Valuation of Land (Miscellaneous) Amendment Bill

Introduction and First Reading

The Hon. J.A. DARLEY (15:54): Obtained leave and introduced a bill for an act to amend the Valuation of Land Act 1971. Read a first time.

Second Reading

The Hon. J.A. DARLEY (15:55): I move:

That this bill be now read a second time.

The report of the Select Committee on Certain Matters relating to the Operations of the Office of the Valuer-General was completed on 11 November and tabled in the Legislative Council on 16 November 2021. This bill seeks to improve the land valuation system by:

(a) addressing issues raised in the report of the select committee;

(b) enhancing transparency and accountability in the valuation process;

(c) ensuring that the objection process is open, transparent and fair;

(d) mandating the annual valuation services of the valuing authority to assist the rating and taxing agencies in their task of determining rates, taxes or imposts levied or imposed on the land on the basis of the valuations of that valuing authority;

(e) providing certainty for agricultural land and the principal place of residence in receiving the protection of notional values with any highest and best use disregarded, as was intended in the original legislation in 1982;

(f) recognising the added value and income from the improvements in the determination of the notional site and capital values;

(g) requiring the Valuer-General in the preparation of guidelines relating to the assessment of a land attribute affecting the value of land to consult and have regard to the views of prescribed groups;

(h) requiring the Valuer-General when requested by a local government authority to value a portion of land forming part of a larger parcel to provide such a valuation, but not to create a separate assessment of that portion on the South Australian Integrated Land Information System;

(i) providing protection for land subject to a lease under the Residential Tenancies Act and its existing use essential to the maintenance of rental stock from higher valuations seeking to apply a potentially highest and best use disincentivising the existing rental use; and

(j) providing protection for the existing use of commercial and industrial land from valuations based on potential use, potential intensification of use or potential or existing land division that is an impost on the existing business use.

The last two items are very important in a COVID and post-COVID world. I expect the present government and opposition would want to protect businesses from the impost of being taxed on a use or benefit that they are not realising, particularly when, in many cases, they are struggling to maintain and derive the full benefit from their existing commercial use in the face of necessary government regulation and changed consumer behaviour and habits.

The dissenting statement by the Liberal member of the select committee that the state government considered the economic impact of implementing such recommendations needed to go further. Along with any impact on revenue, there should be an assessment on the fairness and impacts on businesses, which this government is apparently pledged to protect.

The government has addressed the issues of trust and aggregation of properties for land tax. It is only fair that it protects industry from valuations on unrealised benefits; after all, it is the commercial and industrial enterprises that provide the much-needed employment.

The particular provisions of the bill are now examined. The original intent of section 6A of the act was to ensure the essential requirement of the Valuer-General to be independent in the application of policies and evidence in the valuation of particular properties. The select committee did not consider the intent of the clause was to remove responsibility or ministerial oversight for the soundness of policies and the transparency and accountability of the functioning of a semi-privatised land valuation system, and recommended a legislative clarification accordingly, recommendation 9.

The Valuer-General produces directives on land attributes. The select committee was advised by the Office of the Valuer-General that two tools were both developed post-commercialisation to assist in the identification, development and prioritisation of required policy to direct the valuation process, namely, a guideline, direction and policy procedure document and the policy priority matrix. Identification of areas of concern, and the process for the development and implementation of appropriate policy, needs to be formalised to meet standards of transparency and accountability.

Accordingly, the new section 10 inserts that practice into the legislation and mandates how the formulation of policies will be informed and published to allow for community awareness, input and knowledge of these policies. The Legislative Instruments Act also applies to these policies as if they were a regulation allowing oversight of these policies of the Valuer-General.

Some councils raised concerns to the select committee about up-to-date valuations on recently subdivided land and new developments occurring in their areas in the previous rating period. The new section 14A mandates that a comprehensive program of supplementary valuations must be completed annually on new developments and subdivisions to assist rating and taxing authorities.

Section 17 prevents the Valuer-General creating separate assessment numbers on the South Australian Integrated Land Information System when a council requests a valuation of a portion of land forming part of a larger allotment. This has created problems, such as those arising from the government charges in retirement villages. In section 22A(1)(2)(b) notional valuations apply where:

the owner of the land is a natural person, the land constitutes his or her principal place of residence, and is not used for any commercial or industrial purpose.

