Victorian councils will no longer be allowed to use debt collectors or pursue legal action against property owners struggling to pay their rates under proposed legislation.
The bill will require fairer financial hardship policies and more support by councils to reduce the risk of further debt and ensure people are not driven out of their homes.
The laws, to be introduced in parliament on Wednesday, would allow Local Government Minister Shaun Leane to set a maximum amount of interest on unpaid rates and charges.
It follows a report by the Local Government Rating System Review and the Ombudsman found Victorians struggling to pay their rates were often met with debt collectors, high penalty interest rates and costly litigation.
"We know that many Victorians are doing it tough and that's why we are working to reform the rating system," Mr Leane said.
"Good hardship relief schemes strike a balance where the rate burden is shared while ensuring people in hardship are not driven further into debt or out of their homes."