Existing Council allowances system

The existing Council allowances system consists of:

• Council allowance categories, which group Councils according to recurrent revenue and estimated resident population
• allowance limits and ranges that apply to Council members according to their Council category
• a payment in lieu of superannuation entitlements — eligibility requirements apply
• a Remote Area Travel Allowance — eligibility requirements apply.

The existing system largely reflects the outcomes of reviews undertaken by government-appointed panels in 2000 (2000 Allowances Review)⁵⁷ and 2008 (2008 Allowances Review).⁵⁸

Purpose of allowances

The purpose of Council member allowances is not set out in legislation.

In making the Determination, the Tribunal is required to consider any statement or policy issued by the Government of Victoria with respect to the remuneration and allowances of Mayors, Deputy Mayors and Councillors.⁵⁹

In 2008, the Victorian Government released Recognition and Support, the Victorian Government’s Policy Statement on Local Government Mayoral and Councillor Allowances and Resources (2008 Policy Statement).⁶⁰

The letter from the Minister for Local Government to the Tribunal, dated 17 June 2021, cited the 2008 Policy Statement and stated that:

While this policy notes that the Government views councillor allowances not as a form of salary, but as recognition of the contributions made by those elected to voluntary, part-time roles in the community, the Tribunal may wish to consider whether this view supports a contemporary local government sector that attracts diverse community perspectives to civic life.

The 2019 LGI survey revealed differences in how Mayors and Councillors viewed the purpose of their allowance:

• the most common response from Mayors was that their allowance is a form of salary or wages (37 per cent)
• the most common response from Councillors was that their allowance covered costs relating to the role (35 per cent)
• around one-quarter of both Mayor and Councillor respondents characterised their allowance as representing recognition of their contributions as elected representatives.⁶¹

Existing Council allowance categories

With the exception of Melbourne City Council, Councils are currently assigned to one of three allowance categories via a ‘Category Points’ system, which takes into account each Council’s total recurrent revenue and estimated resident population.⁶²

Council allowance categories were first introduced in Victoria in 2001.⁶³ This followed the 2000 Allowances Review which found that, in the absence of more robust measures of the complexity of a Council member’s role:

• population size was a reasonable indicator of the representational workload involved
• total revenue was an indicator of the size and complexity of the governance role.⁶⁴

The 2000 Allowances Review led to the establishment of a three-category allowance framework. Each category corresponds to a range of allowance values that may be paid to Council members. Each Council may select an actual allowance value taking into account factors such as:

• whether the Council has a greater regional focus than others in the same allowance category
• socio-economic or demographic differences that result in ‘higher than usual’ demands on Council services, relative to other Councils in the same allowance category
• expectations placed on the Mayor by the community.⁶⁵

Council allowance categories and Category points ranges

• Category 1 - 0-40
• Category 2 - 41-190
• Category 3 - 191+

^{Source: State Government of Victoria, Recognition and Support, the Victorian Government’s Policy Statement on Local Government Mayoral and Councillor Allowances and Resources, 2008.}

Calculating a Council’s Category Points

Category Points=(R×D+P) / 1,000

Where:

• R is the Council’s total recurrent revenue (in $’000s) for the most recent financial year as submitted by the Council to the Victorian Local Government Grants Commission.
• D is an index for discounting total recurrent revenue (used to avoid increases in Category Points resulting from revenues increasing with inflation) which is calculated annually using Average Weekly Earnings data published by the ABS.
• P is the estimated resident population of the Council based on the latest data published by the ABS as at 30 June in the most recently completed financial year.

^{Source: State Government of Victoria, Recognition and Support, the Victorian Government’s Policy Statement on Local Government Mayoral and Councillor Allowances and Resources, 2008.}

A Council, not otherwise eligible according to its Category Points result, may be assigned a higher allowance category in exceptional circumstances (e.g. by making a successful submission to a Local Government Panel).⁶⁶

Figure 5 shows the location of Councils in Victoria and the allowance categories that apply to them. Appendix A also lists Councils by their allowance category as at June 2021.

Of the 31 Councils in LGV’s ‘Metropolitan’ and ‘Interface’ Council categories:

• around 75 per cent (24 Councils) are in allowance Category 3
• around 20 per cent (six Councils) are in allowance Category 2
• none are in allowance Category 1
• one Council (Melbourne City Council) does not belong to any allowance category.

