H&M pays ISPT $7.2 million a year for the tenancy rights to sell its cheap and cheerful clothes to throngs of young shoppers who congregate in the Mall.
But the 19th century GPO’s hallowed halls are not the only historic Melbourne building likely to be given a nominal $1 valuation this year, thus avoiding land tax.
A quirk in Victoria’s valuation rules applying to heritage-listed properties could see a number of the city’s wealthiest landlords dispute their assessments.
ASX-listed property giant GPT has objected to the council’s valuation of one the city’s most profitable and, on its own books, valuable office towers.
It owns the $284 million 34-storey building at 100 Queen Street, which is home to ANZ Bank offices as well a collection of some of city’s most important historic buildings.
Another landlord appealing their building’s valuation is the wealthy Cohen family, former owners of the Godfrey vacuum chain. They own the architecturally dazzling, 124-year-old, heritage property, The Block Arcade in Collins Street, which they acquired for $80 million in 2014.
Also up for review is another blue-chip jewel, the Intercontinental Rialto Hotel at 495 Collins Street. The building’s facade is ranked 40th on the Victorian Heritage Register.
Across the state every two years all properties are given valuation notices by local councils to determine the rates and land tax their owners will pay.
Complex valuation formulas calculate how much tax should apply on a site’s «highest and best use» value, not on the «capital improved» buildings on the land.
The rules apply equally to the city’s most valuable buildings, with some exceptions. Melbourne Council gave ISPT a rate notice in 2016 for the GPO which valued the site at $14.8 million — on which land tax would be assessed — with a «capital improved» value of $71.5 million.
ISPT objected, saying the GPO’s site was worth $1 as its heritage status meant it couldn’t be developed for a higher and better use.
It took the dispute to the Victorian Civil and Administrative Tribunal where the Valuer General intervened saying the council’s valuation was «flawed and unreliable,» instead putting a value on the site of $29.1 million.
But the Valuer General, usually the ultimate arbiter of a property’s value, was overruled because his office applied a valuation approach more common in NSW which recognises a property’s commercial potential despite its heritage restrictions.
Tribunal members Mark Dwyer and Justine Jacono ruled in favour of ISPT’s $1 valuation, but said in a scathing observation the valuation rules were «inelegantly drafted,» anachronistic and in need of reform.
«It is forcing parties into complex and costly litigation about the artificiality of a contrived valuation that bears no resemblance to the market or the real-world when the underlying dispute is really about land tax,» they said.
Valuer General Robert Marsh told The Age and Sydney Morning Herald the laws needed updating.
“There’s probably a need for the legislation to change to create more clarity and certainty around the approach to valuation of heritage properties,” he said.
“That was the view my office took and it [the GPO] should be valued accordingly.”
The ISPT valuer who determined the GPO’s value, m3property’s Grant Jackson, said the group used the most common industry «hypothetical development» approach to come up with the $1 valuation.
Mr Jackson said the property industry was surprised the tribunal was «offering gratuitous advice about regulation.»
«They’re just there to decide a matter of law,» he said.
Property Editor at The Age and BusinessDay journalist for Fairfax’s theage.com.au, smh.com.au, watoday.com.au and brisbanetimes.com.au.