It’s about the land, not the owner: how local governments should categorise land for rates

A recent decision from Queensland’s Land Appeal Court highlights that Council policies for rates categories are more than just a guide. In short, Councils must follow the clear intention of rating policies to determine the most suitable category for the land and that exercise involves a consideration of all uses of the land - not just the use carried out by the registered owner.

In this article, we consider the implications of the Land Appeal Court’s decision for local governments.

The key issues

Last year, we discussed a Land Court of Queensland decision concerning the method by which local governments should categorise land for the purpose of rates. This case held that local governments should categorise land for rates flexibly and use policies only as a guide. However, that decision was appealed.

In Western Downs Regional Council v Geldard [2020] QLAC 1, the Land Appeal Court has overturned the previous decision. The appeal raised the following issues:

1. Are policies for rates categories only a guide or carefully drafted to be followed?
2. Is the ‘use’ of land limited to activities carried out by the landowner or all uses of the land?

Background

The respondent (Mr Geldard) purchased land from Australian Pacific LNG Pty Ltd (APLNG), who retained rights to extract coal seam gas from wells on the land under a Conduct and Compensation Agreement. Mr Geldard only used the land for the rural purposes of grazing and cropping.

Western Downs Regional Council (Council) issued Mr Geldard with a rates notice for land under the category of “Petroleum Other”, described as:

''Land other than a Petroleum Lease, with an area 400 Ha or greater, which is used or intended to be used, in whole or in part, and whether predominantly or not, for:

 (a) gas and/or oil extraction…”

Mr Geldard objected to this categorisation, arguing it should be charged rates according to the ‘Rural’ category, which includes ‘Land used principally for rural purposes… not less than 100 ha’. Council overruled this objection and continued to issue rates in the ‘Petroleum Other’ category, despite the transfer of the land from APLNG to Mr Geldard.

Mr Geldard appealed to the Land Court, which held that the proper category was ‘Rural’. Council then appealed that decision to the Land Appeal Court.

The Land Appeal Court’s decision

The Land Appeal Court allowed the Council’s appeal and found that the land fell within the ‘Petroleum Other’ category.

The Appeal Court focused on the words adopted by the Council in the rates categories, noting that their policy is a technical document created by resolution at a special general meeting of the Council. The Court must look to the words the Council had chosen.

The Appeal Court noted that rates are a tax on land and not the owner. Accordingly, the rates categories must depend on the use of the land, not the use by the owner. The Member at first instance had erred in approaching ‘use’ with a focus on the ‘principal’ activity of the landowner because the category is determined by the use of the land as a whole.

In considering the wording of the ‘Petroleum Other’ category, the Appeal Court emphasised that the wording did not require gas extraction to be the predominant use of the land. This was a deliberate departure from previous wording that involved the ‘primary’ use test.

The wording of this category intentionally considered all uses of the land, not only the predominant use. The Appeal Court found that the Member erred in determining the appeal with regard to authorities that did not reflect this changed approach.

The Appeal Court supported the Council’s determination that the ‘Petroleum Other’ category applies to land used for gas extraction, even where it is held as freehold and used for a variety of uses. This was not considered unfair or unreasonable. It is within Council’s power to levy differential rates on land within its local government area, with regard to its use.

The Member also failed to have regard to the words ‘Land, other than a Petroleum Lease’ in the definition of the ‘Petroleum Other’ category. This land was held as freehold and therefore fell within that definition – the fact that it was within the area of petroleum leases did not alter this.

The Appeal Court found that the clear wording of the policy indicated the respondent’s land fell within the ‘Petroleum Other’ category because it was not a petroleum lease, was greater than 400 ha, and was used (in part) for gas extraction and associated activities.

Local government implications

This case highlights that Council policies for rates categories are more than just a guide. They are carefully drafted technical documents that use deliberate wording. Council officers are expected to follow the clear intention of policies for rates categories to determine the most suitable category for the land.

Rates should be charged by reference to the use of the land as a whole. Council should not focus solely on the primary uses of the land or the landowner’s use of the land.

This case made clear that it is within Council’s statutory function to levy rates on owners having regard to all the uses of the land, not just the owner’s use.