If the amendments the Bill seeks to work are accepted by the Parliament, then as some industry commentators have noted, land tax will become a business tax and not a tax on land. The amendment seeks, amongst other things, to overturn the decision of the Land Appeal Court in October 2007 in PT Limited & Anor v Chief Executive, Department of Natural Resources and Water (2007) QLAC 0074 “The Chermside Decision”.

In his second reading speech, the Minister said:

“The Bill deals with intangible improvements, the definition of unimproved value, a formula for valuations on prescribed large shopping centres and the awarding of costs of appeals against valuations.

These amendments are not proposing radical changes to how we currently value highly developed property.”

The Minister goes on to say that the Chermside Decision:

“Has extended the application of intangibles, not only to shopping centres, but also to commercial, industrial and multi unit properties. The Decision does not apply to normal residential or rural properties.”

The Bill (if passed) will implement changes which are retrospective to 30 June 2003.

From a property owner’s perspective, the amendments proposed do indeed propose radical changes as to how highly developed property has been valued. Further, it seems clear that the Bill (if passed) will have a direct impact on all commercial improved property assets i.e. retail, commercial,  industrial and certain residential e.g. blocks of flats and units.

How the methodology commended by the Minister will have the effect of introducing a form of business tax is that the value added by a developer, by undertaking the risk of obtaining the various approvals and bringing a property to its developed state (the development profit) and other intangible improvements (e.g. tenants and site goodwill etc), will be added to the unimproved value.

The property industry needs certainty of outcomes with regard to important revenue matters. Rents are set in advance under commercial leases for significant periods of time. Presently, land tax cannot be recovered by a Landlord and therefore any significant realignment of returns to a property owner will significantly adversely affect their position going forward. The fact that the Bill (if passed) is to have retrospective effect only exacerbates these problems.

It seems that certain prescribed shopping centres are to be excluded from the more general application and are to be assessed under a special system.

Another significant change is to address another aspect of the Chermside Decision. In that regard, the Explanatory Notes to the Bill States:

“The court’s decision represents a change in the principles which have previously been applied in awarding costs and valuation appeals. The amendments bring the VOL Act into line with other contemporary legislation such as the Water Act 2000 and the Integrated Planning Act 1997.”

These changes are dealt with in clause 11 of the Bill and reinforce the principle that each party to an appeal must bear their own costs of an appeal subject to very limited exceptions.

Property owners need to be concerned. Industry organisations have called on the Government to withdraw the legislation. If reading the comments by the Honourable Minister in the second reading speech are anything to go by, this is unlikely.

Click on the PDF link to download a full copy of this article.