NSW Premier Dominic Perrottet has taken the first steps to change how 2.6 million parcels of land are valued each year, with the goal to move to market values rather than the current measure that does not consider any buildings on a block.
Perrottet wants a shift away from valuations – used to calculate land tax bills for investors and commercial property owners as well as council rates – being determined on unimproved land, which does not consider any houses or structures.
However, the premier has warned that any changes to valuations would take years to implement, and in the meantime, an upgraded system would give property owners access to data analytics to better understand how the valuations of their land were determined.
The government has funded a $20 million upgrade to the Valuer-General’s system, which would also prepare NSW to ultimately follow Victoria and use improved land valuations.
NSW land values jumped more than 26 per cent to $2.8 trillion in the year to July 2022 – an increase of almost $600 billion from the previous year – according to the latest report from the state’s Valuer-General. Regional areas including the Hunter, Central Tablelands and the Murray region experienced some of the biggest rises.
A trend of people moving out of cities and urban areas and into the regions during the COVID-19 pandemic and a lack of housing stock contributed to rising land values, according to Urban Taskforce chief executive Tom Forrest.
In NSW, the Valuer-General determines the value of land, and every three years provides a notice of valuation to property owners.
Owners who are subject to land tax, usually property investors, holiday homeowners and businesses, often complain about fluctuations, largely because it is not clear why the valuations on unimproved land have shifted.
Perrottet cited Victoria, which uses both unimproved and improved land values, as a better system.
“Land values increase over time and the Valuer-General assess those land values and on the back of that there is an increase in taxation,” Perrottet told 2GB.
“Part of the issue here is that we value land on unimproved value and that creates challenges, and what I started when I was treasurer was some work to be conducted in relation to how we could move to an improved land value system and I think that will take out the fluctuations.
“It can’t happen overnight but it does become a challenge every time the Valuer General reassesses property values.”
Perrottet said the government was confronted with the difficulties around relying on unimproved land values when it tried to link an emergency services levy to council rates.
The government had planned to scrap a levy on insurance premiums and instead impose a new fee based on the value of property owners’ land. The levy was to fund fire and emergency services.
Then premier Gladys Berejiklian scrapped the plan in May 2017, after landowners in the commercial and industrial sectors insisted they would be worse off under the planned system.
The government reverted to the levy on insurance premiums, but the Insurance Council of Australia remains opposed to it, and has launched a campaign in the lead up to the March 25 election to have it scrapped and replaced with an alternative funding model for emergency services.
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