Knox and Yarra Ranges council ratepayers are set to get some cash back on their rates due to an administration error.

Victorian councils are required to limit the annual average rate increase to no more than the rate cap, that is set by the State Government.

However, a small error in annual rates calculation has been spotted by both councils, which means the average rate increase was higher than the annual cap.

Councillor Jake Keogh said the result meant that the increase for the year was 2.31 per cent, rather than 2.25.

He said the total amount raised by this extra 0.06 per cent was $57,407, an average of 86 cents per rateable property.

Ratepayers will now be credited based on the capital improved value of their property.

Every home owner will receive a letter inside the next month, advising them of the error.