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All investment and development properties incur a land tax liability annually. The annual land tax liability for a property is derived from the value of the land only and doesn’t include the value of any improvements. In brief, anyone can object to the valuation which is provided by the NSW Valuer-General, however there is only a 60-day window in which this can be done. In some instances there are significant savings to be made.

Property developers and owners of major investment properties are the most likely to be hit with excessive land lax assessments.
What property types incur land tax?
Land tax is paid on most properties that are not a principal place of residence or not used for primary production. Development sites and land banks, retail and commercial investment properties, vacant land, land improved with a dwelling or apartments, a holiday home and many other property types incur land tax.
There are various concessions/exemptions from land tax such as a primary place of residence, the property is intended to be a primary place of residence, some boarding houses, a new residence is acquired while the previous one is yet to be sold, you have a home office but the majority of business is done elsewhere, absence from principal place of residence (e.g. move overseas) or a deceased estate.
How much is land tax and how is the amount calculated?
Land tax is payable over a certain threshold. For 2014 the threshold is $412,000. Land tax is calculated at $100 plus 1.6% of the land value up to the premium rate threshold ($2,519,000) and 2% thereafter.
The amount payable is based on the average of the last three years’ assessments. It is possible to object to any of the three assessments. If you are objecting to a value that has previously been objected to, new information must be provided.
In most instances it is too time-consuming to lodge an objection for a small investment property, as a successful objection may only reduce the burden slightly. However, with major development sites and investment properties land tax liabilities can be reduced by many hundreds of thousands of dollars.
Residential strata buildings and land tax
In order to determine the land value for individual residential apartments the Valuer-General assesses the land value of the site on which the apartment building is erected. The total land tax liability for the building is allocated to each apartment based on its unit entitlement under the strata scheme. Some owners will incur a liability and others will be exempt for reasons detailed previously.
How is land tax assessed and what difficulties impact the assessment process? Why might the assessment be wrong?
To arrive at the land value of a property the valuers working for the NSW Valuer-General analyse recent comparable sales. The opinion of value is arrived at after comparing the identified sales to the subject property based on their various characteristics, such as location, site conditions, zoning, development approval, scale, floor space ratio, view profiles, aspect and proximity to employment bases and infrastructure.
Although this method is the simplest way to determine land value, there are often points of contention as how the characteristics are compared (and ultimately land value assessed) is a matter of opinion. Small oversights in the valuation process can change an assessment greatly.
Ideally a valuer will use sales of vacant land to determine the land value (unimproved value) of the subject property; however in most built-up areas vacant land sales are not available and sales of properties with improvements (units, houses, offices) need to be used. In this instance the valuer will deduct the value of the buildings from the sale price to arrive at the land component of the sale price. This process includes a number of assumptions and a large margin for error, particularly as the buildings are given a value without having been internally inspected.
In addition, sales of properties such as development sites and major commercial office buildings often do not transact under standard/basic conditions. Often sales include conditions such as extended settlement periods, various types of options, rental guarantees, lease backs or staged payments and these conditions can allow a purchaser to pay more for a property for any number of reasons. The value for land tax purposes assumes unconditional sale so it can’t be compared to a conditional sale without making the necessary adjustments. If these adjustments have not been made by the valuer then the identified sale might be contributing to an inflated land value assessment.
Next page: Considerations and tips for making an objection.
 
