Interest on overdue Newcastle rates will rise to 9 per cent in line with the maximum amount set by the NSW Minister for Local Government.
The increase from 6 per cent will kick in on July 1 after being endorsed by Newcastle councillors on June 27.
This comes after Port Stephens, Maitland, Lake Macquarie and Cessnock councils also supported the same increase.
The change was recommended for approval by Newcastle council staff "in order to maintain a sufficient deterrent to the late payment of rates and charges".
The maximum rate is set by the NSW Local Government Minister, and is based on the Reserve Bank cash rate plus 6 per cent, rounded to the nearest 0.5 per cent. The 2023-24 maximum was based on the December 2022 cash rate of 3.1 per cent.
Liberal councillor Jenny Barrie moved an amendment to keep the rate at 6 per cent.
"We've already got troubled ratepayers who have fallen behind," she said. "They shouldn't be in further economic distress due to the current inflation, increasing home loan rates."
The council's CEO Jeremy Bath said the overdue fee was suspended or waived for "any ratepayer who reaches out to us and identifies that they are experiencing financial hardship".
"We don't require the provision of bank statements," he said. "We accept people at their word."
Mr Bath said these people were also offered a hardship program offering free financial counselling and vouchers to welfare agencies.
He said the overdue fee was set at a higher rate than fixed-term bank deposits to deter people from missing payments.
The two other Liberal councillors and Independent John Church supported the amendment, but Labor and Greens councillor John Mackenzie voted it down. The original motion was ultimately adopted.
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