Queensland Consolidated Regulations

LOCAL GOVERNMENT REGULATION 2012 - SCHEDULE 4

SCHEDULE 4 – Pricing provisions

1 Definition for sch 4

In this schedule—

"relevant activity" , of a local government, means—

(a) a significant business activity of the local government to which full cost pricing applies; or

(b) a business activity of the local government to which the code of competitive conduct applies.

2 Required revenue for deciding charges

In deciding charges to persons for goods or services provided in conducting a relevant activity, a local government must ensure the projected total revenue from conducting the activity is enough to cover the projected total costs of conducting the activity for—

(a) if the relevant activity is an activity to which the code of competitive conduct applies—a period of more than 1 year but not more than 5 years; or

(b) otherwise—each financial year in which the activity is conducted.

3 Different charges for commercial reasons

(1) A charge may be decided for providing particular goods or services in conducting a relevant activity that is, for commercial reasons, an appropriate charge for the goods or services provided.

(2) For subsection (1) , a charge is, for commercial reasons, an appropriate charge if it could reasonably be charged if the goods or services were provided by an entity conducting the relevant activity with the primary object of making a profit from conducting the activity.

4 Total costs of conducting relevant activity

(1) For this schedule, the total costs of conducting a relevant activity include each of the following—

(a) the operational costs incurred in conducting the activity;

(b) administrative and overhead costs;

(c) the cost of resources used in conducting the activity;

(d) depreciation;

(e) equivalents for Commonwealth or State taxes a local government is not liable to pay because it is a local government;

(f) equivalents for the cost of funds advantage a local government obtains over commercial interest rates because of State guarantees on borrowings;

(g) return on capital.

(2) The total costs must be adjusted for other advantages and disadvantages of a local government conducting the relevant activity that are not eliminated.

(3) Subsection (2) does not apply for a relevant activity to which commercialisation applies.

5 Allocation of administrative and overhead costs

For section 4 (1) (b) , a local government must make a reasonable allocation of its administrative and overhead costs to each relevant activity, having regard to all of a local government’s relevant activities.

6 Cost of resources used in conducting activity

(1) For section 4 (1) (c) , if resources are provided by or to a local government for conducting an activity, the cost of resources used in conducting the activity may be taken to be—

(a) if the resources have an identifiable cost—the cost of the resources; or

(b) if paragraph (a) does not apply and the resources are readily available on the open market—the price at which the resources can be obtained on the market.

(2) If subsection (1) (b) applies, the local government must ensure the terms on which the cost is based are similar to the terms on which they are made available in conducting the relevant activity.

7 Depreciation

(1) For section 4 (1) (d) , depreciation of an asset used in conducting a relevant activity must be based on the depreciable amount for the asset allocated over its useful life.

(2) However, a local government may decide to base the depreciation on an amount decided by the local government to be appropriate in the circumstances.

8 Equivalent amounts for taxes local government is not liable to pay

(1) This section applies for section 4 (1) (e) for working out the equivalent amount for a Commonwealth or State tax a local government is not liable to pay because it is a local government.

(2) The equivalent amount must be worked out—

(a) for a tax to which a tax equivalents manual applies—by applying the general principles provided for in the manual; or

(b) if paragraph (a) does not apply—by estimating the amount a private sector business conducting the relevant activity would calculate to be its liability to the tax.

(3) Subsection (2) (a) does not, of itself, require the local government to comply with a process or other requirement under the tax equivalents manual.

(4) However, the local government must keep, for 7 years from the day the equivalent amount is worked out, details of the calculations made in working out the equivalent amount.

(5) This section does not apply for a relevant activity to which commercialisation applies.

9 Guarantees by State

(1) This section applies for section 4 (1) (f) in relation to a relevant activity that is a business activity to which the code of competitive conduct applies.

(2) If the State guarantees repayment of a debt of a local government attributed to the relevant activity, the local government must, in conducting the activity, take account of amounts equivalent to the cost of funds advantage the local government obtains over commercial interest rates because of the guarantee.

10 Return on capital

(1) This section applies for section 4 (1) (g) .

(2) The amount for the return on the capital used by a local government in conducting a relevant activity must be decided using the rate at which, in the local government’s opinion, a comparable private sector business conducting the activity would be able to obtain the capital in the market.

(3) In deciding the rate under subsection (2) , the local government must have regard to the split the local government considers appropriate, for the type of business activity, between equity and loan capital and the return appropriate to each.

(4) However, the amount for the return on the capital used in conducting a business activity for the first year in which the business activity is a relevant activity may be the amount the local government decides.

(5) In this section—

"capital used in conducting a business activity" means the total value, decided using an accepted accountancy method, of the assets used for the business activity less the liabilities attributable to the activity.