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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-07-16 Daily Xml
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VALUATION OF LAND (MISCELLANEOUS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 18 June 2009. Page 3292.)

Ms SIMMONS (Morialta) (10:37): Having considered the Hon. John Darley's bill in the context of the state's valuation system, where the Valuer-General provides over 845,000 valuations on an annual basis in accordance with the current requirements of the Valuation of Land Act 1971, I advise that the government supports two of the six amendments.

The Valuation of Land Act 1971 has been in operation for 37 years, with the fundamental intention of providing a sound valuation basis for state and local government to determine fair and equitable rates and taxes. It has served South Australia well: we have a fair, independent and transparent valuation process, with sound systems and practices that are tried and tested and supported by court precedents. However, the State Valuation Office currently monitors, analyses and reports on valuations in an environment that is substantially different from the early 1970s when the legislation was enacted.

With this in mind, the Valuer-General has presented the government with an ongoing reform agenda comprising three elements involving a legislative system and business practice and process innovation. The Valuer-General does not seek to change the intent of the act but rather to deliver further efficiency, transparency and clarity in an environment where valuations are being challenged by an increasingly savvy community that also wants increased access to information concerning their property. This reform agenda also recognises contemporary issues that need to be addressed.

The Valuer-General delivers site and capital valuations in accordance with the act and is guided by the international standards of accuracy and uniformity. Importantly, he recognises that accuracy and relativity (also referred to as uniformity of valuation) needs to be addressed in a considered manner by the staff of the State Valuation Office on an ongoing basis. The pursuit of relativity, or the need for all similar properties to be valued at the same amount, is arguably the prime motivator in Mr Darley's agenda, and it is his view that fairness and equity need to be addressed. This is also a view we agree with, but it is the proposed approach to the matter that we cannot support for reasons I will discuss later, especially as there are viable alternatives to Mr Darley's key preferred recommendations, outlined within the Valuer-General's legislative review position paper, which aims to deliver more streamlined and cost-efficient solutions in a more simplified manner.

As I have said, the government supports two of Mr Darley's six recommendations, the first of which relates to year operative for notional values. We support this; however, it does raise possible implications for rating authorities. Section 22A(2a) was designed to help rating authorities manage their budgets and currently requires a notional value determined after a request of the property owner to be applied in the following financial year. As such, rating authorities, particularly local government, would not have their current budgets impacted by refunds associated with reduced values with a volume unable to be forecast.

Mr Darley's recommendation to delete section 22A(2a) creates the opportunity for the notional value to come into effect for the same year in which it was applied for. As notional values are concessional values, determined at levels below a property's true market worth, this would require revenue to be returned or credited to the property owner with no opportunity for the rating authority to manage the resultant financial consequences.

That said, notional values taking effect for the current or following year have no impact on the Valuer-General's practices or procedures, nor should it lead to an increase in notional value applications; thus, there are no resourcing implications. The benefits of this recommendation are logical and should be actioned immediately, subject to consultation with rating authorities. The government appreciates that this matter was raised.

The second recommendation, relating to the valuation of heritage land, is supported, although it will result in a redistribution of property rating and tax revenues. Currently, a heritage listing is not part of the criteria for which a property can receive the benefit of a notional value. Section 22B, which addresses heritage land only, requires the Valuer-General to ignore any potential that is inconsistent with its preservation as a place of state or local heritage. This requires the Valuer-General to consider the restrictions placed on the improvements, and to have regard to these restrictions in determining the site value that would otherwise assume the improvements had never been made.

Implementing Mr Darley's recommendation could affect around 22,000 properties. This change enables a heritage-listed property, be it owner occupied or not, the same type of concessional value as a residential notional, providing it has existing or potential for subdivision and regardless of the purpose for which the land is used.

In contrast, a residential notional value under section 22A cannot be granted if the property is not owner occupied or the property is being used for a commercial or industrial purpose. The purpose of a residential notional value is to prevent an owner occupier from being rated off the land as a consequence of its worth increasing beyond that of a single residential house block, due to an alternative commercial or industrial use or potential for subdivision.

Mr Darley suggests an amendment that would grant something more to a heritage-listed property than that which is currently provided for under the notional value provisions in section 22A. This again leads to a redistributive impact for rates and taxes should these properties reduce in value.

