Tax Files: Submission to the Select Committee on Certain Matters Relating to the Operations of the

Submission to the Select Committee on Certain Matters Relating to the Operations of the Office of the Valuer-General

JOHN TUCKER, DW FOX TUCKER LAWYERS

On 2 September, 2021 Dr Bernard Walrut and I attended before a meeting of the Select Committee of the Legislative Council of the Parliament of SA relating to the Operations of the Office of the Valuer-General to speak to a submission made by the SA members of the Taxation Committee of the Business Law Section of the Law Council of Australia, primarily authored by Dr Walrut.

The submission’s main points were as follows:

1. THE VALUATION OF LAND ACT

That consideration be given to amending the Valuation of Land Act 1971 (VLA), if not adopting a wholly new piece of legislation, that: 1. Reinforces that equality of rating is a fundamental principle of rating law and the requirements of fairness should be achieved by reference to an individual valuation of each property such that comparable properties are to be valued by the same yardstick including as between districts and areas.

I note that the need for an emphasis on fairness in the valuation and consequently the rating of comparable properties between areas gained strong expressions of support from the Chair of the Committee. 2. Introduces a system of smoothing or capping.

Many Members will be familiar with impacts from recent leaps in the valuation of properties subject to

Valuer-General revaluations; some near doubling their prior valuation, these creating shocks for landowners, commercial tenants and, indirectly, even for commercial and leased residential values themselves by reason of reduced net achievable owner returns. 3. Clarifies what is intended by the concept of unencumbered. Valuations for taxes are made on the basis of unencumbered value however there are differing judicial views with respect to leases as encumbrances, particularly long-term leases.

Clarification is need. 4. Adopts an internal definition of owner, not one linked to the Land Tax Act 1936 (LTA).

The definition of owner for the VLA refers to a person who is liable to pay tax in respect of land under the LTA however the 2019 amendments to the LTA now include persons who are notionally owners for limited purposes and their situation requires clarification. 5. Includes express statutory provisions for the creation, use and objection to land use codes.

Of particular concern in relation to the

VLA is the use of land use codes in connection with property taxes. These were advised to have originated in a planning context but spread from there to use in other contexts including for taxes and duties.

2. VALUATIONS AND USE FOR STAMP DUTY PURPOSES

1. That the Valuer-General’s officers should be willing to engage with taxpayer’s representatives and engage in meaningful discussions where there are issues in respect of value and use.

Presently the Valuer-General’s officers do not engage in direct discussions with taxpayer representatives concerning the valuation or use of land as it affects liability for stamp duty. This can limit the Valuer-General’s officers from relevant factual information. Provision for direct communications could potentially limit disputes. 2. That consideration be given to clarifying predominant use of land by reference to the fee simple use in the context of qualifying land for stamp duty purposes. The concept of predominant use with respect to qualifying land for stamp duty refers to the activity of the fee simple owner. Where there is commercial activity involving residential use (e.g. accommodating students) clarification is needed. The Valuer-General uses predominant use of land in accordance with the Valuer-General’s office Staff Instruction No. 129 dated 7 March, 1989. Permutations of use when for a single purpose spread across multiple holdings and involving a mix of use, for example between commercial and primary production or residential, can create uncertainty beyond the scope of the Staff Instruction.

3. NOTICES, OBJECTION AND APPEAL PROCESS

1. Ideally an annual notice of valuation with both site and capital value should be forwarded at least to the registered proprietor. The current system is confusing and persons receiving notices of assessment in respect of non-current year liabilities often have no remedy in the case of valuation matters.

The submission argues that if a taxpayer receives an assessment or notice with rights to dispute the value or tax stated, the taxpayer should have the same rights of objection and appeal to both the tax and value within the time permitted to dispute the tax. The current alternative of multiple notices and dealing with multiple agencies and time periods is unsatisfactory. 2. The objection and appeal process in respect of a taxation matter involving a value issue should be a single process in accordance with the taxation law.

The current division of jurisdictions

between the Supreme Court on State

Taxation matters and the South

Australian Civil and Administrative

Tribunal (SACAT) on valuation matters is argued undesirable, potentially costly and a waste of resources. 3. If the current separate process remains, then the right to object and appeal should not be limited to the current year or exclude discretionary powers. It should allow both, and in the case of both, for past years for cause. 4. Under any appeal process the appellant should have the right to have a de novo review either by SACAT or the

Supreme Court. 5. The time in which to appeal should be extended from 21 days to 60 days.

The current 21 days is the shortest in

Australia.

4. LAND USE CODES

1. The current land use codes appear to serve many roles without an appropriate legislative framework. Their different purposes are governed by different Acts including the VLA,

LTA, ESLA and LGA.

The Valuer-General’s guide to the land use codes is at https://www.sa.gov.au/ topics/planning-and-property/buyingand-selling/researching-a-property/ land-use-codes. Currently the site has a booklet of codes as at 8 December, 2020.

Legislative changes have since been made particularly to planning laws of relevance. In Takhar v Commissioner of

State Taxation [2020] SASC119 Blue

J highlighted that the use of land involves both spatial and temporal dimensions, particularly for land used for primary production. The Full

Court looked to whether a business of primary production was being carried on and then whether the land was being used for that business. 2. Whether a single set of such codes can serve so many roles is open to doubt. 3. Neither the VLA or LTA refer to land use codes or indicators, yet they have become signifi cant under the

LTA particularly in relation to primary production and residential land, and the

Stamp Duties Act 1923 with respect to qualifying land. 4. The time for assigning codes can change for different purposes between 30 June, the date of a transaction or the Valuer-General’s general valuation of the whole of the State each year as at 1 January. Any set of land use codes to be used should be legislatively prescribed and should come with the usual rights of objection and appeal.

Many of the issues aired in the submission have had a long agitation with the Commissioner of State Taxes without however reaching resolution.

A full copy and the submission will be published by the Select Committee in due course and a transcript of our attendance published in Hansard.

Tax Files is contributed by members of the Taxation Committee of the Business Law Section of the Law Council of South Australia. B

New senior counsel appointed

The Society congratulates Jarrod Warren SC and Damian O’Leary SC on their appointments as Senior Counsel on 19 October.

Mr Warren SC obtained a Law (Honours) degree in Adelaide and was admitted to practice in September 1994. He practices in the areas of personal injuries litigation and employment/ industrial law. He appears regularly in the Magistrates Court, District Court, South Australian Employment Tribunal and Administrative Appeals Tribunal. He also appears in the Supreme Court and on occasions in the Federal Court.

Mr O’Leary SC obtained a Law degree with fi rst-class Honours before being admitted to legal practice in October 2007. His areas of practice have been in public law, general commercial law, and civil disputes. He has particular expertise in administrative, constitutional, migration, native title, discrimination and workers compensation law. He has appeared in the Federal Court and as junior counsel in the High Court for the Commonwealth and the State.

Chief Justice Chris Kourakis said: “The appointment of Senior Counsel is a signifi cant event for the successful applicants, for the legal profession and the South Australian community. They have earned this recognition through the diligent performance of their duties to the Courts and their clients.” B