The NSW Government asked IPART to review the local government rating system in NSW. The purpose of the review was to develop recommendations to improve the equity and efficiency of the rating system, in order to enhance councils’ ability to implement sustainable fiscal policies over the long term. The review considered the valuation method used to calculate rates; rating categories; the way in which councils’ total income increases as population increases; the distribution of rates across different ratepayers, and the eligibility and design of exemptions and concessions. Our recommendations are not designed to increase the average rates paid by current ratepayers, but to allow councils to collect revenue more equitably and efficiently from ratepayers. In conducting this review, we have consulted stakeholders, analysed the current rating system and assessed its performance against the key taxation principles of efficiency, equity, simplicity, sustainability and competitive neutrality.