The council got a letter from the minister for local government, Shelley Hancock, advising that she did not have the legal power to approve a "glide path" to alleviate the financial impacts of rates increases.

She said the government understood the proposal to introduce the harmonised rates over three years to create a smoother transition for ratepayers, and also understood the impact Covid-19 had had on local communities and businesses.

However the Local Government Act did not provide her with the power to approve an arrangement that would extend rates harmonisation past 1 July 2021.

"To obtain such a power would require an Act of Parliament and there is no intention to introduce a Bill for that purpose."

Ms Hancock said she could approve putting off rates harmonisation for a year, but because of procedural requirements it would mean council would have to forego rates revenue for three months.

Deputy general manager Kay Whitehead confirmed there would be a significant risk of losing one quarter of rates revenue for the year, and finance manager Tim Snow told councillors this this loss would be approximately $1.8 milllion.

Cr Charlie Sheahan said Covid-19 had delayed any decision about de-amalgamation, which was to have been made by 30 June.

He said the burden fell unfairly on Cootamundra rural ratepayers, who would be required to pay an increased of $480,000 in 2020-21.

"The Minister has put us between a rock and a hard place - are we inadvertently closing the door on a possible demerger?"

The council decided it had no option but to go ahead with rates harmonisation.

The new rates are a base amount of $307.11, plus approximately 0.21 cents in the dollar for farmland based on land value in July 1 2019, 0.49 cents for residential, 1.2 cents for business, and .21 for mining.