The new Land Valuation Act (LVA) 2010 is a momentous departure from the previous system. The 66 year old
dogma of unimproved land value is now replaced by site value as a basis of calculating Council General Rates
and State land Tax for “non-rural” lands in Queensland.
Background
Since 1944 unimproved land value has been used as the basis for calculating Council General Rates and Sate
Land Tax charges.
In early 2010, significant changes to existing legislation were made by the State responding to the Queensland
Court of Appeal decision that the valuation methodology used by the Queensland Government was wrong (see
our news alert April 2010). In brief, those changes included in the added value of 1) approvals 2) ‘intangible
improvements’ 3) entrepreneurial profit 4) infrastructure credits. Objection and Appeal rights were also
significantly reduced.
Following an unprecedented industry wide backlash the State Government agreed to review the whole
valuation system. In most other States (NSW, Vic, SA, WA) the unimproved valuation method has been largely
replaced with the concept of site over recent years, value albeit with slight definitional differences.
In most instances, site value requires assuming that the land is ready to construct buildings or other
improvements.
Site Value (a reverse definition)
“Site value is its expected realisation under a bona fide sale assuming all non-site improvements for the land
had not been made”. Non-site improvements means work done, or material used, on the land other than a site
improvement. Site improvements generally includes clearing, earthworks, filling, drainage’ reclamation,
retaining walls, etc.
Site value is similar to the market value of the land in its current state. It includes the value of any site
improvements made to the land including filling, clearing, levelling and drainage works.
“Non-Rural” = Urban Lands
The Act only applies to “non-rural” land meaning all land that is not designated “rural” under an IPA planning
scheme (or similar). Essentially it covers all lands used for urban proposes, including rural residential land use.
‘Site value’ of improved land is the market value of the land on a bona fide sale, disregarding the value of
buildings and other structures on it.
Valuer General role reinstated
After many years of being the only State without a Valuer-General, the position is again established as
responsible for the administration of the valuations and handling objections. It is a critical role independent of
the Government of the day.
Transitional ‘Offset Allowance’ if over $1.0m increase
If the new methodology causes an increase in value exceeding $1M, an offset will automatically apply and the
increase in value will be phased in incrementally over a 12-year period. An allowance however will not be made
for site works if the current owner of the land was not the owner when the site improvements were made. The
allowance cannot exceed the cost of improvements. The full site valuation will be implemented in the 13th
year, or on the sale, or part sale, of the property within the 12-year period which will trigger the loss of any such
concession.
This will add another “tick box” for those undertaking sale or purchase due diligence estimating subsequent
cash flow consequences . There is a provision stating the Valuer General may give notice to the have such offset
recorded on Title. Why it was not drafted as a compulsory provision is open to conjecture.
What is also not clear at this point is how this provision will be applied where market movement results in say a
$1.0m decrease in raw land value but the transition to ‘site’ value has caused a $1.5m increase. The net change
is only $0.5m. It would seem that the proper application of this provision will rely heavily on the Departments
disclosure of such circumstances.
Transitional ‘Deduction for Site Improvements’ within last 12 years
If the above “Offset Allowance” has not been applied, an owner can make application for deduction of site
improvements made by them in the past 12 years. This allowance will be retained for up to 12 years after the
site improvements were made.
An application for a deduction for site improvement can be made as part of the normal objection process,
provided the landowner can demonstrate that the site improvements were carried out by at their expense in
the previous 12 years.
An application can also be made for a deduction for site improvements that a landowner carries out and pays
for, in the future.
The amount of the deduction will be the lesser of:
(1) the added value of the site improvements on the date of valuation
(2) the costs incurred in undertaking the improvements as at the date of valuation.
The site improvement deduction does not include interest, professional costs, or costs related to obtaining a
development approval or other approval for the works.
Objections and Appeals
There are no significant improvements to, or simplification of the objection process consequently most of the
onerous provisions implemented by the infamous 2010 amendments remain. It is still complex and places a
significant burden on landowners. There have however been some changes that generally favour the land
owner including:
– The periods within which to lodge an Objection or Appeal have been both extended to 60 days from issue of
relevant Notices.
– There is a new requirement that the Department must offer an Objection conference if the site value is greater
than $5M.
– The grounds of Appeal are no longer restricted to those grounds of Objections included in the initial notice of
Objection.
– There are new external review rights to the Queensland Civil and Administrative Tribunal (QCAT) where the
Valuer-General determines that an objection is not ‘properly made’.
Impact
Annual valuations for all Queensland local government areas are scheduled for release in March 2011, based on
a 1 October 2010 valuation date, using the new methodology. They will be used from 01 July 2011 to calculate
rates and land tax.
The properties that are likely to most affected are those large commercial and industrial properties that have a
substantial site works. Purchasers of such property should consider the likely increase in statutory taxes that
may be triggered by such an acquisition.
DISCLAIMER : THIS PUBLICATION IS INTENDED ONLY TO PROVIDE A SUMMARY OF THE SUBJECT MATTER COVERED. IT DOES NOT
PURPORT TO BE COMPREHENSIVE OR TO RENDER PROFESSIONAL ADVICE AND NEITHER PURPORTS NOR IS INTENDED, TO BE ADVICE ON
ANY PARTICULAR MATTER. NO READER SHOULD ACT ON THE BASIS OF ANY MATTER CONTAINED IN THIS PUBLICATION WITHOUT FIRST
OBTAINING SPECIFIC PROFESSIONAL ADVICE. THIS ARTICLE IS COPYRIGHT. FOR PERMISSION TO REPRODUCE THIS ARTICLE PLEASE
CONTACT MAL MISSINGHAM PH: (07) 3888 3999