Australia: Owners of NSW contaminated or heritage constrained land may be entitled to lower rates and land tax

Clayton Utz Insights

Key Points:

In some cases, site owners may lodge appeals or objections against a determination by the Valuer-General or a rates notice by a local council.

Recent Land and Environment Court rulings suggest that landowners of contaminated or heritage constrained land may have been paying higher rates and land tax than necessary based on inflated land valuations, where the Valuer-General has applied the wrong valuation methodology or assumptions. In some cases, site owners may lodge appeals or objections against a determination by the Valuer-General or a rates notice by a local council.

Valuation where there's site contamination

Owners of contaminated land in NSW should make sure that they are paying rates and land tax based on valuations which take into account the existence of site contamination, following a Land and Environment Court decision on 16 April 2015 (Challenger Listed Investments Limited v Valuer-General (No. 2) [2015] NSWLEC 60).

One of the roles of the Valuer-General is to determine "land values" pursuant to the Valuation of Land Act 1916, for rating and taxing purposes. The land valuation exercise required by the statute is a highly artificial one. It requires the Valuer-General to determine the unimproved value of the "fee-simple", stripped of any improvements. It involves a hypothetical sale of something which does not exist in the real world.

Section 6A(2) of the Valuation Act contains some assumptions which the Valuer-General must apply in determining land values – essentially:

  • that the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and
  • that improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used.

In the Challenger case, the Valuer-General had determined the land value of an industrial site in Yennora NSW, owned by Challenger, at approximately $7.5 million, while Challenger contended that the land had a nil value.

The site had been declared "significantly contaminated land" by the Environment Protection Authority pursuant to section 11 of the Contaminated Land Management Act 1997.

In arriving at its land value, the Valuer-General ignored the existence of contamination, in accordance with its policy guideline "Identification and Valuation of Contaminated Land". That policy states that contaminated sites which are operational (or that have an "existing use"), are to be valued on the basis that the existing use of the site could continue in perpetuity, and that as a consequence, no allowance is to be made in the land value for the detriment caused by (or remediation of) any contamination.

Applying the Court of Appeal's construction of section 6A in Valuer-General v Fivex Pty Ltd [2015] NSWCA 53, Justice Pepper held that the Valuer-General's policy was wrong, having misconstrued the operation of and assumptions under section 6A.

Justice Pepper's decision confirms that the Valuer-General must take into account the effect of contamination (including likely costs of remediation) as a matter of fact. It does not matter, for the purposes of the valuation exercise in section 6A, that the contamination was a detriment caused by the use of the improvements (even though their existence was required to be disregarded).

While there is no definition of "contaminated land" in the Valuation Act, "contamination of land" is defined in the Contaminated Land Management Act 1997 as the presence in, on or under the land of a substance at a concentration above the concentration at which the substance is normally present in, on or under land in the same locality, being a presence that presents a risk of harm to human health or any other aspect of the environment.

The Valuer-General's policy offers a considerably more narrow definition of "contaminated land", namely "a property which is identified or recorded, by a local or state government authority as being contaminated or is widely known to be contaminated." Although in the present case, the existence of a declaration by the Environment Protection Authority meant that there was no dispute as to the fact of the contamination, it would appear unlikely that the Valuer-General's preferred definition would survive if challenged.

Valuation where there are heritage restrictions

Section 14G of the Valuation Act, together with the general valuation principles in section 6A(1) (explored above), set out a similarly artificial statutory scheme for valuing heritage restricted land. Section 14G(1) prescribes assumptions the VG must apply, while section 14G(1A) prohibits the VG making deductions for heritage issues outside the discrete assumptions in section 14G(1).

In Oriental Bar Pty Limited v Valuer-General [2015] NSWLEC 59, the applicants argued that the land values of their heritage-restricted properties should be lower. The parties' extensive disagreement stemmed in large part from their different approaches to the application of the general principles in section 6A(1) and their interaction with the heritage assumptions in section 14G(1).

In this matter, the applicants considered the correct valuation approach should consider section 6A(1) first in isolation, meaning that the selection of comparable sales should not be limited to comparables with heritage restrictions. Once comparables were selected using the general principles under section 6A(1), the applicants argued the assumptions required by section 14G(1) should then be applied in adjusting those sales. Interestingly, this approach resulted in the applicants selecting comparable sales with values three times higher than the Valuer-General's comparable sales. While this may initially appear counterintuitive (because an applicant generally prefers lower values to reduce rates), following large deductions made as a result of the assumptions in section 14G(1), a lower final value was reached. However, this methodology might not always produce the lowest result.

Conversely, the Valuer-General argued that the interaction between sections 6A(1) and 14G(1) should operate from the onset so that the highest and best use is restricted to a property's existing heritage restricted use. As a result, comparable sales should be selected which also suffer heritage restrictions.

In her decision, Justice Pain confirmed that the Valuation Act does not specify a particular valuation approach and, provided the assumptions required by section 14G(1) are made, more than one valuation approach could be appropriate. However, she ultimately preferred the applicants' approach to valuation since it was both theoretically in accordance with the statutory scheme (which requires precise application of its terms) and was also consistent with the approach taken in Krisgay Pty Ltd v Valuer-General [2007] NSWLEC 600 in making a heritage valuation under the Heritage Act 1977. However, despite accepting the applicants' valuation methodology, Justice Pain considered that the sales actually selected by the applicants were not in fact suitably comparable.

Justice Pain also considered separately the treatment of comparable sales which enjoyed the benefits of development consents. The applicants sought a downward adjustment of 10% when comparing a sale to the subject if at the time of sale it benefitted from a development consent. However, she considered that section14G required the Valuer-General to assume there were no legal impediments to continuing the existing use of the subject land – this impediment would exist if there was no development consent on the subject land. Accordingly, she considered no adjustment to take into account development approvals or existing use rights benefitting a comparable rate was warranted.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions