It is the costly downside to record prices being paid for farm land around the nation.

Municipal councils have already begun adjusting valuations to include the rural property bonanza in their rating strategies.

Prices for Australian farm land jumped an average 12.9 per cent in 2020, according to Rural Bank - rising for the seventh year in a row.

Regional housing prices have also experienced record levels of growth in the past year, according to the National Australia Bank in a report last week.

"The continued flow of new arrivals into regional areas has placed an unprecedented level of upward pressure on property values, with many locations now experiencing dwelling values at new record levels," NAB said.

But the rate rises are expected to hit farmers the hardest, the rate hit will be spread more evenly across the largest population categories like towns.

Record sale prices continued last year and again from the start of this year across most of the commodities, but especially in cattle and cropping.

Good seasons, great commodity prices and record low interest rates have combined into the perfect storm for farm property value .

Although the pleasant upside for farmers is in individual bank equity, they will again to fork out thousands of dollars for services many of them never receive.

Some state farm lobby groups have calculated expected rate rises will be above 10 per cent again this year, despite the protestations of the councils.

Victorian Farmers Federation president Emma Germano said many farmers were "nervous about the impact" of the record sales on their council rates.

States like New South Wales and Victoria have fixed rating caps so councils cannot impose rises of more than one or two per cent.

Most of the other states follow the same practice, although it's not law.

But the biggest number in the often confusing equation applied by councils remains the same - property values.

The council as a whole might have a cap on rates, or apply a "fairer" strategy like differential rating but the cost to individuals can vary widely, based on that property value.

The rate cap applies to the council's total rates revenue and not individual properties.

Most states - South Australia, Queensland, NSW and Victoria - revalue land each year so councils can figure out their rates formula.

For the others like Western Australia, Tasmania and the Northern Territory, revaluations occur each three years or even six years.

Differential rating applies different rates in the dollar for different land uses.

So the council's overall budget can only rise by a small amount, but how they tax each resident to fund the budget is up to them.

A record price of $11,000 an acre was paid for cropping land in western Victoria a few weeks ago and some at the auction were fearful of the impact of these incredible prices on their rates.

Kaniva is within the West Wimmera Shire which is one of the few not to yet adopt differential rating.

That most recent record price won't hit these year's rates because the annual revaluations are from January 1 each year.

"... therefore the influence of the most recent sales won't be reflected in the valuations database until the following year," a council spokeswoman said.

"Recent sales are not expected to impact on rates accounts due to rate capping. Individual rates bills may change by more (or less) than the capped rise amount," the spokeswoman said.

"This may happen because: the value of the property has increased or decreased more or less than the average valuation change relating to the entire council area."

The South Australian Local Government Association said most councils base their rating strategy on capital value - the value of land plus improvements.

Rising property valuations do not always mean higher rates, but will impact how rates are apportioned across each ratepayer, the association agrees.

LGA president Angela Evans, Mayor of an Adelaide suburban council the City of Charles Sturt, said rising property values won't always mean higher rates for individual property owners.

"Each rates notice is determined not just by the value of the property, but also by the mix of properties in the council area - including residential, commercial and primary production properties - and the relative change in value of all rateable properties."

Council must determine every year what the rate in the dollar needs to be in order to generate the required rate revenue, a spokeswoman for the association said.

"In simple terms, the amount of rates payable is determined by multiplying the property value by a rate in the dollar determined by the council e.g. if the property value is $200,000 and the rate in the dollar is 0.00254 the rates payable will be $508 (this will vary according to the rating method used)."

The Victorian Farmers Federation has long campaigned on the issue of council rates.

"Victoria should move to a local government funding model where the state sets a general rate for all property and redistribute funds collected from rates on the basis of equity and need," the VFF believes.

VFF president Emma Germano said: "The rate cap only limits the total revenue councils can collect from ratepayers. That still allows for variation in rate increases between different types of property.

"We are seeing across the state that farm rates are consistently rising above the capped value, but residential and commercial rates remain stable," she said.

"Councils need to use their differential rating powers in a way that offsets against the valuation increase for farms.

"The VFF is actively lobbying councils to ensure they maintain the rate burden across all sectors, and that the burden doesn't shift more onto agriculture."

In Queensland, council rates are based on valuations "in selected local government areas around the state".

"Local governments use statutory land valuations as a basis to calculate rates," a spokesman for the Local Government Association of Queensland said.

"However, valuations are just one of many factors taken into account when councils are framing their annual budgets and determining rates. It is not unusual for rates to change even though statutory land values have not changed."

Queensland farm lobby group AgForce last year told landholders they had to object to their new land valuations to head off big rate rises.

Some of the biggest rises for "primary production" last year were Diamantina 155pc, Bulloo 128pc, Quilpie 108pc, Central Highlands 100pc, Issac 97pc, Charters Towers 97pc, Balonne 89pc, Murweh 85pc and Barcoo 82pc.

The NSW Farmers Association said it had long campaigned on trying to have councils "even out" their rate rises across all groups and not just farmers.

A spokesman said farmers often feel they don't get the same services for their rate dollars as the "townies" do.

The Western Australian Local Government Association says councils apply a rate in the dollar which is multiplied by the valuation to obtain the rate amount for each property.

The state's Valuer General sets values used to calculate individual rates according to a Gross Rental Value which a property could raise if rented.

In many country areas, unimproved values are used according to land value.

Farm lobby groups have been calling for a more even distribution of the rates burden across city and country.

One senior councillor and former Mayor of the Victorian municipality of Golden Plains Shire, Owen Sharkey, has called on his council to explore possible opporunities to amalgamate with neighbouring councils to lessen the rates burden on his residents.

Golden Plains has just indicated it will raise farm rates from 2.5-5 per cent this year, again this formula depends on rising property values.

After the upset caused by wholesale council amalgamations in recent years across most states, it is not believed there is much appetite for more.