In Australia most rates and land tax are based on the land value (unearned increment) as this is considered to be the most equitable method of assessing both liability for charges and taxes related to land and ability to pay. Owners of more valuable properties will, accordingly, pay more than those whose properties are less valuable. The definition of value is a statutory one and the relevant statute requires the valuer to take into account certain assumptions (eg that the land is vacant or freehold) when valuing properties.

The best evidence of land values are sales of comparable vacant land within a locality that take place around the valuation date. However, in the absence of vacant land sales, values are based upon an analysis of sales of improved properties (that is, including buildings) in the vicinity which occurred around the date of valuation. Such sales provide the most reliable guide to value and reflect the market conditions at that time.

In the case of properties involving improvements the valuer deducts the added value of all the improvements from the selling price to ascertain the value of the land. The added value of the improvements represents the depreciated replacement cost and is determined by deducting from the replacement cost an allowance for accrued depreciation and obsolescence.

Land values reflect the market's perception of the attractiveness of an area. If buyers are willing to pay higher prices for property in a particular area then land values in that area will reflect this. Other factors which, if prominent, may affect the valuation include transformers, concrete bus shelters, easements, main streets, traffic lights/ noise, lanes and pathways.

property taxation