In comparison, of the 48 Councils in LGV’s ‘Regional City’, ‘Large Shire’ and ‘Small Shire’ Council categories:

• just over half (25 Councils) are in allowance Category 2
• around 40 per cent (20 Councils) are in allowance Category 1
• around 6 per cent (three Councils) are in allowance Category 3.

Existing Council member allowance values

Table 3 sets out existing allowance ranges that apply to Council members according to their Council category.[1]

^{Notes: (a) Values do not include an additional amount equivalent to the Superannuation Guarantee contribution.
(b) Deputy Mayors are subject to the same allowance range as Councillors, for a given category.}

^{Source: LGV, ‘Guide to Councils – How Councils Work: Acts and Regulations’, Know Your Council, https://knowyourcouncil.vic.gov.au/guide-to-councils/how-councils-work/….}

Until the Tribunal’s Determination takes effect, a Council is required to set the value of its allowances (within the applicable Council allowance category range) within six months of a general local government election, or by 30 June following the election (whichever is later). A Council may also adjust the value of its allowances if the Council’s allowance category is changed by the Minister for Local Government.⁶⁸

The 2019 LGI survey found that most Councillors and Mayors received an allowance at, or near, the top of the range for their allowance category.⁶⁹

The 2019 LGI survey also suggested that a high proportion of respondents were dissatisfied with the value of the allowance received. Of those that responded:

• 44 per cent of Mayors and 59 per cent of Councillors agreed with the statement ‘I do not get paid enough’
• however, 50 per cent of Mayors and 27 per cent of Councillors agreed with the statement ‘I am paid an appropriate amount’.⁷⁰

The remainder of respondents said they did not have an opinion on the matter, or that Councillor allowances were too high.⁷¹

Allowances for Melbourne City Council

Allowances for Melbourne City Council are currently set in an Order made by the Governor in Council. These allowances are set by reference to the level of allowances set for Category 3 Councils. As at June 2021, for Melbourne City Council:

• the Lord Mayor’s annual allowance of $200,870 is double the maximum annual allowance of a Category 3 Mayor
• the Deputy Lord Mayor’s annual allowance of $100,434 is equal to the maximum annual allowance of a Category 3 Mayor
• a Councillor’s annual allowance of $47,165 is equal to one-and-a-half times the maximum annual allowance of a Category 3 Councillor.⁷²

Allowances for Greater Geelong City Council

Although Greater Geelong City Council is a Category 3 Council, allowances for the Mayor and Deputy Mayor are set in an Order made by the Governor in Council. As at June 2021, for Greater Geelong City Council:

• the Mayor’s annual allowance of $100,434 is equal to the maximum annual allowance of a Category 3 Mayor
• the Deputy Mayor’s annual allowance of $31,444 per annum is equal to the maximum annual allowance of a Category 3 Councillor.

Allowances for other Councillors in Greater Geelong City Council are set according to the same process which applies to other Category 3 Councils.

Trends in allowance values

From 2001 to 2007, there was no change to allowance limits and ranges. Allowance levels were increased by around 30 per cent following the 2008 Allowances Review. This change reflected increases applied to the remuneration of Victorian statutory and executive officers since 2000, and the finding of the 2008 Allowances Review that allowance levels presented a barrier to candidacy for women, young people and mid-career professionals.⁷³

Since 2008, Council member allowances have been adjusted annually in line with the ‘annual adjustment guideline rate’ set by the Premier for public sector executives and board members in Victoria.⁷⁴ For 2020-21, the annual adjustment rate was zero and no changes were made to allowances.

Figure 6 provides an example of how the maximum allowance payable to Councillors in a Category 1 Council has changed since 2001-02 and compares this to changes in the growth in the Melbourne Wage Price Index since that time.

Similar changes occurred to the maximum allowance payable to Councillors in categories 2 and 3 over the same period.

Superannuation arrangements

Superannuation arrangements for Council members are complex.

The Superannuation Guarantee (Administration) Act 1992 (Cth) (SG Act) provides that employers must contribute a minimum amount to a complying superannuation fund on behalf of each eligible employee. SG contributions are expressed as a percentage of ordinary time earnings and are set at 10 per cent for 2021-22.

