Tamworth Regional Council will consider applying for a special one-off rate variation to increase its rate peg to two per cent, equating to a $1.60 per week average increase for residents and $2.80 per week for businesses.

The move comes after pricing watchdog IPART set the council's rate peg - the maximum amount it can increase general income - at a record low of 0.7 per cent for the 2022/23 financial year.

For the first time, IPART based the decision on an individual council's level of population growth.

Tamworth mayor Russell Webb slammed the move, and said while nobody likes to see rates increase, he believes the one-off rate variation is necessary.

"I think it's something we have to do," he told the Leader.

Cr Webb said staff had based their forward financial plan on a two per cent rate cap, and 0.7 per cent cap meant $514,610 in additional income needed to be found.

"Council along with just about every other council in regional NSW do a lot of pre-planning and pre-budgeting, and we all work on that 2 per cent to 2.5 per cent increase in rates each year to cover our increase in operating costs," he said.

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"When the IPART model got invoked, it meant that most of the councils got somewhere between 0.7 to 0.8 per cent increase, which meant that most regional councils in NSW were going to have a major shortfall in rates income as opposed to what they had been planning for."

With councils across the state slamming the unexpected decision, the government cleared the way for a special one-off Additional Special Variation (ASV) for councils.

In a report to council, chief financial officer Rami Abu-Shaqra urged councillors to support the rate variation, as it already grapples with a 2022/23 budget shortfall of around $2 million.

"Council is in the opinion that the impact on the ratepayers from this ASV, if granted, will be reasonable," he said.

"This request for permanent special variation will not add any additional burden to the ratepayers that was not previously planned for and consulted with the community."

Cr Webb said the rate variation was "necessary" and he would support the motion.

"All it will do is take our rating base up to where we would normally have planned it to be, to cover increased costs to meet the needs of our operational plan," he said.

Council will vote on the recommendation at Tuesday night's ordinary meeting.

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