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Written by Peter Carter

March 3, 2010

The Queensland Premier today announced some relief to investors and commercial landlords from the worst aspects of changes to the basis upon which valuations for land tax assessments are conducted. The Valuation of Land and Other Legislation Amendment Bill 2010 which the government has scheduled to pass into law this month, changes the meaning of the term “unimproved value”.

The new law will mandate that assessments of the “unimproved” value of land take into account intangibles such as the potential profit that attaches to development approval, goodwill of the leasing operation, the value of paid infrastructure charges and the “benefit of a lease that enhances the value of the land”.

This practice was ruled unlawful by the Queensland Court of Appeal in December when it decided the valuation of Pacific Fair shopping centre on the Gold Coast owned by AMP. While the government says that the law is merely an adjustment intended to legitimise current land valuation practice, the changes have implications for property investors.

Given the proscription on how development approvals and infrastructure charges are to be treated, developers and landlords may receive higher land tax assessments at an earlier point in the development process. Although the requirement to include the value of goodwill is likely directed at the shopping centre and CBD property giants such as AMP itself, the law will have implications for suburban landlords and self-managed superannuation funds.

These landlords can equally be assessed upon the value of any goodwill component of their smaller buildings and centres. The Bill uses a circuitous method to achieve the intended outcome. This in itself is a recipe for uncertainty and likely further litigation.

Land tax increases and other changes began from July 2009.

Although retail tenants cannot be charged any portion of a landlord’s land tax, the prohibition does not apply to commercial and industrial tenants. Even for retail tenants, land tax increases will flow through in the form of increased rents.

The 2010 Bill also contains changes as to the way in which valuation objections are made and handled.

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