Council
2 September, 2025
Councils count the cost
Somerset Council has warned that growing costs and accounting pressures around asset depreciation are threatening the long-term financial sustainability of local government, with Moreton Bay Council also naming it as one of the largest costs in its annual budget.
This comes as the State Government formed a Depreciation Taskforce to support local councils to better tackle the growing depreciation challenges to ultimately provide cost of living relief to ratepayers. It followed the revelation Sunshine Coast Regional Council was forced to declare a $30 million hole in its 2025/26 budget due to an apparent miscalculation in its depreciation method. In Moreton Bay Council’s most recent 25/26 budget, depreciation was estimated to be a $165 million expense.
Somerset Mayor, Jason Wendt, said his council was acutely concerned about the issue given the level of ageing assets and rapidly rising construction costs. The council manages more than $500 million in infrastructure assets including roads, bridges, stormwater systems and parks. Roads make up nearly 80 per cent of the council’s asset base.
“Managing these long-life assets presents unique financial challenges, especially around depreciation,” he said. “Depreciation is intended to reflect the consumption of an asset’s service potential over time, yet it is often misunderstood as an immediate funding requirement. When depreciation estimates are inaccurate or poorly applied, they can distort financial statements, misdirect council attention, and ultimately weaken long-term asset planning and community trust in Council services.”
Cr Wendt said depreciation is more than an accounting entry, with real implications for council budgets and the community. Somerset’s 2025–26 Budget was designed to balance the demand for new facilities with the pressing need to maintain existing ones.
Cr Wendt said funding programs often incentivise new builds rather than maintaining or replacing ageing infrastructure. “All councils have aging asset bases and limited funds, with rates as the major source of revenue,” he said. “The problem boils down to the fact costs to renew assets are growing at a pace greater than the growth in rates.”
Construction cost increases underline the challenge, as in the past five years, non-residential construction prices have increased 37.6 per cent, heavy and civil engineering 26.9 per cent, and road and bridge construction prices in Brisbane 28.9 per cent. Federal financial assistance grants, meanwhile, remain static, with councils in 2025–26 set to receive the equivalent of just 0.51 per cent of Commonwealth taxation revenue.
“These grants need to keep pace with the rise in costs to alleviate the burden on rates revenue, which is why our Council partnered with the Local Government Association of Queensland’s (LGAQ) campaign calling on 2025 Federal Election candidates to commit to a fairer funding model for council,” Cr Wendt said. “Grant programs also need to consider supporting replacement or maintenance of ageing assets.”
A spokesperson for Moreton Bay Council said councils are encouraged to use around 60 per cent of annual depreciation as a benchmark for asset renewal spending, but added depreciation doesn’t directly determine maintenance or upgrade budgets. “Each year we review the useful life and depreciation rates of assets to make sure they reflect how they are being used by the community,” they said.
While Moreton Council confirmed depreciation costs haven’t directly impacted rates, its cost “is considered in the total revenue need to be raised by Council”. “We welcome the opportunity to be part of the Taskforce to share experiences and find practical ways to help councils manage the costs of looking after community assets.” Like Somerset, Moreton pointed to grant funding gaps as a major challenge.
The LGAQ welcomed the State Government’s recent announcement of a taskforce to examine depreciation rules. LGAQ CEO, Alison Smith, said councils are struggling to maintain liveability standards as costs surge. “Queensland councils are fighting a daily battle to provide the liveability communities rightly deserve in the face of significant cost increases,” she said. “Councils also need the Federal Government to step up with its promised fair funding because without it, the liveability of all Queensland communities is under severe threat.”
Federal Treasurer Jim Chalmers has tasked the Australian Accounting Standards Board with reviewing depreciation requirements.
