Victorian statute imposes a Fire Services Levy, which requires the calculation of the capital improved value of leviable land.

The Supreme Court of Victoria (Court of Appeal) upheld the VSC decision of Richards J that the above-ground wind farm assets were chattels and therefore excluded from the land valuation.

Snapshot

  • Wind farm operators occupying land under leases from property owners will be impacted by the decision. Other operators, such as solar farms, will also likely be affected.
  • In the first instance, Fire Service Levies based on the value of the equipment put on the land by those operators will likely be too high. Objections to valuations should be lodged.
  • The decision will likely have wider prospective application, including for wind and solar farms. For example, the decision may have tax implications for the treatment of wind farm, and similar, equipment as fixtures or chattels both in Victoria and in other States.

Detail

In December 2020 judgment was delivered in favour of the Ararat Wind Farm (AWF), represented by Herbert Smith Freehills, in the Supreme Court of Victoria.

On 1 October 2021, a unanimous judgment was delivered dismissing an appeal by the Valuer-General Victoria (VGV) appeal in Valuer-General Victoria v AWF Prop Co 2 Pty Ltd & Ors [2021] VSCA 274.

The VGV has decided not to further appeal the decision to the High Court.

Background

The AWF operates a wind farm facility on leased agricultural land in Ararat, Victoria. Victorian statute imposes a Fire Services Levy (FSL) on the owner of leviable land under the Fire Services Property Levy Act 2012 (Vic). Under that Act, the land owner is required to pay the FSL each year.

The FSL is calculated based on the capital improved value (CIV) of the leviable land as defined in the Valuation of Land Act 1960 (Vic), being the amount for which the land would be sold for if it was held for an estate in fee simple ‘unencumbered by any lease’. In calculating the CIV, chattels are excluded from the valuation.

Richards J held at first instance that the CIV valuation within the Ararat Rural City Council municipality was $14 million, which replaced the $470.4 million valuation originally applied by the ARCC.

Legal issues

The Court of Appeal confirmed the primary judge’s conclusions in favour of AWF and held that:

  1. Land title, not occupancy, is the starting point for valuing land. The occupancies to be valued when assessing CIV are therefore the separate occupancies created by the wind farm leases over the land owned by each separate land owner.
  2. The above-ground assets, including the wind turbines and towers, substation, wind-monitoring masts and buildings, are not part of the land to be valued for the purposes of calculating the CIV (i.e. not fixtures or improvements). The Court held those assets are chattels at both common law and pursuant to section 154A of the Property Law Act 1958 (Vic).
  3. The VGV argument that AWF had an ‘equitable interest’ in the land resulting from its interests in the wind farm assets was dismissed.
  4. The turbine foundations, roads, fences, carpark and underground cabling are not chattels and are included as part of the land to be valued.
  5. It was appropriate to value the land by reference to the expected rental of the land by an owner to a wind farm. The rent paid under the actual leases is likely to be a guide to the market rental for occupation.