SHACK LEASES

The Hon. J.A. DARLEY (15:07): I seek leave to make a brief explanation before asking the Minister for Sustainability, Environment and Conservation questions regarding rents for shack sites on crown land.

Leave granted.

The Hon. J.A. DARLEY: As I have already stated several times before, my objection to the crown shack rentals was first raised in 2009. There has never been any objection to the method of determination of shack rents; that is, calculated on a rate of return on the current unimproved value of shack sites. The rate of return fixed by the former minister was 4 per cent. After a direction from the Premier, the then minister sought advice from the Valuer-General, who advised the rate of return should be 2.75 per cent. This is more than 31 per cent less than the rate of return originally used to calculate shack rentals, and therefore I contend that the shack lessees have been overcharged for their rents.

As honourable members would know, the Valuer-General is an independent statutory officer responsible to parliament. I requested the Valuer-General to provide advice to me on the appropriate rate of return for the years 2009, 2010, 2011 and 2012. The Valuer-General has recently advised me that, in her opinion, the rate of return is constant at 2.75 per cent for each of these years and at present.

I understand ministers are advised by their departments and contend that, since 2009, the department has either deliberately misled or has been completely incompetent in their advice to the minister on this issue. My questions are:

1. Does the minister continue to steadfastly hold the position that there has not been any error in the calculation of shack rents?

2. When will the minister correct the department's mistake and refund overpaid rents to shack lessees?

3. Is the minister going to review the unimproved values that have been used to calculate rents since 2009?

4. If so, when and, if not, why not?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) (15:09): I thank the honourable member for his most important question. I think I have advised the chamber previously of approximately 300 life tenure shack leases on crown land and 100 in national park reserves. Life tenure means that the lease expires when the last lessee passes away. By way of background, the crown land subject to shack leases has been assessed a number of times, most significantly in 1994 under the shack site freeholding policy. I am advised that the intention of this policy was to permit freeholding (that is, the purchase of land) wherever possible.

Most shacks on crown land were sold to occupants under this process. Six criteria had to be met for a shack to be eligible for freeholding. All shack sites were assessed to identify those suitable for freeholding, taking into account criteria including public health requirements, continued public access to the waterfront, flood and erosion issues, and planning requirements. Sites that met the criteria were sold to the occupant; those that did not meet the criteria were issued with non-transferable, life tenure leases, which I explained at another time as meaning that these leases expire when the last lessee passes away.

These leases carry an obligation to pay rent. The rationale for rent setting has always been that the state should receive a fair return for the private and exclusive use of its land assets. Lease conditions for non-transferable shack leases on crown land and in national parks provide for the periodic revaluation of the annual rent to be paid to the Crown for the right to occupy that land.

Shack rents are set by obtaining a land value from an independent valuer and applying a rate of return to that value. I am informed that for rents effective from 1 January 2012, the rate of return was set at 4 per cent. I am advised that this was based on independent advice from the New South Wales Valuer-General and a New South Wales valuer in private practice. For rents effective from 1 July 2013, the rate of return was set at 2.75 per cent. This was based on advice from the South Australian Valuer-General.

Throughout the history of setting shack rents, the rate of return has been adjusted periodically in response to local economic conditions. I am advised that rates of return applied by the Valuer-General over the years have ranged from 1.5 per cent to a mid-range of 3.5 per cent to a high 8 per cent. I can advise that the Department of Environment, Water and Natural Resources will seek advice on an appropriate rate of return for shack sites every two years.

Shack rents on crown land at Fishermans Bay, Glenelg River, Milang and in the Coorong National Park were determined using a 4 per cent rate of return to the unimproved land value of the shack site effective 1 January 2012. Rents of shack sites in Innes National Park, including Pondalowie Bay and the remainder of the settlement of Fisherman Bay, were determined using a 2.75 per cent rate of return effective 1 July 2013.

Lessees have the opportunity to lodge an objection to the new rent within one month of being notified as part of their lease conditions. I am advised that objections to shack rental increases were received from shack lessees at Fishermans Bay, Glenelg River and Milang. The Department of Environment, Water and Natural Resources sought advice from the Valuer-General to determine some of these shack lease rent objections. I can advise that in all reviews completed to date shack rents were upheld.

I understand that the Hon. Mr Darley has a very keen interest in this matter. I have been having ongoing discussions with him regarding this issue and I assume I will have ongoing discussions with him about this issue into the future.