This later clause is too restrictive in a COVID and post-COVID world, as more people are working from home or able to operate their business from their premises. For this reason the later clause is modified to read, 'and the land predominantly constitutes the person's principal place of residence'.

Section 22A(1)(b)(ii)(D) also needs to be modified to allow for some commercial and industrial use associated with a number of principal places of residence on land invested in a body corporate:

(D) the land is not predominantly used for a commercial or industrial purpose.

Section 22A(1)(c) refers to a number of enhancements of land that need to be disregarded in determining notional valuations for qualifying agricultural land or principal place of residence. This includes existing or potential land division and proposed use, but also needs to be strengthened to include actual use when 'the fact that part of the land is actually used for its highest and best use'.

In section 22A(2), the valuing authority may assign a notional value to agricultural land or principal place of residence of an owner if it is satisfied that they are entitled to this benefit. This needs to be changed to the requirement that it must apply the notional value. Section 22C is inserted to address land use for commercial or industrial purposes. For land valuation purposes, existing use of the property only is to be considered, with the potential use, intensification of use, or potential or existing land division to be disregarded.

Taxing unrealised use is unreasonable and detrimental to business. In addition, fully recognising the value and income from improvements is essential in the determination of notional site and capital values. There is an increase in practice emerging of discounting these improvements to maximise the site value and therefore the land tax.

Section 22D is inserted to help address the precarious position of maintaining the private rental stock and market. For land valuation purposes, where land is used for residential rental purposes, the existing use and configuration of the land for residential use and derived rental income are the only factors that are to be considered. Any potential use, including intensified residential use or existing or proposed land division are to be disregarded. Similarly, fully recognising the value and income from improvements is essentially in the determination of fair notional site and capital values for taxation purposes.

The process of objection to valuation needs to be made more transparent and accountable, with the guarantee that certain steps will be followed. Accordingly, it is made clear in section 24(1) that a person can object to:

…any aspect of the valuation such as its land use and notional value benefit determination, or any other land attribution, or lack thereof.

I had previously attempted to delete the 60-day limit for an objection to be lodged and the Valuer-General's discretion that this time period could be extended as unnecessary and troublesome to the objector. There is no compelling reason for this limitation, and the person receiving the valuation notice should be able to object until the next valuation notice. Indeed, from an administrative viewpoint, it may smooth out the workload.

Because of the mess with the land tax notices being issued extending into the following financial year by the government, a prior attempt to get rid of this unnecessary time limit was not able to be enacted without unintended consequences. I am currently advised, well into January 2022, several thousand land tax notices have not been issued, extending back 2½ years. In circumstances where poor administration may again arise, or continue to arise, I have been forced to insert the following change and I quote:

An objection to the valuation may be made by the owner or occupier so served, or an agent acting on behalf of the owner or occupier, or within 60 days after the date of service of the notice or within the relevant valuation period, whichever is the longer.

It is important that a person has every reasonable opportunity to raise their concern about their valuation, as it can have a substantial financial impact. I would like to point out that about 1 per cent of the valuations are objected to and about 50 per cent of these objections are successful. Historically, and prior to privatisation, common sense prevailed and the informal process provided plenty of opportunity for the objector to put their view. It is now necessary to legislate these steps formally:

1. The objector has the opportunity to meet with the valuer on site before the valuer makes their recommendation to the Valuer-General, and subsequently the objector must be provided with the evidence upon which the valuer's recommendation relies and be allowed to submit their comments.

2. An agent of the objector, as well as the objector, must be provided with this information from the valuer and, in addition, any other information informing the Valuer-General's view prior to the determination of the Valuer-General upon which his or her decision will rely. The objector may submit their comments.

3. The Valuer-General, in making his or her determination, must take into account (1) and (2) above.

4. The objector and agent are provided with the full evidence upon which the Valuer-General's decision relies, to enable an informed process for further appeal.

Amendment in the bill to section 24, Objection to valuation, and section 25, Valuer-General to consider and decide upon objection, have been changed accordingly. Provisions of the bill seek to address some outstanding issues emerging in the valuation system. Protection for the principal place of residence and agricultural land from creeping imposts denying them the rights of notional valuation is unfair and unsound government policy.

Similarly, the need to protect residential rental land and commercial land and industrial property from valuations based on unrealised potential is essential to protect these properties from unfair and unsound government policy. Accordingly, I commend the bill to the council and naturally welcome any amendments which will improve the bill.

Debate adjourned on motion of Hon. I.K. Hunter.