How is pastoral lease rent determined?
The Valuer General determines rents based on accepted valuation practice. This is achieved by analysing sales of pastoral leases and deducting the value of any improvements to determine the unimproved land value. A capitalisation rate is then applied to the unimproved value to derive a rental value.
Being based on analysis of sales of pastoral leases in the market place, the assessments reflect the impact of any drought, industry economics and other factors that were considered by the parties to the sale transaction.
Only pastoral lease sales that are considered to represent “fair market” transactions are used in determining what is termed ‘market unimproved value’. These sales are analysed by distributing the sale price between livestock, plant and equipment, house and buildings, waters, fencing, any other improvements and the unimproved land value. This unimproved value evidence provides the basis for determining a separate unimproved value for each lease. The final market unimproved value considers a number of factors relevant to the pastoral enterprise such as potential carrying capacity (PCC), land system productivity, location, access, rainfall reliability, water supply, size, and environmental issues.
The Valuer General also consults with the Pastoral Lands Board in relation to the economic state of the pastoral industry.