What's a block of land worth? It depends who you listen to

March 5, 2010 - 3:35PM

Property industry warns new state legislation on unimproved land would push up taxes by as much as 40 per cent across Queensland.

It's Groundhog Day in Queensland's Land Court.

The owner of a major shopping centre - in this case the Gold Coast's Pacific Fair - has accused the Queensland Government of over-valuing the land on which it operates.

The government has insisted its valuation is justified.

The court has ruled the government has falsely inflated the unimproved value of the land by more than $200 million dollars in order to charge the centre owner exorbitant land taxes.

This legislative arm wrestle between the courts and the State Government has happened before, in the past decade, over Chermside Shopping Centre.

What's more, it's likely to be played out in at least another 300 cases awaiting hearing in the Land Court, unless a government bid to adjust the meaning of "unimproved land value" is successful in State Parliament.

What is unimproved land value?

Put simply, unimproved land value is the dollar figure a block of land is deemed worth without any buildings or structures on it.


But the State Government believes the unimproved value of a block of land should be increased if the site is home to a lucrative business, rental accommodation or new development. It argues the courts - as with the Pacific Fair Shopping Centre case - are giving the big end of town a multi-million dollar tax break and creating black holes in state and council budgets.

It plans to change the rules - and dodge the Land Court - by way of the Valuation of Land and Other Legislation Amendment Bill, tabled in State Parliament last month.

Mum and dad 'at risk'

If it passes, the property industry warns land taxes will be pushed up by as much as 40 per cent across Queensland, and it won't be just big business that feels the pinch.

The hike will be a blow to the hip-pockets of "mum and dad" residential investors and their tenants, small business owners and suburban home owners alike, because the proposed legislation is not limited to commercial property, independent land valuers say.

"The whole legislation is designed to extract money from the major shopping centres, but [the government] hasn't limited it to that. It filters down to home owners," says Allen Crawford, executive director of Brisbane valuer Chesterton.

He says profits made on new developments and renovated properties will be automatically added to the unimproved land value, meaning neighbours living on almost identical blocks could be charged vastly different amounts in council rates.

"The developer might have land with the unimproved value of $400,000, while his next-door neighbour has land with the unimproved value of $300,000, ironically based on the $300,000 the developer paid for his land.

"The council rates for the developed property will therefore be one third higher than the neighbour's."

However Natural Resources Minister Stephen Robertson has said his battle is strictly with shopping centre behemoths.

"While I understand that the commercial property owners would prefer lower valuations because it means lowers council rates and land tax, our duty is to protect the interests of the community as a whole to ensure consistency," Mr Robertson said in a statement.

"If we don't correct the Appeal Court's interpretation of the law, then we would be accepting commercial property valuations on a fundamentally different basis to other property valuations, which recognise how land is actually used in the real world."

The Minister was not available for comment on the issue this week.

However experienced Brisbane property valuer Rodney Brett says suburban home owners are not immune to the impending legislation.

"The residential home owner is not excluded under the proposed amendments. No one is excluded," Mr Brett says.

"Where there is an increase in the taxable value [of land]...council rates will follow that increase."

Yet Ben Crossan of CSA Valuers says small business owners could bear the brunt of the proposed legislation.

He says small business owners, leasing retail or office space, will be slugged with higher rent bills if the legislation is unchallenged.

"Commercial or industrial [property owners] can pass on land tax to their tenants, who will have little choice to pass on their increased overheads to consumers."

This could mean shoppers pay more for their lunchtime snack at their local fish and chip shop, he says.

Renters will also feel the squeeze if landlords push up weekly rent costs to cover higher land taxes.

Property analyst Michael Matusik claims this will in turn drive investors interstate and soften the Brisbane property market.

"Land tax chewed up 12 per cent of my income from my investment properties and if the state implements this new land tax I will not reinvest in this state again," Mr Matusik says.

Mr Brett brands land tax under the proposed legislation "enterprise tax".

"The fundamental change now, is one whereby, the taxable value will include any additional value brought to the property by virtue of developing. It's no longer unimproved value," Mr Brett says.

Mr Crawford has accused Mr Robertson of falsely implying the Court of Appeal has incorrectly interpreted the meaning of unimproved land value.

"The [courts] have done what they always done since 1944 and that is follow precedent. It is a lie to say [the courts] have changed the interpretation of the law," he says.

"There is a clause in the bill which turns the [definition] of unimproved land value on its head.

"The government has said, 'we'll give it special meaning' [according to] the way we've always valued land' - they have not always done it this way. It's a total lie."

Mr Crawford says "mum and dad" superannuation funds could suffer under the proposed legislation, because the market value of large assets, including shopping centres, would fall under the weight of increased land taxes.

"Mum and dad's superannuation money is tied up in the big end of town - so as far as that's concerned the public should be worried," he said.

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