Melbourne’s GPO building valued at $1

Melbourne’s GPO building valued at $1

8 March 2019

The Victorian government has vowed to close a legal loophole that allows owners of multimillion-dollar heritage buildings avoid paying land tax by having the sites valued as little as $1, reports The Age.

Last December, the Victorian Civil and Administrative Tribunal (VCAT) ruled that the site of Melbourne’s famous GPO—a sprawling 8,000 square metre shopping complex in the heart of the city—was worth only $1.

Victoria’s Valuer-General had argued the site on which the 160-year-old building sits was worth $29 million.

The victory has potentially delivered the GPO’s owner—Australia’s largest industry super property fund ISPT—a $650,000-a-year windfall in averted land tax and prompted other heritage building owners to rush to VCAT to appeal their building valuations.

ASX-listed property giant GPT has objected to the council’s valuation of one of 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 as a collection of some of the 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.

The problem, as far as the government sees it, revolves around the interpretation of Sections 2(8) of the VL Act used in Victoria for the assessment of land tax. The section allows for an artificially reduced site value compared to the unaffected market value that would otherwise arise if the land was not heritage constrained.

The rational behind the reduced land tax rule reflects the community benefit achieved through the heritage protection of the building, and the potential impediment to the land owner arising from higher maintenance costs and/or restrictions on development or use associated with the heritage registration.

Nevertheless, VCAT members Mark Dwuer and Justine Jacono, who ruled in favour of the $1 valuation, said the rules were “inelegantly drafted”, anachronistic and in need of reform.

Valuer-General Robert Marsh said 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.”

Victorian Treasurer Tim Pallas is determined to close the legal loophole “whether by way of review through [the VCAT] or by doing what we do regularly, which is legislation intended to close the gap in what we understand to be is the existing and predictable revenue base of the state.”

“So, we’ll look at it and take advice on what the appropriate way through the issue is, but we are concerned. And of course, every taxpayer loses out and the services of the state loses out,” he said.

The GPO, located in the beating heart of Melbourne’s golden mile of retail real estate, the Bourke Street Mall, is occupied by Swedish fast fashion giant H&M, who pays ISPT $7.2 million a year in tenancy rates.