BALDWINS • FoodLegal

Australian Lawyers and Consultants

High Court Landmark Decision on Valuations:
Win on Land Tax Will Help Ratepayers too

April 2003

The Australian High Court recently ruled, in Maurici v Chief Commissioner of State Revenue, that the land tax valuation method used by the Chief Commissioner in New South Wales was flawed as it resulted in an over-inflated valuation.

The decision opens the gate to challenge many valuations in all States and Territories in Australia for either Land Tax or Municipal Rates purposes.

In Maurici, the taxpayer argued that his land valuation should be reduced as it was based on sales evidence for scarce vacant land. The High Court said there was, in the valuation, evidence of a premium that was included in the valuation because of the scarcity of vacant land, especially given that the land in question was a Harbour waterfront property in Sydney. The taxpayer argued that the appropriate method of valuation required that an estimate be made of the value of the improvements, consisting mainly of a substantial house, so that this estimate be deducted from the notional selling price of the property in its fully improved state in order to derive "the unimproved value" on which the tax assessment would be based.

Although the Chief Commissioner argued that he was legislatively bound to use the unimproved value of land as a basis of valuation, the High Court held that "in valuing the land, the respondent’s valuer did not proceed rationally, in that he was unreasonably selective in ultimately confining himself to two sales of scarce vacant land for the purposes of the comparison." Also, "sales of properties of a different character are likely to attract a different class of buyer and are unlikely to provide a reliable indication of value". Therefore the High Court found that the improved value of land was a relevant factor in valuation matters.

If any client is unhappy with a municipal valuation, the High Court’s decision of Maurici provides an excellent precedent to argue against current municipal valuation methodology. Baldwins has been briefed to act in other similar situations.

Return to the Tax Law Archive or Corporations Law Archive.