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October 05,2022
Demysifying Rating and Taxing Valuation and Objections for Non-Valuers
Following on from with our last post here, we thought it would be helpful to provide a practical guide on how rating and taxing valuations are done in NSW and some tips when preparing an objection to your land value.
How Rating and Taxing valuations are done:
Rating valuations are completed under the provisions of the Valuation of Land Act 1916. This piece of legislation is extremely complex so were not going to go into too much detail. This post is more of a guide to the practical application of rating valuations in NSW. The method used to provide valuations for rating and taxing is the Mass Appraisal approach. Apologies in advance for the use of jargon. Mass appraisal is completed by grouping like properties together into “components”. A sample of several properties are then selected out of the component that represents different statistical markers in that group. These properties are called “benchmarks”. These properties are typically the median value property, and properties in lower and upper quartiles as well as properties that may represent a different sub-market in that group (if required). It’s a little easier to explain with an example: There are 1,000 residential properties in Gotham City south of Wayne Mansion. All of these properties are placed in a component called Gotham City South. Three properties have been selected as benchmarks. The median property, a low value property with a smaller land area and a higher value property being a large 1,000sqm block. These three benchmark properties are individually valued. Based on the percentage change that results from the previous year’s land value, a factor is generated. The factors generated are then applied to the rest of the properties in the component. This approach has its benefits, its affordable to implement for the government, reasonably accurate and is able to be rolled out to every property in the state without being overly resource heavy. It also works very well with properties that have large groups of similar properties like the Sydney suburbs. Mass valuation does have its flaws though. It doesn’t work very well with properties with unique features, good or bad. Typically, some of the properties that mass valuation struggles with are constrained properties, properties with contamination issues, heritage properties, development sites etc. Also, by way of application of percentage factor increases, previous errors in land values can be compounded year on year if not kept in check. There are processes to stop values getting out of kilter. Were not going to discuss all of them but one of which is the objection process.What to do you need to do to lodge an objection to your land value?
Get to Know Your Property. Do a little bit of research and learn all the important features of your property. The area, the location, the zoning. The good and the bad. Is your property unique? Does your property flood? Is it heritage listed? Does something impact its development potential or its value? Arm yourself with this information first. Find Evidence to Compare to Your Property. Using what you know about your property, do some research and find the closest physically comparable sales evidence for comparison to your property. These sales should be as close to 1 July as possible as that is the relevant date for all rating valuations. Vacant land sales are strongly preferred as they require less adjustment than improved properties and eliminate some of the subjectivity from the equation. Work Out What Your Property Is Worth. Armed with your evidence, work out what your property is worth and see if its worth lodging an objection. If you get here and your value is too high, its time to jump on the Valuer Generals website and lodge your objection. What is Required by the VG for an Objection to be Accepted? If you plan to lodge an objection, there are a couple of things you should know.- It needs to be lodged on time. You have 60 days from the date of your notice to lodge an objection. Extensions are sometimes permitted for extraordinary circumstances. For example; you were overseas at the time of the notice being issued or health reasons etc. Better not to risk it though.
- You need to provide evidence to support your objection. That means you need sales evidence, or a sale of the subject property for an objection to be accepted. The days of, “my neighbour has a lower value than mine” don’t cut it anymore.
- You need to justify why you are lodging your objection so make sure you have a few comments written down before you jump on the website to make the process easier.