While land tax is easily calculated and understood, the key input to the calculation, the property's Annual Rental Value (ARV), is more opaque.
What is the ARV?
The ARV is a value assigned to every property by the Department of Land Tax that is intended to represent the rental income the property would generate, were it rented unfurnished on the open-market.
Five Year Cycle
ARVs are assigned to every property based on a survey undertaken by the Director of Land Valuations every five years. The last assessment came into force on the 31st December 2009 and the next review will be conducted in 2014. The revised ARVs will come into effect on the 31st December 2014.
Factors that influence ARV
The ARV of a property is based on multiple factors, the principal inputs being:
Invariably, property rental values fluctuate over time and such market fluctuations between ARV revaluation dates, whether up or down, are not reflected in the current ARV assigned to a property. Accordingly, at any given time your actual ARV may be higher or lower than the market rent you could get for your property. The five year re-evaluation is intended to re-level the playing field by bringing ARVs back into line with prevailing market conditions.
If you make improvements to your property that increase the square footage or add ancillaries or amenities to your property, the Department of Land Tax will adjust your ARV (and hence your land tax) when such improvements are completed. However, in the absence of such improvements (which normally increase the property's ARV), there is no provision for a property owner to apply for a reassessment of the in force ARV, despite the potential for substantial deviation between the ARV level and actual market rents due to changes in market conditions.