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There are any number of reasons a property owner might disagree with their assessment and these may be reasonable cause for an objection. Any objection needs to have supporting evidence based on analysis of the sales used by the Valuer General or sales not considered. Some reasons to object might be:
<ul>
<li>My development site has been given the same rate/square metre in value as all the comparable sales but it is in an inferior location and with inferior amenity.</li>
<li>There have been a number of sales around my property that have not been used by the Valuer General and I am of the opinion they are the most comparable and they support a lower land value for my assessment.</li>
<li>My land is heritage listed and the valuer general did not take this into account in their assessment.</li>
<li>Two of the sales used by the Valuer-General were between related parties (e.g. family members) and as such cant be relied upon. I have new sales that support a lower value. </li>
</ul>
How long do I have to consider an objection?
A period of 60 days is provided in which an objection can be lodged. This can be lengthened at the Valuer-General's discretion. This is only a narrow time to object and it is in the objector’s best interest to object before the end of the 60 days.
Notwithstanding the above as previously mentioned your land tax liability is based on the average of the previous three years and it is possible to object to any of the three years that appear on the notice. As such, if you miss the 60 day window you will have another chance to object to the value the following year.
Things that ought be taken into consideration before lodging an objection?
<ul>
<li>How much of my time will it take to lodge a professional and well researched objection?</li>
<li>Should I appoint a valuer/property professional to prepare the objection on my behalf? If so, what fee should I expect?</li>
<li>By what amount do I estimate I can reduce my liability by? After considering the time and cost to lodge an objection, is it worthwhile?</li>
<li>Who is a property consultant that can provide some guidance/advice in this?</li>
<li>Do I have the expertise to properly lodge an objection?</li>
<li>The assessment is based on an average of three years and this should be taken into account when deciding what years out of the three can be objected to.</li>
</ul>
What increases the chance of success?
<ul>
<li>Properly analyse the sales identified by the Valuer General so that all details of the sale are known and their impact on the value explored.</li>
<li>Identify any key sales not used by the Valuer General.</li>
<li>Provide a clear and concise objection.</li>
<li>Instructing a qualified valuer and/or land economist to prepare an objection for you.</li>
</ul>
Determining objections and how to appeal. Is it worth appealing?
After an objection is lodged it will be reviewed by an independent valuer appointed by the Valuer-General. Once the objection has been reviewed a notice of determination of the objection is sent to the relevant party. If a notice is not received within 90 days of lodgement then the objection is deemed to be disallowed.
If an objection is not successful then you have 90 days to lodge an appeal with the Land and Environment Court of NSW.
The cost of an appeal can be significant due to the inclusion of lawyers and property valuers. The high cost of an appeal is part of the reason it is important to lodge a professional objection.
Sam Barrow is an Associate Director for <a target="_blank" href="https://www.landsburys.com.au/">Landsburys Property</a> providing strategic advice and property valuation services. Sam has experience in all property types, however specialises in residential and mixed use development projects and master planned communities throughout New South Wales.
 
 
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sbarrow-W3PnSwsfJs

Land tax 101: Time is ticking on the NSW 60-day objection period - is it worth appealing?

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The drivers of change are the ingredients of opportunity.
How these drivers interact and where they interact is the secret to a identifying a successful development.
The common denominator in today’s market is risk minimisation.
Financiers demand it, developers desire it and valuers are tasked with identifying it.
As a consequence the most sought-after sites are those that have an approval, are situated in a triple-A-rated location, with presales on cash deposits, to local buyers with a pre-approved takeout and a fixed-cost lump-sum construction contract to a triple-A-rated builder.
Welcome to Disneyland.
Less sought after are the sites without approval. However, although all major developers are telling us they don’t need an approval, it seems the guidelines on “why not to buy” an unapproved site are presented in a 10-episode mini-series while the “reasons to buy” are written on the back of a napkin. Not helping the situation is that a function of the demand is high vendor expectations.
The truth is that sites that fit the ideal criterion may exist, but they are not for sale.
Identification of a site that can be packaged with a limited risk profile requires a lot of time, effort and cost.
The complexity of the planning regulations in NSW contrives to give the administrators of the planning laws a very powerful instrument that enables them to implement their own personal agenda or refuse an application based upon “community objection “. Further, it remains to be seen if NSW Planning Minister Brad Hazzard’s “radical” overhall of the NSW planning system will rectify some of these planning delays.
Due to the rezoning of lands to accommodate Sydney’s growing population and to satisfy the demands of the market to be located close to community/social amenity and infrastructure, it is often necessary to amalgamate sites.
In the past this task has been the realm of the entrepreneur/ developer or the acquisitions team of a public group, however while still in limited existence the difficulty associated with site amalgamation and the cost has decimated the ranks.
So where do the developers go in today’s market, and how is opportunity identified?
A formal acquisitions strategy needs to be developed that pulls together infrastructure, town planning changes, demographic analysis and an understanding of current/proposed supply so a developer has a clear location-based direction. This strategy will allow for identification of potential sites within a region. Identifying and packaging one of these sites inevitably delivers better returns than a site shopped around to all in sundry the for the past 12 months.
In reality the successful developers have prevailed because they have relied on their existing (albeit shrinking) pipeline or have been lucky enough to be handed the right site. Finding an opportunity requires taking some risk, and limiting the risk by obtaining advice from the outset pays handsome dividends. Meriton, Walkers, Winton, Frasers, Payce, Mirvac and others all limit risk through a managed process.
So identifying the diamond in the rough or the location of the next Carlton United Brewery site, Harold Park, Jacksons Landing, Rhodes, Homebush Bay or South Sydney requires a team effort and old-fashioned instinct.
In reality and as mentioned above the question of “Where are the opportunities in a changing market?” requires identification and interpretation of the following key elements.
 
