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On 11 February 2010, the Queensland State government introduced the Valuation of Land and Other Legislation Amendment Bill 2010 into parliament. This Bill comes after lengthy and ultimately unsuccessful litigation with several major shopping centre owners. |
The Property Council of Australia has raised three main concerns with the proposed Bill;
• The change in the definition of ‘unimproved value’, which is used to calculate land tax liabilities and council rates. The proposed unimproved value will now include, among other things, the development premium or profit and risk in the development process, any goodwill, the added value of leases and agreements for lease, and the value of any infrastructure charges that have been paid.
• The changes to the proposed objection and appeal process will make it more difficult to object to valuations. The amendments proposed place an enormous burden on owners, and are likely to be unworkable given that an owner only has 45 days to prepare and lodge any objection.
• The amendments proposed in the new Bill are to be retrospective, applying to all valuations in effect from 30 June 2002, including those for which objections have already been lodged or for which appeals have been instituted.
The Bill was scheduled to be debated in parliament on 23 February 2010 but due to ongoing and intensive lobbying efforts by the Property Council Premier Anna Bligh has deferred the debate to a later date. The Property Council stated that this was a responsible move which will allow Government time for detailed investigation and for robust engagement with relevant industry representatives.
Directors of Brisbane’s major valuation practices are united in their concerns at the inequities and uncertainty that the proposed legislative amendments will create. The retrospective proposal will mean that existing appeals yet to be decided will now be assessed inequitably in relation to those previously determined. They also state that the proposed legislation is unworkable and the likelihood of errors is well beyond that which is acceptable, ultimately resulting in uncertainty in future unimproved values.
The implications
• Effectively, the more an owner improves their property, the more they will be taxed.
• The Bill will increase the unimproved value of the land and, subsequently, the liability for rates and taxes. The Property Council of Australia and other industry groups have conservatively estimated land tax increases in many cases of 20-40% across the board, with more highly developed properties facing much more substantial increases as a result of these amendments.
• There will be a reduction in asset values as a consequence of the capitalization of net income reduced through the increase in land tax and rates.
• The Bill will increase the cost of doing business through increased property holding costs or increases in rent rates by landlords passing on the additional costs to their tenants.
Below is a scenario analysis of the impact of the Bill on an industrial property that was conducted by the Property Council of Australia.
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The background
The introduction of the Bill was intended by the State minister as a response to a recent Court of Appeal’s decision on 22 December 2009 in regards to the unimproved value for Pacific Fair Shopping Centre. In that decision, the Court of Appeal dismissed the States appeal to assess the unimproved value to include the added value of any leases, the goodwill associated with the business conducted on the land, and an amount for any development premium or profit and risk associated with its previous development. As a consequence of the decision the unimproved value of the shopping centre was assessed at $47.5 million, whereas the State had contended for a number of different values, the highest being $255 million.
In a statement made by the State Minister it was the State’s intention to “correct the Appeal Court’s interpretation of the law”. The Minister has said that application of the Court of Appeal’s decision would have resulted in a 20% reduction in valuations for industrial land, and a 35% reduction in valuations for commercial land. It appears that the State intends to rush the new Bill through Parliament, before the new unimproved valuations are due for release in late March 2010 (valuations as at 1 October 2009 and with effect from 30 June 2010). Therefore protecting their land tax income stream and denying owners their much anticipated reductions in land valuation.
| If you own property or are thinking of buying property in Queensland and would like to know more about this issue please one of our commercial property buyers agents on 1300 664 373. |
NB: Information in this article has been sourced from various sources including the Property Council of Australia and Hopgood Ganim lawyers.
