For Land Tax Purposes Land Value Includes GST

Storage Equities Pty Ltd v Valuer-General [2013] NSWLEC 137 makes it clear that land value includes the GST component should it be applicable (at least as it relates to NSW land transactions).

The vast majority of commercial property transactions are not subject to GST because they fall within the “going concern” exemption, which means that in general terms the Storage Equities case only has limited application for commercial property.

If the Federal Government change the GST Law so that the “going concern” exemption is removed or substantially modified, then one of the likely unintended consequences of that change is that the Land Values used as comparables for future land tax purposes will increase by 10% and therefore without reference to any true increase in the economic value of commercial land, the land tax will increase in the order of 10% as well.

What a ridiculous outcome that would be! Applying a tax to another tax grossly distorts all notions of fairness and equity.

Personally, I think the current definition of land value in the Valuation of Land Act should be modified to make it clear that land value excludes all State and Commonwealth duties and taxes so that it is clear that the value being taxed is solely the economic value of the land.

The Federal Government needs to do its best to ensure that all unintended consequences associated with modifying the GST be properly addressed.