Land Valuation Act 2010 LGAQ Assessment of Impact on Councils

Land Valuation Act 2010 Background: LGAQ has sought site value for non-rural properties for many years At least 6 reviews of valuation system in Queensland have recommended this since mid 1970’s Catalyst for action now may be adverse Court decisions against the Department re Shopping Centre valuations and to align Qld with the rest of Australia Land Valuation Act 2010 commenced 20 September 2010

Land Valuation Act 2010 Key points: Valuations for non-rural land will be assessed on site value from 2011 Land that is zoned rural under a planning scheme will continue to be valued using the unimproved value methodology Concessions – subdivision remnant blocks etc – will, (as a legislative requirement), be reviewed by December 2012 Valuer General (VG) position reinstated

Land Valuation Act 2010 Site value: Site value is the market value of the land in its present state. It includes the value of any improvements made to the land including filling, clearing, levelling and drainage works Site value does not include structural improvements on the land such as houses, sheds and other buildings nor excavations necessary for the structural improvements on the land (such as building foundations, footings or underground car parks) DA’s, Leases, infrastructure credits etc (intangibles) are not considered

Land Valuation Act 2010 Unimproved Value: Unimproved value means the amount a parcel of land could be expected to sell for at the date of valuation, assuming that no improvements have been made to the land (e.g levelling, filling and drainage). Unimproved value does not take into account any improvements on the land, such as houses and fences. DA’s, Leases, infrastructure credits etc (intangibles) are also not considered

Land Valuation Act 2010 What if the land is zoned both rural and non- rural? If land is zoned both rural and non-rural the valuation methodology used is determined by the zoning that has the greatest land area. For example, if more than half the area of land is zoned rural, then the land will be valued using the unimproved methodology. Owners can apply to change from non-rural to rural if certain criteria are met

Land Valuation Act 2010 Other changes: Objection process will be longer (60 days not 45 days as at present), fairer and will require “real” justification by landowners Transition from unimproved to site can be “phased in” by VG for properties with an increase of more than $1M in value between the existing unimproved value and the site value in over a maximum of 12 years (while owned by the same party – “the offset allowance” A “deduction allowance” can be made by the VG for new site improvements for up to 12 years (while owned by the party that paid for the improvements) In 2011 landowners cannot have both the offset allowance and the deduction for site improvements made before the commencement of the LVA – the owner must choose one

Land Valuation Act 2010 Impact on Local Government: Annual valuation issued – except in unusual circumstances or if there is no market movement in the local government area First valuations will be issued in late March 2011 May need to model rates extensively – movement in valuations might be affected by site, market forces or time since last valuation issued As previously stated the time period for lodging objections has been extended from 45 days to 60 days, after the issue of the valuations Therefore, local governments may need to manage changes to valuations on objection or appeal decided after 1 July – be prepared for possible reductions to key or important properties (VG should keep councils informed)

Land Valuation Act 2010 Impact on Local Government (cont’d): Councils have proved adept at managing extreme shifts in value relativity over the last 8 years of volatility in the market Early modelling by DERM indicates that the vast majority of valuations will not be adversely affected in any material way by the shift to site value – some values may reduce in 2011 because of the slowdown in the market and removal of intangibles Heavily filled properties, such as some canal estates, will now have the site works included in their valuations. Under unimproved value they were excluded, leading to lower values We have the tools available to sort out the “extreme” shifts in valuation, if they occur after site value is introduced State Land Tax and Rentals are likely to cause more upheaval and protest than council rates

Land Valuation Act 2010 Impact on Local Government (cont’d): Existing averaging, capping etc processes will not be affected by change of valuation method from unimproved to site Minor changes to rating software will be needed to allow for information about property valuation method DERM will advise landowners whether their property has been valued as unimproved or site on their valuation notice Therefore, no need to advise on rates notice whether site or unimproved value – just “value”

Land Valuation Act 2010 Impact on Local Government (cont’d): For properties with “phase in” application, the valuation that will appear on the valuation notice to the property owner and will be used as a basis to calculate rates by local government will be the site value shown on the valuation notice, which has had the offset instalments or the site improvements deducted. The notice will identify if the site value is an adjusted value as a result of offset instalments or deduction allowance In 2011, the rateable valuation may be subject to change if the owner has the opportunity to chose between the offset allowance and the deduction allowance, if applicable

Land Valuation Act 2010 Impact on Local Government (cont’d): Not good practice to blame DERM for rating problems caused by movement in values – explore modelling of rating tools to get equitable outcomes In March 2010 the government announced that the introduction of site value was not a revenue raising measure Change of ownership might trigger loss of “phase in allowances or deductions” – new owners should do due diligence so they are aware rates will be based on a higher valuation than for the old owner A note on the title will alert potential purchasers that an allowance has been made to the valuation and will be removed on change of ownership

Land Valuation Act 2010 Impact on Local Government (cont’d): Valuer General/DERM have promised to work closely with Councils In the next few months, all local governments will either be invited to briefings/discussion forums or be consulted by senior staff from the State Valuation Service on the legislative changes and what changes in process local governments can expect

Land Valuation Act 2010 Questions? Thank you!