ISPT wins costs in landmark GPO $1 valuation case

Victoria’s planning tribunal – which doesn’t usually award costs – decided to back ISPT’s bid. The total amount awarded to ISPT has yet to be agreed by the parties or, failing that, be set by the courts.

The super fund’s win has already delivered a $650,000-a-year windfall in averted land tax.

The GPO, occupied by Swedish fast fashion giant H&M, is in the beating heart of Melbourne’s golden mile of retail real estate: the Bourke Street Mall.

H&M pays ISPT $7.2 million a year for the tenancy rights to sell its clothes to throngs of young shoppers who congregate in the mall.

Planning tribunal

ISPT won its original case supporting a $1 value for the GPO in February after the Valuer General, in an unusual move, asked to be joined to the proceedings. It used the 19th-century GPO’s hallowed halls as a test case to argue that property should be valued on a “rent differential” basis, which would boost land tax payable to the government.

Planning tribunal members Mark Dwyer and Justine Jacono said the Valuer General’s intervention in the case completely changed the proceedings and it continued to prosecute its method “even when it became clear that the valuation was flawed.”

The Valuer-General had an obligation to act as a model litigant, they said.

“We believe it fell short in that role … far from minimising the overall level of legal and valuation costs, the Valuer General’s conduct led to ISPT being put to significant and unnecessary costs beyond those that it might ordinarily have expected to incur in a proceeding of this nature,” they said.

A quirk in Victoria’s valuation rules had allowed heritage-listed properties to be given a nominal value because they can’t be redeveloped for a higher and best use. This is not the case in NSW, where a property’s commercial potential is recognised despite its heritage restrictions.

Other city landlords – including property giant GPT – have successfully appealed or settled similar heritage disputes since the decision, giving them favourable land tax outcomes.

The “loophole” prompted the state government to amend the Valuation of Land Act 1960 to remove references to heritage buildings in June, though the change is yet to be tested.

“Heritage registered commercial properties that generate significant income should not receive an unfair advantage through reduced land tax liabilities – that’s why we’ve changed the law to close this loophole for good,” a spokesperson said.

A valuer contacted by The Age, who handles multiple similar cases but was unwilling to be named, said the change was a “knee-jerk reaction” which the government hoped would create higher site-value assessments.

“They did this in such a hurry, they don’t know what the ramifications will be,” they said.