Infrastructure: What locations will benefit from improved infrastructure over in the short to medium term, for example, transport – such as rail links to growth corridors; express rail services; new light rail; improved bus corridors; key motorway improvements.
Town planning changes: Changes to land use, intensification of use.
Demographics: We are now just days away from the release of the new census data. The first release in six years and understanding population trends will not only reveal opportunity but will be key in pursuing a specific target market. Analysis of area, age characteristics, income levels and population movements is the first step in establishing market growth, product design and accommodation type.
Affordability: Building to a price point is essential for success. Overcapitalisation or constructing the incorrect product type for a particular market can be avoided. However, this mistake is repeated all too often.
The successful development is the one that sells. Therefore all elements must be right if the all sold sign is to be erected.
The voyage of discovery is not in seeking new landscapes but in having new eyes.
Understanding these issues in isolation won’t achieve success, but knowing how they interact will unlock the opportunity.
Sam Barrow is property advisor and valuer for <a href="https://www.landsburys.com.au/" target="_blank">Landsburys Property</a> providing strategic advice, risk analysis and valuation services. Sam has experience in all property types, however specialises in residential and mixed use development projects and master planned communities throughout New South Wales.
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How to identify property development opportunities in a changing market

<html><body>
All investment and development properties incur a land tax liability annually. The annual land tax liability for a property is derived from the value of the land only and doesn’t include the value of any improvements. In brief, anyone can object to the valuation which is provided by the NSW Valuer-General, however there is only a 60-day window in which this can be done. In many instances there are significant savings to be made.
Property developers and owners of major investment properties are the most likely to be hit with excessive land lax assessments.
What property types incur land tax?
Land tax is paid on most properties that are not a principal place of residence or not used for primary production. Development sites and land banks, retail and commercial investment properties, vacant land, land improved with a dwelling or apartments, a holiday home and many other property types incur land tax.inst
There are various concessions/exemptions from land tax such as the property being a primary place of residence, the property is intended to be a primary place of residence, a new residence is acquired while the previous one is yet to be sold, you have a home office but the majority of business is done elsewhere, absence from principal place of residence (e.g. move overseas) or a deceased estate.
How much is land tax and how is the amount calculated?
Land tax is payable over a certain threshold. For 2012 the threshold is $396,000. Land tax is calculated at $100 plus 1.6% of the land value between the premium rate threshold ($2,421,000) and 2% thereafter.
The amount payable is based on the average of the last three years’ assessments. It is possible to object to any of the three assessments. If you are objecting to a value that has previously been objected to, new information must be provided.
In most instances it is too time-consuming to lodge an objection for a small investment property, as a successful objection may only reduce the burden slightly. However, with major development sites and investment properties land tax liabilities can be reduced by many hundreds of thousands of dollars.
Residential strata buildings and land tax
In order to determine the land value for individual residential units the Valuer-General assesses the land value of the site the apartment building is erected on. The overall liability for the entire site/building is allocated to each of the units based on their unit entitlement under the strata scheme.
 
