How Are Council Rates and Water Adjusted at Settlement in NSW?
Why your settlement figure isn’t just the price less the deposit, and how the rates, water and strata levies get split fairly between buyer and seller.
How are council rates and water adjusted at settlement in NSW?
They’re split by the day. Under the standard NSW contract the seller pays the outgoings up to and including the settlement date and the buyer pays from the day after. If the seller has already paid ahead, the buyer reimburses them at settlement. If something is unpaid, the seller’s share comes off what the buyer pays. Your conveyancer calculates all of it and it shows up as a line on your settlement statement.
At a glance
- Who pays for what? The seller up to and including settlement day, the buyer from the next day.
- What gets adjusted? Council rates, water and sewer service charges, water usage, strata levies, and land tax only if the contract says so.
- How is water usage worked out? Usually from a special meter reading, or estimated from the daily average on the last bill.
- Do I pay the council directly? No. The adjustment is settled between buyer and seller at settlement. The buyer then pays future bills.
- Why is my figure different to the price? The adjustments, plus the deposit already paid, are why the balance at settlement isn’t a round number.
What an adjustment actually is
Council rates and water charges are billed for a period, usually a quarter or a year. A sale almost never settles on the exact day one period ends. So one side has paid for days the other side will own the property, and the contract evens that out.
The standard NSW Contract for Sale deals with this in its adjustments clause. Outgoings are apportioned between the parties on a daily basis, with the seller liable up to and including the adjustment date, which is normally the settlement date, and the buyer liable after it.
In plain English
It works like splitting a bill with a housemate who moves out halfway through the quarter. Whoever paid the bill gets paid back for the days they didn’t live there. No one pays the council twice, and no one gets a free month.
Council rates
In NSW, council rates are levied for the financial year and most owners pay them in quarterly instalments. The conveyancer orders a rates certificate from council before settlement. It shows the annual rates, what has been paid, and anything owing.
If the seller has paid the current instalment in full, the buyer reimburses them for the days after settlement. If the seller is behind, the arrears are paid out of the seller’s money at settlement so the buyer never inherits the debt.
| Item | Amount |
|---|---|
| Annual council rates | $2,400 |
| Rates per day | $6.58 |
| Seller has paid the quarter to | 31 December |
| Settlement date | 15 November |
| Days the buyer owns in that quarter | 46 |
| Buyer reimburses the seller | $302.47 |
Figures are illustrative. Your conveyancer uses the exact amounts on the rates certificate.
Water: service charges and usage
Water is two adjustments, not one. Across Newcastle and Lake Macquarie your water authority is Hunter Water, which bills quarterly.
- Service charges for water and sewer are fixed amounts billed for the period. They’re split by the day, exactly like council rates.
- Usage is billed in arrears, after the meter is read. At settlement the water used since the last reading hasn’t been billed yet, so it has to be worked out.
There are two ways to handle usage. The conveyancer can order a special meter reading close to settlement, which gives a real figure. Or usage is estimated from the daily average on the most recent bill and the seller pays that estimate for the days since the last reading. Either way, the buyer receives the next bill and the seller has already contributed their share.
“The adjustments are why your settlement figure is never a round number.”
Strata levies
Buying a unit or townhouse adds strata levies to the list. Levies for the administrative fund and the capital works fund are adjusted the same way as rates. Special levies are different: who pays depends on when the levy was raised and what the contract says, so it’s one of the first things we check on the strata report and the Section 184 certificate.
Land tax
Land tax doesn’t apply to your principal place of residence, so most home sales don’t involve it. On an investment property it can. The front page of the NSW contract says whether land tax is adjustable. If it says no, there’s no land tax adjustment at all. If it says yes, it’s apportioned between the parties, and any land tax the seller owes has to be cleared at settlement.
What people think
“I’ll just pay the council for the rest of the year once I move in.”
“The seller’s unpaid rates are their problem, not mine.”
What actually happens
Unpaid rates are a charge on the land, so they follow the property to the new owner. That’s exactly why the conveyancer orders certificates and makes sure arrears are paid out of the seller’s proceeds at settlement. Once settlement is done, you’re responsible for everything from that day on.
What to actually do
Sellers: keep paying until settlement
Pay instalments as they fall due. Anything you’ve paid past settlement comes back to you in the adjustments.
Check your settlement statement
About a week before settlement you’ll get a statement showing each adjustment. If a figure looks wrong, raise it then, not on the day.
Buyers: expect the next bills in your name
After settlement, notice of the sale goes to council and the water authority. The next bills come to you, and you pay them in full because the seller’s share has already been settled.
Don’t cancel payments early
Sellers sometimes stop a direct debit as soon as they exchange. Leave it running until settlement, then cancel it.
We calculate every adjustment for you and show you the figures before settlement day.
The short version
Council rates, water and strata levies are split by the day at settlement. The seller pays up to and including settlement day, the buyer pays after. Prepaid amounts are reimbursed, unpaid amounts come out of the seller’s side, and water usage is read or estimated. Land tax is only adjusted if the contract says so. Your conveyancer works it all out and it appears on your settlement statement.
Settlement coming up?
Talk to Justin, Julie, Amanda or Nicole. We’ll work out every adjustment and tell you exactly what’s due on the day.
