There are two ways votes are counted: through the preferential system and proportional representation.
The preferential system applies where a single candidate is being elected to a ward.
Under the preferential system, all valid first preference votes are counted and sorted to determine the number of first preferences for each candidate.
Where one candidate has a majority – 50 per cent plus one – that candidate is declared elected.
If no candidate has an absolute majority, the candidate with the fewest votes is eliminated and his or her votes are allocated to his or her second preference. This process is repeated until one candidate obtains an absolute majority and is declared elected.
Proportional representation is used for counting election results for councils that aren't subdivided and where there is more than one councillor to be elected in a ward.
Candidates are elected in proportion to the number of votes they receive. This doesn't require a candidate to obtain an absolute majority of votes to be elected.
The returning officer will determine a quota.
The quota is obtained by dividing the total number of formal votes by one more than the number of candidates required to be elected, then increasing the result by one. For example, in an unsubdivided ward involving seven councillor positions and 60,000 formal votes, the quota would be [60,000 ÷ (7+1)] + 1 = 7501.
Any candidate who receives a number of first preference votes equal to, or greater than, the quota is elected. If no candidate receives a quota on first preference votes, the candidate with the lowest number of first preferences is excluded and his/her votes are distributed.
If no candidate has achieved a quota, this process is repeated until a candidate achieves the quota. Should a candidate gain an exact quota, he or she is declared elected and his or her ballot papers are set aside as finally dealt with as there are no surplus votes to distribute.
If the elected candidate receives more votes than the quota, that candidate's surplus votes are transferred to the remaining candidates according to the preferences on the ballot papers.
Because it is not possible to tell which votes elected the candidate and which are surplus, all the candidates votes are transferred but at a value less than one. The value of the transferred votes is calculated by dividing the surplus by the total number of ballot papers for the candidate.
Each ballot paper transferred to another candidate has this value. Any candidate who has gained the quota once the surplus votes have been transferred is elected.
If there are still vacancies to fill once the surplus votes have been distributed, the candidate with the lowest number of votes is excluded. The excluded candidate's ballot papers are then transferred to the remaining candidates (at the value they were received) according to the preferences on them.
This process of transferring surpluses from elected candidates and distributing preferences from excluded candidates continues until all vacancies have been filled.
The returning officer is permitted by the electoral regulations to use electronic voting equipment to assist in the counting of votes.
Election of City of Melbourne councillors uses a different form of the proportional representation method that is set out in the City of Melbourne Act 2001.