There are resourcing issues for the Valuer-General associated with this amendment, particularly in relation to the timing of its introduction. In its first year the Valuer-General would require sufficient time to undertake the valuation task required prior to the values coming into force. As such, the government supports in principle the recommendation relating to the valuation of heritage properties, subject to consultation with rating authorities and consideration of the time lines of its introduction.

However, the government is not in support of Darley's amendment to relativity. In delivering a general valuation for rating and taxing purposes, the Valuer-General is faced with the same challenges as every other jurisdiction, both in Australia and overseas, in providing a valuation base for rating and taxing purposes that is both accurate and uniform and, therefore, relative.

To achieve this annual valuation task of more than 845,000 assessments with the resources available, the Valuer-General utilises mass appraisal techniques in accordance with widely adopted international best practice. In reality, mass appraisal is the simultaneous valuation of multiple properties and does not entail individual property inspections of all properties as part of the process. The objective of mass appraisal, in accordance with international best practice, is that an acceptable percentage of properties are within an acceptable range of the correct value, ensuring that acceptable levels of valuation, accuracy and uniformity (relativity) are provided.

The Valuation of Land Act 1971, through the provision of an objection process, accommodates the fact that valuations are subjective professional opinions and that it is not feasible for the Valuer-General to be in a position to have all the facts and resources to deliver a general valuation where all the valuations are accurate. Therefore, property owners who feel their valuations are not accurate are given the opportunity of bringing their concerns to the attention of the Valuer-General for his consideration.

Recent crown law opinion outlined significant case law that supports the longstanding practice that the Valuer-General's principal objective, in accordance with the Valuation of Land Act 1971 and its definitions, is accuracy, meaning that valuations must be determined or justified with reference to market evidence or sales and not other valuations, which are simply an opinion of value. Therefore, if a valuation is considered fair and reasonable with reference to market evidence, it will not be amended upon objection even if it is demonstrated that it might be too high when compared to other valuations that the Valuer-General has determined.

The current and longstanding practice in these instances is that those valuations that are identified to be low on a relativity basis will be addressed in the next general valuation. Mr Darley during his incumbency as valuer-general consistently applied these practices. A standard Notice of Disallowance of Objection letter, sent from Mr Darley and dated 29 August 1990, states:

The valuation has been determined having regard to property sales and is considered reasonable. The relativity questions you have raised will be investigated for the next general valuation, but, as previously stated, your valuation is considered reasonable.

The proposed changes seek to place relativity as an issue to be addressed ahead of accuracy. This can lead to the consequence where valuation is made less accurate so that it can be in line with a valuation that is undervalued. In essence, the Valuer-General need make only one under-valuation and this would be sufficient for other property owners in their locality or state to seek a reduction.

Time expired.

Mr GRIFFITHS (Goyder—Deputy Leader of the Opposition) (10:47): It is my pleasure to speak on this bill on behalf of the opposition and to confirm that the opposition supports all six amendments introduced by the Hon. Mr Darley in the other place. Having previously worked for 27 years in local government has given me somewhat of a detailed understanding of how Valuer-General systems work and the concerns that they raise within the community when a valuation attached to a property is seen as being incorrect, or there is an inequality between the value of adjoining properties. We need to ensure that the opportunity does exist for the public at large to have access to the information they need to assess whether they want to appeal against a valuation, or to look at what their neighbour's valuation might be to see whether a relationship exists between them.

I think that the Hon. Mr Darley in bringing this bill before the parliament—and, as all members in this chamber would know, he served previously as a valuer-general and therefore has a far greater detailed knowledge than many of us could ever hope to achieve—has done so on the understanding of what changes need to occur. The relationship he has with the community and the number of concerns that are brought to him has emphasised the need for this change to occur across the six amendments.

While it was noted during the debate that occurred in the other place that the government intended to support only two of those amendments (and that has been confirmed by the member for Morialta in her contribution today), I hope there might be an opportunity to review that situation, because it seems to me that, in looking at the bill, the amendments seem quite sound.

