods… Because the state government has stepped in and potentially doomed investors to a lifetime of inflated rates.

This situation began unfolding last year, when Mackay investor Ayril Paton was informed that the council rates on his Mackay investment property, which he’d owned for 15 years, was being placed in a new, more expensive ‘rates’ category: ‘Investor Residential’.

When he objected, he was told that the Mackay Council was well within its rights to charge inflated rates to investors, just as other councils were doing as per the Local Government Act. Ayril studied the Local Government Act and found that it did not give approval for this; he contacted a solicitor, formed the Mackay Investor Rates Committee (MIRC), raised $45,000 to fund the legal battle and took the Mackay Regional Council to court.

It went to the Supreme Court, which sided with Ayril and ruled that it was in fact illegal for a council to charge investors higher rates than owner-occupiers.

The Queensland Local Government Association has since launched action in the Court of Appeal and if they win, the practice of charging investors more for their rates could be rolled out nationally.

I don’t need to say it, but I will: this could be potentially devastating for all Australian investors.

Why do Councils charge investors more?
The practice of charging investors more than owner-occupiers for Council rates – despite the fact that the very same supplies and services are afforded to each – has been going on for some time in different markets. In fact, around 20 different councils throughout Queensland, including Brisbane, the Gold Coast, Sunshine Coast and Townsville, have been charging investors inflated rates for a number of years.

Townsville City Council chief executive officer Ray Burton says his council has “traditionally recognised that owner-occupied properties should be rated differently to commercial and investment properties,” adding, “We are committed to doing everything we can to see that continue, and await the outcome of the LGAQ’s appeal on behalf of councils in Queensland.”

Burton doesn’t offer any explanation as to why investors should be rated differently, but it seems the logic behind it is that landlords are gaining the benefit of a tax deduction for their rates, so they can therefore afford to be charged a little extra. Sounds like a really fair way to treat landlords, right?

Obviously, we feel this is an unfair and deeply flawed practice. Many Australians get a tax deduction for their mobile phone, their laptop, even their car. Should they have to pay more for these items if they can claim a tax deduction, too?

What is the situation right now?
When the case was heard at the Rockhampton Supreme Court, Judge McMeekin concluded: “It follows that in my view the making of the decision to adopt the differential rating categories identified, was an improper exercise of the power conferred on the respondent under the LGA.”

This case is now being appealed by the Council, with funding coming from councils throughout Queensland who are fearful of losing their investor rates income.

However, the State Government has just stepped in and complicated the situation further.

On the 6th of June 2014 at 9:30pm, Deputy Premier Jeffery Seeney tabled a bill in the Queensland State Parliament to amend the Local Government Act, to allow for councils to charge extra rates based on the owners place of residence and nullifying any claims in retrospective.

As the matter is still in appeal in the Supreme Court, the state government’s changes to the Act may indeed be illegal. Either way, it smacks of injustice that this situation has been resolved in favour of Councils via a bill rushed through at 9.30pm, rather than allowing it to play out fairly and with full transparency through the courts.

The result of this Appeal will be very important, whichever way it goes.

If the appeal is upheld, investors in Mackay will be forced to pay increased council rates for their investment properties, now and for years to come. Other councils throughout the country will be watching very closely because a successful appeal leaves the door open for every council in Australia to follow suit.

If the appeal is dismissed, Mackay Regional Council will be forced to repay a massive refund bill (in the vicinity of $1.6 million for over 7,700 properties). That could leave the gate open for thousands of investors around Queensland to launch action, meaning over a dozen other councils throughout Queensland would be forced to refund rates overpayments to thousands of investors. They would also lose millions of dollars in revenue each year, as they’ll have to charge investors the same rates as owner-occupiers.

What can investors do now?
If this situation seems spectacularly unfair to you as a landlord – and it should! – then we urge you to take action in any way you can.

If you think this doesn’t affect you because you don’t own property in Mackay, think again. The truth is, the outcome of this battle will impact every investor in Australia.

Do you really think it’s fair to be charged more for your investment property’s rates than owner-occupiers? If you don’t stand up for what’s right NOW, this is the very likely reality that all investors will face – because you can bet your bottom dollar that if the Mackay Council can get away with this, it won’t take long for other Council’s to follow suit.

So what can you do?

Get involved and spread the word on social media. Share this article with every investor you know. Repost the link on property forums, on websites, email it to all of your investor friends. The more people who know about this injustice, the better chance we have of convincing the Councils and the state government that we won’t be pushed around.

And if you really want to put your money where your mouth is: contact Ayril Paton and join the Mackay Investor Rates Committee ([email protected]). He has opened a specific trust account to deal with the mounting legal costs of the Appeal.

Your contribution, no matter how small, can help Ayril fight this on behalf of all investors. Note that any funds remaining at the end will be redistributed to each contributing party on a percentage basis.

As Ayril writes in his letter to the Queensland Governor, “The Local Government was found by the Supreme Court to be using an improper exercise of power in an illegal action. The State Government has supported the illegal action by making amendments to the Act. It is a scary day when the Government is allowed to carry out illegal actions upon we the people and when challenged, change the laws to suit themselves.”

Now is the time to stand up and support our rights as landlords to be treated fairly!

About Helen Collier-Kogtevs

Helen Collier-Kogtevs is a bestselling author, educator, speaker and property investor. Her passion for wanting to make a positive difference to people’s lives, inspired her to create mentoring programs that teach people how to retire on $100k plus with 10 properties in 10 years or less.

www.realwealthaustralia.com

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