The SG Act excludes Mayors and Councillors across Australia from the definition of ‘employee’. This means that Councils would not ordinarily be required to pay the SG contribution to Council members. Section 12(9A) of the SG Act states that:

a person who holds office as a member of a local government council is not an employee of the council.

However, the Australian Taxation Office does allow Council members to re-direct their allowances to superannuation on a pre-tax basis if they wish to do so.⁷⁵

In addition, each Council has the option to resolve to become an Eligible Local Governing Body (ELGB) under the Taxation Administration Act 1953 (Cth).⁷⁶ Where a Council has made such a resolution, Council members are considered to be employees for a variety of taxation purposes and for the purposes of the SG Act.⁷⁷

Since 2008, an amount equivalent to the SG contribution is paid to Council members in those Councils that have not resolved to become ELGBs. This followed a recommendation of the 2008 Allowances Review which noted that:

For those who forgo income and/or employment to participate in local government the loss of superannuation has been identified as a significant issue. This can become a barrier to participation for both existing and potential Councillors.⁷⁸

As a result of the factors above, the Tribunal understands that all Council members receive either an SG contribution or an amount equivalent to the SG contribution in addition to their allowance.

Remote Area Travel Allowance

A Remote Area Travel Allowance — paid as compensation for time spent on long‑distance travel — is available to eligible Council members.⁷⁹

To be eligible, a Council member must normally reside more than 50km by the shortest practicable road distance from the location specified for Council meetings, or for municipal or community functions which the Council member has been authorised by Council to attend.

The Remote Area Travel Allowance is equal to $40 per day for authorised events that are attended, subject to an annual cap of $5,000 per Council member.⁸⁰

Impact of allowance levels on Council member diversity

The Minister for Local Government’s letter to the Tribunal noted that:

The Tribunal may wish to consider the impact that allowances may have on representation in local leadership roles, especially in terms of the representation of women.

Past reviews have found that the value of the allowance payable to Council members can have a significant impact on an individual’s decision to stand for Council, with implications for diversity of representation. For example, the 2008 Allowances Review found allowance values presented a barrier to standing for election (and re-election) for certain groups. The 2008 Allowances Review reported that increasing the value of allowances would encourage women, young people and people from culturally - and linguistically diverse backgrounds, in particular, to nominate for election to Council.

Several Victorian Government initiatives aim to promote diversity in the local government sector.

Victorian Government initiatives to promote diversity in local government:

Gender equality initiatives

Setting a target of 50 per cent women Councillors and Mayors by 2025, as part of the Gender Equality Strategy.

• Forming a Gender Equality Advisory Committee to advise the Minister for Local Government and Minister for Women on how to deliver the 50 per cent target and improve gender equality across the sector, including through implementation of the Gender Equality Act 2020 (Vic).

Providing funding for the:

• ‘It’s Our Time’ campaign to promote and support women on councils
• Victorian Local Governance Association’s ‘Local Women Leading Change’ program
• Australian Local Government Women’s Association – Victoria to continue and expand its mentorship program, pairing 43 newly-elected female Councillors with experienced mentors from across the State.

Increased participation by Aboriginal communities

• Providing funding to encourage Aboriginal and Torres Strait Islander people to nominate as candidates in the 2020 local government elections.

^{Sources: Department of Premier and Cabinet, Safe and Strong, a Victorian Gender Equality Strategy, accessed 29 June 2021, https://www.vic.gov.au/our-gender-equality-strategy; LGV, ‘Gender Equality in Local Government’, accessed 29 June 2021, https://www.localgovernment.vic.gov.au/our-programs/gender-equity; Premier of Victoria, ‘Support for Next Generation of Women on Councils’, Premier of Victoria, media release, 11 March 2021.}

In the local government elections in Victoria in 2020:

• the proportion of female Council members increased to over 43 per cent, representing the highest proportion of female Council members in Victoria’s history, and in any Australian jurisdiction
• at least 28 openly LGBTIQ+ candidates were elected to 20 Councils, an increase from 11 elected at the 2016 local government elections.⁸¹

