Annual council rate notices containing property valuations have recently been issued by local councils in Victoria.
Rate payers should consider whether the property values on their notices are reasonable, so that an objection can be lodged within the two month deadline. A successful objection could translate into significant savings in the form of reduced rates, 2021 Land Tax liability or 2021 Vacant Residential Land Tax liability.
Victorian rate payers should have recently received their council rates notices. A rates notice will state a property’s Site Value and Capital Improved Value (CIV) as at 1 January 2020. Whilst these values are used by local councils for calculating council rates, they will also be used to calculate a taxpayer’s Land Tax and Vacant Residential Land Tax (VRLT) liability for the 2021 land tax year. If you believe the Site Value and/or the CIV of your property is too high, there are two ways to challenge these values.
What is the Site Value and Capital Improved Value (CIV) of a property?
The Site Value and CIV of your property as stated on your council rates notice is determined as part of an annual state-wide general valuation process which values land as at 1 January of each year.
A property’s Site Value is the unimproved value of the land excluding capital improvements such as buildings and fixtures. The Site Value is also used to determine the taxable value of a property for land tax purposes in the following land tax year (i.e. 2021 land tax year).
A property’s CIV is the value of the land plus any buildings or other capital improvements on it and is used by local councils to calculate the Fire Services Property Levy and council rates in some council areas. The CIV is also used to calculate any VRLT liability you may have in respect of the property in the following VRLT year (i.e. 2021 VRLT year).
What if you disagree with the valuation of your property?
There are a number of reasons why you might disagree with the Site Value and/or the CIV of your property. For example,
- the assessed value of your property may have increased significantly in the last 12 months
- your property might be subject to a heritage overlay, or
- you might be unable to develop your property due to planning or zoning restrictions.
If you disagree with the assessed Site Value or CIV for your property, there are two ways in which you can object to the valuation.
Option 1: Object to your council rates notice
Generally, an objection must be lodged with your local council within two months of the date of receipt of the council rates notice. Unfortunately, there is no discretion for your local council to receive objections outside the two-month objection window. As such, we urge all rate payers to review their rates notices as soon as possible.
Your local council has four months from the date they receive your objection to either agree that the value of the property should be adjusted or disallow the objection. If a decision is not made within this time, the council is deemed to have disallowed the objection. You can then apply to the Victorian Civil and Administrative Tribunal (VCAT) for a review or apply to refer the matter to the Supreme Court in limited circumstances.
Option 2: Object to your Land Tax Assessment or VRLT Assessment
If you miss the two-month window in which to object to your rates notice, you have another opportunity to object to the valuations as they appear in your land tax assessment or your VRLT assessment.
An objection must be lodged with the State Revenue Office (SRO) within 60 days of the date of receipt of the Land Tax assessment or VRLT assessment, using the correct form. The SRO will then forward the objection to the relevant local council, who will have four months from receiving your objection to either agree that the value of the property should be adjusted or disallow the objection.
What are the benefits of objecting to a valuation?
If a property is taxable for land tax or for VRLT purposes, a higher Site Value or CIV on your council rates notice will in turn, result in a higher 2021 land tax or VRLT liability.
An objection that is allowed by the council could result in a reduced Site Value and/or CIV, which in turn, could lead to significant land tax and/or VRLT savings in the following land tax year.
For example, if the council agrees to reduce the Site Value of a commercial building from $18 million to $15 million, this could result in land tax savings of at least $67,500 for the 2021 land tax year. The potential land tax savings are greater if the landowner is an absentee owner for land tax purposes or if the landowner holds multiple parcels of land.
For the same property, a reduction in CIV from $20 million to $17 million would translate to VRLT savings of $30,000 for the 2021 land tax year.
What do you need to do?
Rate payers should review their council rate notices in a timely manner. Rate payers who notice any unusual or significant changes to the Site Value or CIV of their properties and are dissatisfied with the valuation of any one or more of their properties should consider objecting to the valuation within the strict 60 days’ timeframe.
Contact your Pitcher Partners Tax advisory representative to assist with arranging a review of your property’s valuation and with lodging an objection with your local council or with the SRO.