Land Tax in the Victorian Extractive Industry
This article is an extract from a discussion paper regarding the calculation of land tax by MICHAEL HOCKING, Certified Practicing Valuer for CJ Ham & Murray Pty Ltd.
In December 2017 the Victorian Parliament passed Legislation amending several Acts including the Valuation of Land Act 1960 centralising all rating and taxing of land in Victoria. The Responsible Authority is Valuer-General Victoria (VGV). A transitional period of up to 5 years will apply allowing Councils to retain the services of existing “in house” Valuers and contractors until 2022. However, there are economic incentives for Councils to adopt the changes sooner rather than later.
From 2019, rating and taxing valuations will be completed annually rather than biannually which was the case in previous years. This process will capture increases in property values, including Site Value which forms the basis of Land Tax Assessments issued by the State Revenue Office (SRO).
Importantly, SRO relies upon the Site Value determined by the Valuer-General Victoria and there is a different objection process to follow depending on whether an objection is lodged in respect of a Municipal Rating Assessment or a Land Tax Assessment.
This paper is intended to inform extractive industry operators about the recent changes to valuation assessments, how Land Tax is calculated, and the process adopted by VGV in determining Site Value and the grounds and process involved in lodging a Land Tax Objection.
The information detailed in this paper is not intended to provide individual operators with tax advice and is for discussion purposes only and to assist the CMPA in forming a collective response on behalf of its members should it be deemed necessary.
Given that the State Revenue Office has commenced issuing Land Tax Notices to extractive industry operators in Victoria under the new Centralised Valuation system and amended legislation there may be circumstances and consequences to extractive industry operators that are not fully contemplated in this Discussion Paper.
The owner of land utilised for business and investment purposes in Victoria is liable to pay Land Tax except in circumstances where an exemption is applicable.
Example – 1
Land tax based on Site value of $5,000,000
Refer to Item 6 in the Table above, where Land Tax will be calculated at $24,975 plus (2.25% of $2,000,000 = $45,000). Total = $69,975.
Example – 2
Land tax based on Site value of $10,000,000
Site Value in excess of $3,000,000 = $7,000,000 @ 2.25% plus $24,975) = $182,475. A doubling of the Site Value assessment more than doubles (2.6 times) the rate of Land Tax payable.
The State Revenue Office website has a Land Tax calculator which will automatically generate this calculation and it is recommended that operators access the Land Tax calculator to confirm the assessment detailed on your Land Tax Notice is accurate.
In the event an individual or company owns multiple sites the Land Tax Assessment will represent the cumulative Site Value of all land property held by an individual or company on or before midnight on 31st December, immediately preceding the tax year.
This may also apply to Leased sites in circumstances where Lease conditions impose the responsibility to pay land tax on the operator.
There have been recent court decisions relating to the application of the Retail Leases Act (RLA) to certain business activities. The RLA confers the responsibility to pay land tax on the landowner and this paper does not contemplate circumstances where a Contractual arrangement between a Landowner and Operator falls under the provisions of the Retail Lease Act.
Further topics discussed in the paper include; Land tax exemptions, How Site Value is determined and Lodging a Land Tax Objection.
To obtain a full copy of the discussion paper please contact the CMPA on 03 5781 0655 or for further information contact Michael Hocking 03 9500 8633.
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