How is land tax assessed and what difficulties impact the assessment process? Why might the assessment be wrong?
To arrive at the land value of a property the valuers working for the NSW Valuer-General analyse recent comparable sales. The opinion of value is arrived at after adjusting the identified sales based on their various characteristics, such as location, site conditions, zoning, development approval, scale, floor space ratio, view profiles, aspect and proximity to employment bases and infrastructure.
Although this method is the simplest way to determine land value, there are often points of contention because of the number of adjustments that need to be made to the sales evidence in order to arrive at a land value of the subject property. Small oversights in the valuation process can change an assessment greatly.
Ideally a valuer will use sales of vacant land to determine the unimproved value of the subject land, however in most built-up areas vacant land sales are not available and sales of properties with improvements (units, houses, offices) need to be used. In this instance the valuer will deduct the value of the buildings from the sale price to arrive at the land component of the sale price. This process includes a number of assumptions and a large margin for error, particularly as the buildings are given a value without being internally inspected.
In addition, sales of properties such as development sites and major commercial office buildings often do not transact under simple conditions. Often sales include conditions such as extended settlement periods, various types of options, rental guarantees or staged payments and these conditions can allow a purchaser to pay more for a property for any number of reasons. The value for land tax purposes assumes unconditional sale so it can’t be compared to a conditional sale without making the necessary adjustments. If these adjustments have not been made by the valuer then the identified sale might be contributing to an inflated land value assessment.
There are any number of reasons a property owner might disagree with their assessment and these may be reasonable cause for an objection. Any objection needs to have supporting evidence based on analysis of the sales used by the Valuer General or sales not considered. Some reasons to object might be:
<ul>
<li>My development site has been given the same rate/sqm in value as all the comparable sales but it is in an inferior location and does not similar amenity.</li>
<li>There have been a number of sales around my property that have not been used by the Valuer General and I am of the opinion they are the most comparable and they support a lower land value for my assessment.</li>
<li>My land is heritage listed and the valuer general did not take this into account in their assessment.</li>
<li>Two of the sales used by the Valuer-General were between related parties (e.g. family members) and as such cant be relied upon. I have new sales that support a lower value. </li>
</ul>
How long do I have to consider an objection?
A period of 60 days is provided in which an objection can be lodged. This can be lengthened at the Valuer-General's discretion. This is only a narrow time to object and it is in the objector’s best interest to object before the end of the 60 days.
Notwithstanding the above as previously mentioned your land tax liability is based on the average of the previous three years and it is possible to object to any of the three years that appear on the notice. As such, if you miss the 60 day window you will have another chance to object to the value the following year. 
Things that ought be taken into consideration before lodging an objection?
<ul>
<li> How much of my time will it take to lodge a professional and well researched objection?</li>
<li>Should I appoint a third party to make the objection on my behalf? If so how much will they cost?</li>
<li>How much do I think I can reduce my liability by? After considering the time and cost to lodge an objection is it worthwhile?</li>
<li>Who is a property consultant that can provide some guidance/advice in this?</li>
<li>Do I have the expertise to properly lodge an objection?</li>
<li>The assessment is based on an average of three years and this should be taken into account when deciding what years out of the three can be objected to.</li>
</ul>
What increases chance of success?
<ul>
<li>Properly analyse the sales identified by the Valuer General so that all details of the sale are known and their impact on the value explored.</li>
<li>Identify any key sales not used by the Valuer General.</li>
<li>Provide a clear and concise objection.</li>
<li>Instructing a qualified valuer and/or land economist to prepare an objection for you.</li>
</ul>
Determining objections and how to appeal. Is it worth appealing?
After an objection is lodged it will be reviewed by an independent valuer appointed by the Valuer-General. Once the objection has been reviewed a notice of determination of the objection is sent to the relevant party. If a notice is not received within 90 days of lodgement then the objection is deemed to be disallowed.
If an objection is not successful then you have 90 days to lodge an appeal with the Land and Environment Court of NSW.
The cost of an appeal can be significant due to the inclusion of lawyers and property valuers/land economists. The high cost of an appeal is part of the reason it is important to lodge an professional objection.
Sam Barrow is property advisor and valuer for <a target="_blank" href="https://www.landsburys.com.au/">Landsburys Property</a> providing strategic advice, risk analysis and valuation services. Sam has experience in all property types, however specialises in residential and mixed use development projects and master planned communities throughout New South Wales. 
 
 
 
 
 
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Sam Barrow

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