Mr Darley has a great knowledge of this area. In my discussion with him on the bill, he provided me with some comments made by the Hon. Ian Hunter in the other place. One quote from the Hon. Mr Hunter is, 'Currently, a heritage listing is not a criteria to which a property can receive the benefit of a notional value.' A notional value implies that, instead of the full capital value or market value of that property being attached to it for rating valuation purposes, a notional value or a reduced value is given to the property which reflects its current use, and therefore a lesser degree of return can be expected from that.

In noting this comment from the Hon. Ian Hunter, the Hon. John Darley has informed me that that is not correct. Based on his knowledge of the bill and the legislation covering South Australians, the ability to reflect a notional value for a property that is heritage listed does occur. Therefore, we believe that the comment made by the honourable member in the other place is incorrect.

Mr Darley also mentioned another comment made by the Hon. Ian Hunter concerning multiple objections. That is a bit of a shame, because they do have to provide an opportunity for multiple objections. Again, he asserts that a comment made by the Hon. Ian Hunter was incorrect. Let us see whether there is an opportunity to review this, because some landholders in South Australia do have multiple properties and they need that option.

All members of parliament would be aware of the fact that, at the time of council rates, land tax bills or, indeed, SA Water accounts (which have a valuation attached to them) being sent out, concerns are expressed by thousands of South Australians about the value attached to their land by the Valuer-General. In the main, people are understanding and accepting of this. I know that the Valuer-General attempts, as much as is humanly possible—and given that there are hundreds of thousands of individual properties to which a valuation is attached, it is a very difficult role—to ensure that each valuation given to a property reflects what its market value would be via the capital value or, indeed, its site value for the unimproved value of the land, but many people are very concerned about this and they want to ensure the system is improved.

By introducing this bill—and the opposition in the upper house certainly gave it full support—the Hon. Mr Darley is doing so on the basis that South Australians need to be given the opportunity to ensure that openness and accountability exist. One of the improvements highlighted within the bill is the opportunity for people to sit down with the valuers in an effort to understand the issues behind the value which has been attached to the property and, indeed, to see whether there is an opportunity or scope for a review to take place.

I think that is a good move, because openness and accountability and the ability to discuss how to improve everything within our lives is a good thing, and valuations are no different. In a commercial sense, the valuations attached to these properties make an enormous difference to the rates and taxes paid for these properties and, indeed, to the equity attached to the people's land holdings and their businesses, because land and buildings form a significant part of that equity.

This bill gives us an opportunity for us to improve it. I am confident that other members of the opposition will speak on this bill. Yes; I am getting some nods of agreement behind me. I am also confident that the opposition will be supporting all six clauses when the debate occurs at the committee stage of this bill.

I know that the Hon. Mr Darley has introduced this bill on the basis of his discussions with hundreds of people from around South Australia. Certainly, the opposition is supporting this bill, given the fact that we are contacted by many people on a daily basis concerned about valuations attached to their properties, especially in relation to land tax valuations—and it will soon be the season for council valuations—and they would expect us to support this bill. I confirm that the opposition will support the bill in its entirety.

Mr WILLIAMS (MacKillop) (10:53): I am sure that, after giving its opinion on this bill, the government now wants to adjourn it. I inform the government that some of us think this should be debated and voted on, because I am sure the government will not put any other opinions. The reality is that the valuation of land is a very important function of state government, and the impact of land valuation is greatly felt across the community.

We know that one of the failings of this government is to do with land tax. This government is hooked on the increasing revenues that it is receiving from land tax, so I can understand why the government would not want the citizens across the community to have greater access to information about the valuation of their properties, and I will give a few examples if time allows me.

Land tax in this state is a burning issue in the community, yet this government would deny the community access to information on how their properties are valued. I think that is an absolute shame. Denying people this information goes to the heart of democracy. The Hon. John Darley in the other place, I think, has brought to the parliament a very fine piece of legislation. It is based on sound principles and it would enhance the valuation system.

The valuation system is one whereby the Valuer-General goes out and makes a valuation, and that valuation has always been subject to appeal by the land-holder. That is the only check/balance in the system, and it is the contestability of the valuation between the land-holder and the Valuer-General which allows us to come to a landing on what is a fair and equitable valuation. If we make that contest an uneven, one-sided affair we will never get to the point where we have a fair and equitable valuation across the whole community, and I believe that is the situation in which we now find ourselves.

