Tasmania was the first state to levy a tax on land values in 1857. Tasmania's current legislation was passed in 1952. The land value base is the assessed annual value; an annual rental value.

See the Tasmanian system


Queensland introduced the land value (unimproved value) system in 1887 for rural areas and in 1890, despite a nationwide and international depression, it was extended to urban areas. It is the only system used in Queensland being also used by the Metropolitan Water Sewerage and Drainage Board in Brisbane.

See the Queensland system


In 1893, South Australian municipalities were given the choice of adopting a land value system but with severe restrictions that hindered its general adoption. Today, only 4 councils have opted to tax on land values with the remainder opting for improved values.

See the South Australian system.


In Western Australia, the Roads Act 1902 gave Road Boards permission to use either a site value or annual value system to raise revenue. The majority opted for the site value system. Urban municipalities were given the same power in 1945.


Enabling rating legislation was passed in 1920 and within the next ten years, 9 of the 28 municipalities in greater Melbourne adopted the new system including the choice of site values. Each municipality is allowed to choose its own rating base. Of the 210 municipalities about 150 have opted for net annual value (NAV) and 60 for site value (SV). The option to use a capital value base was available to municipalities from the 199211993 rating year.

See Victorian system


General valuations based on unimproved values every 2 years.

See ACT system


The Commonwealth Government introduced the Land Tax Assessment Act, 191Othat was designed to break up large land holdings. The tax was based on unimproved values but was repealed in 1952 when its legality was threatened as being unconstitutional. However, in Osborne v The Commonwealth (1911)12 CLR 321 the High Court held that although the tax was progressive and designed to break up large holdings it was legal.

Various state acts for example, the Land Tax Act, and Land Tax (Management) Act 1956 in NSW replaced it. The NSW tax was a progressive tax until 1986 when it was reduced to a flat 2 cents in the dollar rate. The monies so derived are placed in state revenue and therefore, do not go directly to local government.


First land tax legislation in NSW was the Land and Income Tax Assessment Act 1895using unimproved values. In 1906, NSW abolished the annual rental value system and made it compulsory for municipal councils both urban and rural, to use the unimproved value for a minimum rate. However, the balance could be raised by a tax on both land and buildings. The Sydney Harbour Bridge Act 1922 enabled the unimproved value taxation of land in the City of Sydney, municipalities and shires that came within the influence of the bridge.

The Local Government acts of 1905 and 1906allowed local authorities to impose rates based on unimproved values.

The Local Government Act 1919, replaced the previous local government acts and provided for the assessment of a general rate on unimproved value. This has been replaced by the Local Government Act 1993 under which the main sources of finance for councils are rates, charges, fees, grants, borrowings and income from investments. The Act allows for categories of ordinary rates based on whether the land is residential, farmland, business or mining. There are also special rates for council services or special purposes such as water, sewerage or drainage,

The current valuation Act is the Valuation of Land Act 1916(as amended). Under this Act, the central valuation authority, the Valuer General, was created with the objectives of achieving continuity, uniformity, and stability of land valuations for property tax purposes. The initial aim was an idealistic one on the assumption that the values provided the landowner could be used for all purposes:

The object of the Valuation of Land Act, 1916, as gathered from its provisions, was to have one value for a block of land whether for taxation or for resumption purposes   Pike J, Mobbs v VG 6 LGR 79.

The Valuation of Land Act of 1916 is not a taxing Act, as many people seem to think. The object of that Act was to bring into line the serious differences that used to exist between the valuation of land for taxing purposes and the value of land for compensation and mortgage purposes; under the Act the one value applies in every case. It applies for compensation as well as for rating   Pike J, Alison v VG 6 LGR 25.

These idealistic aims soon dissipated, as the cost of upkeep of a proper Improved Value tax system was far too prohibitive. The shortage of qualified and experienced staff meant that assumptions and qualifications in the definition of market value were necessary to maintain an efficient tax system. These controlling factors still apply today. The original tax bases were:

There is virtually no difference between the old unimproved value and the later land value in urban areas however, in certain non urban areas it allows the valuer to disregard the original state of the timber and determine land value based on the existing economic clearing of the property. Land values are now the compulsory value base for local councils and on all residential land for the Waterboard.


Ground improvements (invisible improvements) such as reclamation and drainage are included as part of the land value but they must be economical.


Land value is a statutory value subject to a number of statutory conditions and assumptions. It is the present value of the land excluding manmade structural improvements such as houses, fencing, and driveways. See definition above.

Therefore, ground Improvements are those improvements that "merge" with the land and therefore, are difficult to differentiate from the land. They are also called invisible improvements for example, reclamation, drainage, and clearing.

The 1916 Act has been replaced by the Valuation of Land Act 2003. The basic definitions are still the same.



The AAV is an annual improved value subject to certain statutory assumptions and is used in by the Waterboard for the taxing of non residential land. It is defined as follows:

(1) The assessed annual value of land is 
(a) nine tenths of the fair average value of the land, with the improvements (if any) thereon; or
(b) $10.
whichever is the greater'  s7(1) Valuation of Land Act 1916.
Similar provisions apply in s7C for the AAV of strata.


In 1986, in order to overcome problems of along lead time between general valuations, the NSW Government introduced the concept of equalisation factors. Between general valuations an adjusted value is determined by applying the relevant equalisation factor to the base date land value.

The Valuer General determines the equalisation factor each year for each zone in each local government area. The factor is multiplied by the nominal land value to approximate a value that would have been applicable if a General Valuation had been made at the equalisation date or common base date.


Australia has experienced a number or enquiries into the property taxation system. These have examined and established factors and ideals for improving the property tax system. The following are the most important enquiries:


The NSW Committee of Enquiry  1960 (The Bridge Report) recommended no major change in the use of unimproved values but rather, fine tuning of the statutory definition. However, the committee did recognize the following problems with the concept:

It would be futile for valuation purposes in England or the European Continent, to speculate whether land was marsh or forest or open country at some long past period .... It is important that the concept of value should be capable of reasonably precise determination... It can readily be appreciated that in determining Unimproved Values of pastoral and agricultural lands, the most contentious are those relating to the amounts allowed for treatment of timber, scrub and undergrowth.

Therefore, although recognizing anomalies in the unimproved value definition particularly for rural lands, the Committee was not prepared to embrace the land value concept.


The Queensland Committee of Enquiry also recognized problems with the valuation of timber treatment for rural land:

This requirement introduces unnecessary uncertainty and complexity in the valuation process and provides differences, disputes and litigation between the valuing authority and the owner'.


The NSW Royal Commission made specific recommendations on the problems recognized in the Bridge Report ( a previous governmental report):

The theory behind the recommendation made by the Bridge Committee was that the owner of the land would recoup himself for the cost of such invisible improvements through increased productivity due to the performance of the work, or it and when the land is sold .. . by the price received for the land.

The Commission recommended important changes to the valuation base particularly, the introduction of land values to overcome a number of anomalies.

The role of property tax or a tax on immovable property as part of public revenue has not been very well considered in governments particularly the Federal Government. However, the dearth of debate and understanding not only applies to governments but also academics. In this context property taxation will now be analysed under the criteria of good taxation.