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Millions may have overpaid land tax, rates | Updated: 2:11:09 PM, Friday February 01, 2013
By Sean Nicholls Millions may have overpaid land tax, rates

More than 2 million official land valuations in NSW will be examined by a new inquiry, prompted by fears that property owners are overpaying land tax and council rates.
“I am determined to apply the blowtorch to the entire process” … Matt Kean. Photo: Edwina Pickles

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More than 2 million official land valuations in NSW will be examined by a new inquiry, prompted by fears that property owners are overpaying land tax and council rates.

The inquiry will examine more than 29 million pieces of confidential data for all 2.4 million land valuations between 2000 and 2012 to pinpoint which council areas have suffered the biggest discrepancies between official estimates and market values.

Concerns have been sparked by reports indicating that the system used by the Office of the Valuer-General is out of step.

Last year Fairfax Media reported that wealthy landowners were having their private and commercial property values reduced by billions of dollars for land tax and rating purposes because they could afford court challenges.

For example, in 2010 Alan Rydge, the chairman of the hotels and cinema group Amalgamated Holdings, had an initial valuation of $17.2 million for his Point Piper home reduced to $9.5 million after an appeal in the Land and Environment Court.

In Broken Hill a mining company, Perilya, had its land valuation reduced from $21 million to $4.9 million. It also emerged that more than 40 per cent of the Valuer-General’s valuations in the state’s midwest were wrong.

In October the Mid-Western Regional Council was told that valuations for 300 blocks of land in its area were wrong, with most being overvalued.

The government uses the valuations to assess land tax and for the compulsory acquisition of land. Councils use them to determine rates.

The historical analysis of land valuations in NSW, to be conducted by a private firm hired by competitive tender, will help the parliamentary committee conducting the inquiry decide whether to recommend wholesale changes to the system.

The consultant will be asked to test whether official valuations have outstripped market values and if property owners have suffered “material volatility” in their land valuations, including in particular local government areas.

The inquiry, which will open in Broken Hill on Thursday, is taking public submissions until March 8, after which it will hold public hearings. The chairman of the joint standing committee on the Office of the Valuer-General, the Hornsby MP, Matt Kean, said the system needed to be fair, transparent and to provide certainty to property owners.

“The valuation system determines the amount of tax paid by every land owner in NSW,” he said. “Recently we have seen shocking examples of the system failing right across the state. I am determined to apply the blowtorch to the entire process in order to safeguard the public’s confidence.”

An issues paper says the inquiry will examine volatility in land valuations and the complexity and fairness of the system.

It notes that the present system was established in 1916 and subsequent changes have been “ad hoc”, resulting in “unnecessary complexity” in the legislation.

For most land in NSW a “mass valuation” approach is used, whereby similar properties are grouped together. Representative properties are individually valued on July 1 to determine how much their value has changed from the previous year.

The change, based on recent sales of vacant land and properties, is then applied to the rest of the group.

The issues paper notes that in Ireland land is valued at the market price by its owner once every three years and in Singapore land tax is assessed on the annual amount of rent that could be charged for the property.

The Valuer-General, Philip Western, could not be contacted for comment on the inquiry.

He has previously said discrepancies exist because sometimes new information has come to light which alters the valuation and that it is not an exact science.

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