HG Paper: A Radical Change to Queensland’s Rating and Land Tax System - 15 February 2010

On 11 February 2010, the Queensland State government introduced the Valuation of Land and Other Legislation Amendment Bill 2010 into parliament. This Bill comes after lengthy and ultimately unsuccessful litigation with several major shopping centre owners.

In introducing the Bill, the Minster said that the intention was to respond to the recent Court of Appeal’s decision in Chief Executive, Department of Natural Resources and Mines v Kent Street Pty Ltd [2009]. In that decision, the Court of Appeal dismissed the State’s appeal against the Land Appeal Court’s decision to reject the State’s assertion that the unimproved value of improved land, for the purposes of levying land tax and rates, included the added value of any leases, the goodwill associated with the business conducted on the land, and an amount for any development premium or profit and risk associated with its previous development. As a consequence, the unimproved value for Pacific Fair Shopping Centre was assessed at $47.5 million, whereas the State had contended for a number of different values in the Land Court, the highest being $255 million.

The Minister, in a press release on 11 February 2010, said that it was the State’s intention to “correct the Appeal Court’s interpretation of the law”. In doing so, the State obviously proposes to achieve what the Land Appeal Court has previously said amounted to a “radical change to the State’s rating and land tax system", affecting a variety of commercial properties “ranging from shopping centres of various sizes to central business district properties and various tourist attractions”.

The State appears to accept that in more recent years, it has adopted valuation practices that the Courts have determined were flawed. Rather than facing the consequences, however, the State proposes that the amendments will be retrospective, applying to all valuations in effect from 30 June 2002. The Explanatory Notes to the new Bill acknowledge that in doing so, the Bill infringes some “fundamental legislative principles,” but states that the retrospective amendments are necessary to avoid, among other things, the State having to repay significant amounts of land taxes already charged.

The Minister has said that application of the Court of Appeal’s decision would have resulted in a 20 percent reduction in valuations for industrial land, and a 35 percent reduction in valuations for commercial land.

With new unimproved valuations due for release in late March 2010 (valuations as at 1 October 2009 and with effect from 30 June 2010), it appears that the State intends to rush the new Bill through Parliament, protecting their land tax income stream and denying owners their much anticipated reductions in land valuation.

While the proposed amendments are aimed at protecting the State budget’s bottom line in the short term, their legacy, in terms of the inevitable disincentive to investment in Queensland, will be with us for years to come.

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