With respect to my own farm, some years ago I received a valuation on two parcels of land which were next door to each other but quite dissimilar, and they were given the same valuation per acre. They were relatively small parcels of land, of the order of 100 acres. They were quite dissimilar because one had about 20 acres of scrub on it, which I was unable to do anything with, it was totally non-productive, and it also had a 60 acre swamp on it, which became inundated with about a metre of water every winter. So, in reality, of that about 100 acres less than 30 acres was productive for the whole year. The block next door was very highly productive and had a good soil type. It got wet in the winter, but it was a highly productive piece of land. Those two parcels of land were valued identically.

When I went to the valuation department in Mount Gambier and spoke to people there and told them why I thought the value of the one parcel of land should be reduced, to my dismay, the response was, 'If we accept that the two pieces of land should be valued completely differently, because you are making the argument that one is much more productive than the other, what we will do is increase the value on the more productive piece and leave the valuation on the less productive piece where it was.' That was the response that I received from the Valuer-General's department. I left knowing that I had no chance of getting fairness and equity in that situation.

That is why I say that the valuation on those two parcels of land is wrong. The Valuer-General knows it is wrong, because I have explained to him why it is wrong, as I have just explained to the house, but there was no interest in sorting it out; there was no interest in the Valuer-General's department to get it right. I was told, 'Look, we are all powerful. You are just a little citizen with no powers. Go home and forget about it.' That is what was going to happen, and that is what happens in every street in every town and community in this state: the citizenry are powerless when it comes to arguing their case. This piece of legislation before us will address that and will enhance the valuation system.

Another example that has come to my attention in the last couple of weeks is a valuation that has been put on parcels of land in national parks that have shacks on them. The government is of the mind that these shacks should disappear, that they should go. There are some at Milang, which are used on Tourism SA brochures to highlight some iconic sites in South Australia, but the government wants to get rid of them. There are a number of them around the Coorong in my electorate and there are a number on the Glenelg River in the electorate of Mount Gambier.

I have debated the issues with regard to these shack sites at length in this place to try to get the government to come to its senses and allow them to be freeholded, as a lot of other shack sites across the state have been, to give better tenure. However, the reality is that these shack sites have limited tenure. The tenure is tied to the lessee and, on the death of the lessee, the estate is obliged to remove the shacks and it reverts to vacant crown land.

The lease they have with the Department for Environment and Heritage prevents any subleasing, so the shack sites cannot be sublet, they cannot be rented out on a daily or weekly basis, and they cannot be used as a permanent residence. Yet, the lessees of these shack sites in the last few weeks (at the end of June) received a letter increasing their annual rental fee to the Department for Environment and Heritage by over 300 per cent, and the letter stated that the rent has gone up because of the new valuation (because the leases allow for a new valuation every three years). The lessees are told they can appeal the rent but, if they do, they have to give some evidence, but they are not given access to any of the information about how the valuation was reached. They have received a letter saying that the valuation is based on other similar sites across the state.

Mr Speaker, how can you put a monetary value on something which, by definition, cannot be traded? How can you put a market value on something for which there is no market? Yet this government makes claims to these people—and, unfortunately, there are only a few hundred of them across the state so they have a small political voice—that a market value can be established for something for which, by definition, there is no market. That is one of the problems we find with the current valuation system. Further, the government, to this point at least (and I am working on this currently), is refusing to give these citizens access to any information as to how they establish the value on these pieces of land. This bill goes towards trying to correct those sorts of anomalies.

I argue that the valuation system should be robust, it should be something that we can all trust, and it should be something which shines with fairness and equity, but it does not. Unfortunately, in South Australia, under this current Labor government, an increase in valuations is being used to prop up a Treasurer who lost control of his budget the day he came into office, and therein lies a significant problem.

We have seen in recent days that the government has been at pains to ensure that those out on our roads collecting fines did not waiver from their duty for more than a few hours because the government is hell-bent on raising every dollar it can. We find the same thing with valuations. The government does not want the people of South Australia to have the ability to appeal their valuation because the government is so desperate for every dollar it can get, and that is a direct result of mismanagement.

We have a government that is turning its back on good, sensible reform to our valuation system because it cannot afford to give up one dollar in revenue, and that is a shame. I support the bill in its entirety.

Debate adjourned on motion of Mrs Geraghty.

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