Victorian Council Rating Arrears in 2026: New Ministerial Guidelines for Hardship, Rates and Charges

Today The Age reported that Victorian councils are facing the sharpest rise in rates arrears in more than a decade. Even though this news is not what we wanted to see; a positive has emerged with Payble being cited as a leading solution to the problem.

As reported, new state guidelines were released mandating flexible payment plans and suspended interest for those on deferred payment plans. For a detailed breakdown, check out our Fact Sheet.

Payble’s latest arrears analysis referenced in The Age shows the crisis is accelerating faster than many expected. This page breaks down what’s driving the surge, why arrears have become so difficult to manage, and how leading councils are already bucking the trend through early engagement with ratepayers and bill smoothing.

Victorian Rates Arrears Are at a Record High

Payble’s 2024/25 statewide analysis shows:

• Average arrears rose from 10.3% in 2024 to 11.6% in 2025 
• Some growth corridors now have nearly 20% of households behind on rates
• Total overdue balances have increased 32% year-on-year
• Early 2025–26 data suggests arrears are accelerating further

These increases are occurring despite Victorian rates rising by only 4.2%, compared with the national average of 6.3%. Lower increases may have softened short‑term pressure on households, but they have not slowed arrears growth and may create upward pressure on future rate rises as councils attempt to close funding gaps.

Why Arrears Are Rising: Economic, Structural and COVID‑Era Factors Colliding

1. Cost‑of‑living and mortgage stress

Interest rate rises in 2026 are expected to push mortgage stress in Victoria to new highs. As households prioritise mortgages and essential utilities, council rates are often the first bill deferred as they are typically due later.

2. COVID‑era enforcement pauses

The roots of this arrears challenge go back to the COVID period. Enforcement pauses were necessary at the time, but many ratepayers misunderstood them as rate relief rather than deferral. Combined with expanded hardship protections introduced in 2022, this changed the way and the timing of engagement between councils and communities. The result is that arrears have been building quietly in the background, only becoming visible once economic pressures intensified and household budgets tightened.

3. Hardship protections introduced in 2022

The Local Government Amendment Act expanded hardship protections, but also created uncertainty around when councils could intervene. Many councils paused engagement for long periods, allowing arrears to grow unchecked.‍

4. Victoria’s unique billing structure

Most Victorian councils issue rates in July, but set due dates toward late February.
This long gap means:

• arrears are often not reviewed until late in the financial year
• balances are larger and harder to address
• repayment plans become less effective

5. Cost shifting and additional state fees

Some councils must collect state‑mandated fees on rates notices, increasing the total bill and exacerbating payment stress.

New Victorian Rules: Flexible Payments Are Now Mandatory

In December 2025, the Victorian Government issued Ministerial Guidelines Relating to Payment of Rates and Charges under section 181AA of the Local Government Act. These new rules require councils to:

• Offer modern, flexible payment plans (monthly, fortnightly, weekly)
• Lower the threshold for hardship support
• Stop charging interest during approved deferral periods
• Avoid penalty interest in hardship cases
• Provide clearer, more consistent hardship policies across the state

These changes aim to eliminate the “postcode lottery” of inconsistent arrears practices, but they also increase the urgency for councils to modernise their payment systems. Learn more by downloading our Fact Sheet.

Will This Solve the Arrears Issue for Council?

A common pitfall of ministerial guidelines is that they can often create paralysis and action; despite being well intentioned. A particular section of the release which may prove to be difficult for council leadership is in Section 7.1 which states that hardship assessment requires ascertaining that “paying rates and charges means…they would be unable to afford necessities of life for themselves and/or dependants”

This places a rather large burden of proof on councils to assess hardship more broadly than under previous legislation; possibly leading to more individuals who qualify for hardship and thus a larger proportion of the population who may be considered “in arrears”

Why Flexible Payments Work to Fight Arrears

Payble’s data shows that when ratepayers are given a choice between:

• paying in full
• scheduling a future payment
• or paying smaller weekly/fortnightly/monthly amounts

More than half choose flexible payments

At Yarra Ranges Council, 53.7% of 19,542 ratepayers opted for flexible payments when offered the choice.

Large arrears balances feel overwhelming. Smaller, predictable contributions feel achievable. This shift in psychology is why bill smoothing is so effective.

Breaking a large balance into smaller, regular payments turns a snowballing debt into something predictable and achievable.

Councils Bucking the Trend: What Success Looks Like

Despite statewide pressures, several councils are improving their arrears position.

Greater Dandenong:

• Improved from 38th to 30th in the state 
• Significant given the area’s socio‑economic diversity and high mortgage stress
• Success driven by early engagement and flexible instalment

Whitehorse City Council

• Improved seven places (33rd → 26th)
• First in Victoria to introduce automated pre‑approvals for hardship plans via Payble
• Faster access to support = earlier intervention = lower arrears

These councils demonstrate that arrears growth is not inevitable but requires proactive, modern approaches.

What This Means for Councils Right Now

The combination of rising arrears, new state rules, increasing mortgage stress and structural billing challenges means councils need to modernise their payment and engagement approach, fast.

The councils already doing this are seeing measurable improvements. Those that delay risk deeper arrears, higher workloads, and greater financial pressure.

Explore the Deeper Analysis

Click here to download the Fact Sheet examining the new legislation & check back in on Feb 28th for Payble’s 2025/26 Victorian statewide arrears report, including:

• council‑by‑council rankings
• regional trends
• arrears growth patterns
• case studies
• recommended interventions