A new report commissioned by Local Government NSW (LGNSW) has revealed that councils across New South Wales are now shouldering an annual cost shifting burden of $1.5 billion—an increase of $140 million since the 2021/22 financial year.
Prepared by independent consultants Morrison Low, Cost Shifting 2025: How State Costs Eat Council Rates outlines how State and Federal governments are increasingly transferring responsibilities to councils without providing adequate funding. Over the past decade, the cumulative cost of this shift has reached $11.3 billion.
LGNSW President Mayor Cr Phyllis Miller OAM said the situation was becoming unsustainable.
“Councils are at breaking point. The combination of relentless cost shifting, rate capping and inadequate State and Federal funding is eroding the sector’s financial sustainability,” Cr Miller said.
According to the report, councils are being left to cover significant shortfalls in services they did not create, including:
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The collection of the NSW Government’s Waste Levy, considered a “hidden” tax within waste management fees
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A mandated 11.7 per cent contribution to the NSW Government’s Emergency Services Levy
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Development assessment and regulatory responsibilities, where fees set by the State fall short of actual costs
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Library funding, which has dropped from a 50 per cent State commitment to just 6 per cent of total costs for many councils
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Forced rate exemptions for some profit-driven, State-owned corporations and other organisations from paying rates, even though they use and benefit from local government services and infrastructure.
“This means, on average, nearly $500 per ratepayer in NSW is being diverted from essential local priorities like roads, libraries, sporting facilities and community programs,” Cr Miller said.
Multiple inquiries over the past 18 months, including a November 2024 NSW Parliamentary inquiry, have echoed concerns about the financial pressures councils face. That inquiry recommended the NSW Government identify opportunities to reduce cost shifting to local government.
Cr Miller called for immediate action and genuine reform from the State Government, including proper funding and regulatory changes.
“As always, LGNSW stands ready to work with the State Government to finally put an end to cost shifting and ensure councils have the resources they need to serve their communities appropriately,” she said.