References

57. Victorian Councillor Allowances Review Panel, Review of the remuneration of mayors and councillors (State Government of Victoria: Melbourne, Victoria, June 2000).
58. Local Government (Councillor Remuneration Review) Panel, Local Government (Councillor Remuneration Review) Panel Report (State Government of Victoria: Melbourne, Victoria, January 2008).
59. VIRTIPS Act, s24(2)(a).
60. State Government of Victoria, Recognition and Support, the Victorian Government’s Policy Statement on Local Government Mayoral and Councillor Allowances and Resources (State Government of Victoria: Melbourne, Victoria, April 2008), 1.
61. LGI, Councillor expenses and allowances: equitable treatment and enhanced integrity (State Government of Victoria: Melbourne, Victoria, September 2020), 11. The other response options for this question were ‘It accounts for the opportunity cost of being a Councillor’, ‘I don’t have a strong view on the matter’ and ‘Other’.
62. State Government of Victoria, Recognition and Support, the Victorian Government’s Policy Statement on Local Government Mayoral and Councillor Allowances and Resources (State Government of Victoria: Melbourne, Victoria, April 2008), 15.
63. Victoria, Victorian Government Gazette, No. G 13, 29 March 2001, 556-558.
64. Victorian Councillor Allowances Review Panel, Review of the remuneration of mayors and councillors (State Government of Victoria: Melbourne, Victoria, June 2000), 21.
65. Victorian Councillor Allowances Review Panel, Review of the remuneration of mayors and councillors (State Government of Victoria: Melbourne, Victoria, June 2000), 22.
66. State Government of Victoria, Recognition and Support, the Victorian Government’s Policy Statement on Local Government Mayoral and Councillor Allowances and Resources (State Government of Victoria: Melbourne, Victoria, April 2008), 11.
67. LGV, ‘Guide to Councils – Councillor remuneration’, Know Your Council, accessed 2 March 2021, https://knowyourcouncil.vic.gov.au/guide-to-councils/how-councils-work/….
68. Local Government Act 1989 (Vic), s74(1).
69. LGI, Councillor expenses and allowances: equitable treatment and enhanced integrity (State Government of Victoria: Melbourne, Victoria, September 2020), 11.
70. LGI, Councillor expenses and allowances: equitable treatment and enhanced integrity (State Government of Victoria: Melbourne, Victoria, September 2020), 11.
71. LGI, Councillor expenses and allowances; equitable treatment and enhanced integrity (State Government of Victoria: Melbourne, Victoria, September 2020), 11. 179 Councillors and 38 Mayors responded to this question.
72. Local Government Electoral Review Panel, Local Government Electoral Review Stage 2 Report, (State Government of Victoria: Melbourne, Victoria, July 2014), 79
73. Local Government (Councillor Remuneration Review) Panel, Local Government (Councillor Remuneration Review) Panel Report (State Government of Victoria: Melbourne, Victoria, January 2008), 1.
74. Tribunal’s analysis of Ministerial notices published in the Government Gazette which specified the rate of adjustment.
75. Australian Taxation Office, ‘Interpretative Decision 2007/205 - Assessability of superannuation contributions made in favour of local government councillors’, 24 October 2007.
76. Taxation Administration Act 1953 (Cth), s446-5(1)(a) and Schedule 1, 12-45(1)(e).
77. Local Government (Councillor Remuneration Review) Panel, Local Government (Councillor Remuneration Review) Panel Report (State Government of Victoria: Melbourne, Victoria, January 2008), 20.
78. State Government of Victoria, Recognition and Support, the Victorian Government’s Policy Statement on Local Government Mayoral and Councillor Allowances and Resources (State Government of Victoria: Melbourne, Victoria, April 2008), 14.
79. Local Government (Councillor Remuneration Review) Panel, Local Government (Councillor Remuneration Review) Panel Report (State Government of Victoria: Melbourne, Victoria, January 2008), 14.
80. Victoria, Victorian Government Gazette, No. G 27, 5 July 2012, 1489-1492.
81. MAV, ‘News – Diversity on the up in Victorian councils’, Municipal Association of Victoria, accessed 21 April 2021, https://www.mav.asn.au/news/2020-news/diversity-on-the-up-in-victorian-….