Charities and other bodies that do not currently pay Council rates on their properties need to be aware of a new levy that is set to apply from 1 July 2013.

Land owners currently contribute to the cost of Metropolitan Fire and Emergency Services Board and Country Fire Authority in Victoria through their property insurance premiums. This will change from 1 July 2013, when the current insurance-based model will be replaced with a new levy known as the Fire Services Property Levy (Levy). The Levy will be imposed pursuant to the Fire Services Property Levy Act 2012 (Vic) and collected by local councils on behalf of the Victorian Government.

This new Levy will result in non-rateable properties used by charities, religious and other not-for-profit organisations, or otherwise for public benefit purposes (e.g. aged care, welfare, health, education) being valued for the first time by local Councils. Therefore, charitable and other organisations that own properties which are not subject to Council rates will have to carefully prepare for the new regime and understand the implications of valuations being undertaken by Councils for such properties.

Components of the Levy

The Levy payable in respect of each separately rateable property will consist of a fixed and variable rate component. The fixed component has been announced at $100.00 for residential properties and $200.00 for non-residential properties. The variable component will be calculated as a percentage of the capital improved value (CIV) of each property, with the Victorian Government stating that an announcement on applicable rates should be expected as part of the 2013 Victorian budget (in May 2013).

The variable rates will be assigned based on the different property classification of each property (for example, public benefit or vacant land) and the location of the property (metropolitan Melbourne or rural). For this purpose, each property will now be assigned an Australian Valuation Property Classification Code (AVPCC) by the local council which will be determinative of the applicable variable rate applied to the CIV of each rateable property.

Capital improved value for non-rateable properties

Land used for charitable purposes, land vested in religious bodies for certain uses, and land used or owned by certain other organisations for public benefit currently constitutes non-rateable land for council rate purposes, and as such, council valuations have historically not been carried out in respect of such properties.

For the purposes of the Levy, the owners of non-rateable properties will receive a valuation notice for the CIV for each such separately occupied non-rateable property. As such, these properties will become non-rateable leviable properties for the purposes of valuations. The CIV of a property is, in its simplest, its market value.

Having regard to the unique nature of these properties and the specialised purpose of their improvements which may have a significant value, determining a CIV would be complex and obtaining appropriate comparable market evidence will be difficult. The Victorian Government has recently published Specialist Property Guidelines for non-rateable leviable properties . Owners of non-rateable leviable properties may have already been contacted by their Council or the Valuer-General’s office to seek specifics about their properties for the purposes of valuations. The Guidelines contain a sample questionnaire that provides guidance as to information which property owners will be required to provide to assist in an accurate valuation. The questionnaire requires detailed information that is not easily obtained by and may not be readily available to non-rateable property owners in respect of their specialised properties, such as, assets / depreciation schedule, details on replaceable costs or depreciation costs. This could in turn, affect the valuations of such properties.

Objections to CIV

As a result of the Levy, objections to CIV will become a significant consideration for many non-rateable property owners, which would not have been previously faced with valuations for their properties.

Charitable and other organisations with non-rateable property holdings will need to understand the valuation cycles of Councils, and particularly their rights to objection if the CIV is considered too high, as this will have a direct impact on the Levy that will be payable in respect of those properties.

Given that this is a new regime that will affect property owners in Victoria that have never before been faced with valuations for their non-rateable properties, we are currently working with a range of not-for-profit organisations with such specialised property portfolios in their preparation for the forthcoming valuations. Gadens Lawyers will be pleased to advise on the legal and practical impacts of the Levy, including assisting in estimating expected Levy liabilities for budgeting and other purposes, and in the valuation objection process.