Rate Capping

In reply to the Hon. S.C. MULLIGHAN (Lee) (24 July 2018).

The Hon. S.K. KNOLL (Schubert—Minister for Transport, Infrastructure and Local Government, Minister for Planning): The Deputy Valuer-General has advised that the City of Port Adelaide Enfield (the council) rates on capital value and not turnover. The Council adopts the Valuer-General's capital values for properties within the residential land use category, but they also utilise their own valuers to determine capital values for properties within the other land use categories, including commercial categories.

The Local Government Act 1999 allows councils to adopt valuations made by the Valuer-General, or valuations made by a valuer employed by the council, or a combination of both. The council is unique in that they are the only council in the state to use a combination of both.

The methodologies utilised by the council's valuers to determine capital values for their assessments appears consistent with those utilised by the valuation industry to determine a market value, and appears consistent with the valuation practices relied upon by the Valuer-General in determining rating and taxing valuations.

In the case of commercial properties, the most common valuation methodology is the capitalisation of income approach, where the income is a product of the market rental that can be expected for the property.

In this way, the rates that are applied against a capital value for a commercial property are not against the turnover of the commercial business that occupies the property, but reflect the value associated with the market rental that the owner can expect to realise from leasing the property.

Under the Local Government (Rate Oversight) Amendment Bill, councils would not be able to increase their total revenue from general rates above the rate cap, unless they can make the case to the independent regulator that an increase above this level is needed. Councils would continue to use property valuations as the basis of the policies they set to determine the contribution of ratepayers towards this capped revenue.

The proposed rate oversight system would therefore have no impact on the method used by the City of Port Adelaide Enfield to value its commercial properties.