Client Update: New Qld land valuation regime
3 September 2010
In brief: The much anticipated Land Valuation Bill 2010, which provides a new regime for the valuation of land for the purposes of calculating land tax, land rental (for state land) and the making and levying of local government rates, has been introduced into Parliament. If passed, it will mean a new direction for Queensland valuation law. Partner Bill McCredie (view CV) and Senior Associate Eve Lynch report on the significant changes the Bill proposes.
- How the new regime will affect you
- A fresh valuation approach
- Valuation methodology for non-rural land – site value
- Site improvement deductions
- Transitional offset arrangements
- Objections and appeals
- Going forward
How the new regime will affect you
If passed, the new regime provided for in the Land Valuation Bill 2010 (the Bill) will apply to the next round of valuations to be issued in March 2011. The new regime may trigger an uplift in the value of land heavily improved by 'site improvements', including, for example, land that has been extensively filled. Allowances and concessions will be relevant in some circumstances, and transitional offset arrangements will apply where there is an uplift in the value of non-rural land of greater than $1,000,000.
A fresh valuation approach
In the context of its controversial amendments to the Valuation of Land Act 1944 (Qld) (the VLA) earlier this year, the Queensland Government committed to the introduction of a new methodology for the valuation of land before the issue of valuations for the 2011-12 financial year. If the Bill is passed, annual valuations for all Queensland local government areas will be issued in March 2011, based on a 1 October 2010 valuation date, and be assessed according to the new methodology. Under the Bill, all land in Queensland will be valued annually unless 'unusual circumstances' apply.
In a move welcomed by industry, the Bill reintroduces to Queensland the independent role of the Valuer-General, who will be responsible for maintaining the valuation roll and overseeing valuations for all local governments in Queensland.
The Bill introduces a new methodology for valuing land, and distinguishes between 'non-rural' and 'rural' land for the purpose of statutory valuations. A summary of the new valuation approaches follows.
Valuation methodology for non-rural land – site value
For non-rural land, the traditional concept of 'unimproved value' under the VLA will be replaced by 'site value'.
'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. In a significant departure from the existing regime, the value of development approvals, leases and agreements for lease and infrastructure credits will not form part of the statutory value.
However, in contrast to the VLA regime, works undertaken to improve the land or to prepare it for development ('site improvements') will be included as part of the value. Improvements that will be captured in the statutory value include vegetation clearing, improvement of soil fertility or structure, remediation of contamination, excavation or filling (except excavation for footings or foundations or for an underground car park) and underground drainage works.
The value of site improvements will be the lesser of the:
- added value of the improvements given to the land on the date of valuation, regardless of their cost; or
- cost of effecting equivalent improvements on the land on the date of valuation.
The 'site value' of unimproved non-rural land will be the market value of the land.
Valuation methodology for rural land – unimproved value
Rural land will be valued according to its 'unimproved value'. The unimproved value of improved rural land is the market value of the land assuming that all improvements on the land had not been made.
The 'unimproved value' of unimproved rural land will be the market value of the land.
Site improvement deductions
Owners will have an opportunity to apply to the Valuer-General, at any time, for a 'site improvement deduction' for site improvements paid for by the owner and effected to the land in the 12 years prior to the relevant valuation.
The amount of the deduction will be the added value of the site improvements as at the date of valuation (provided the added value does not exceed the actual cost of effecting the improvements) and the deduction will apply for a period of 12 years from when the improvement costs were paid.
Importantly, deduction rights will be lost upon transfer of ownership in the land (excluding transmission by death). Further, where the transitional offset arrangements apply to the statutory valuation (discussed below), a deduction application can not be made for existing site improvements (that is, site works paid for before commencement of the new Act) unless the benefit of the offset is forfeited.
Transitional offset arrangements
Where the new regime triggers an uplift in value exceeding $1,000,000, an offset will automatically apply and the increase in value will be phased in incrementally over a 12-year period.
Again, the benefit of the transitional offset arrangements will be lost upon transfer of ownership in the land.
Objections and appeals
The rights of owners to object and appeal against statutory valuations were significantly eroded by the amendments effected to the VLA earlier this year. The objection and appeal rights provided for under the Bill restore balance in this regard.
In summary, a 'properly made' objection may be made in relation to a statutory valuation (including a decision by the Valuer-General on a deduction application) within 60 days after the date of issue. Objections must include the amount of valuation sought, details of any comparable sales and full details of the site improvements where a deduction is sought. Where the Valuer-General determines that an objection is not 'properly made', external review rights by application to the Queensland Civil and Administrative Tribunal may apply.
For valuations exceeding $5,000,000, the Valuer-General must offer an objection conference to the owner. Conferences will be facilitated by an independent chairperson appointed by the Valuer-General and mandatory disclosure obligations will apply.
An objector will continue to have a right of appeal to the Land Court against an unfavourable objection decision.
Going forward
The proposed new regime will have implications for all landowners in Queensland. Given the opportunity under the new regime to obtain deductions for site improvements, it is expected that the issue of valuations in March 2011 will prompt many landowners to consider the value of improvements to their land and the scope of applicable deductions.
For further information, please contact:
- Bill McCrediePartner,
Brisbane
Ph: +61 7 3334 3049
Bill.McCredie@aar.com.au - Paul LalichPartner,
Sydney
Ph: +61 2 9230 4026
Paul.Lalich@aar.com.au - Chris SchulzPartner,
Melbourne
Ph: +61 3 9613 8772
Chris.Schulz@aar.com.au - Jim ParkerPartner,
Sydney
Ph: +61 2 9230 4362
Jim.Parker@aar.com.au - Robyn GlindemannSpecial Counsel,
Perth
Ph: +61 8 9488 3712
Robyn.Glindemann@aar.com.au
