H&M pays ISPT $7.2 million a year for the tenancy rights to sell its cheap and cheerful clothes to throngs of young shoppers who congregate in the mall. Illustration: Matt Golding Credit:Matt Golding But the 19th-century GPO's hallowed halls are not the only historic Melbourne building likely to be given a nominal $1 valuation this year, thus avoiding land tax. A quirk in Victoria's valuation rules applying to heritage-listed properties could see a number of the city's wealthiest landlords successfully dispute their assessments. ASX-listed property giant GPT has objected to the council's valuation of one of the city's most profitable and, on its own books, valuable office towers.

It owns the $284 million, 34-storey building at 100 Queen Street, which is home to ANZ Bank offices as well as a collection of some of the city's most important historic buildings. Another landlord appealing their building's valuation is the wealthy Cohen family, former owners of the Godfrey vacuum chain. They own the architecturally dazzling, 124-year-old heritage property The Block Arcade in Collins Street, which they acquired for $80 million in 2014. The Block Arcade's landlords could also challenge its valuation. Credit:Eddie Jim Also up for review is another blue-chip site, the Intercontinental Rialto Hotel at 495 Collins Street. The building's facade is ranked 40th on the Victorian Heritage Register. Across the state every two years all properties are given valuation notices by local councils to determine the rates and land tax their owners will pay.

Complex valuation formulas calculate how much tax should apply on a site's "highest and best use" value, not on the "capital improved" buildings on the land. The rules apply equally to the city's most valuable buildings, with some exceptions. Melbourne City Council gave ISPT a rate notice in 2016 for the GPO that valued the site at $14.8 million – on which land tax would be assessed – with a "capital improved" value of $71.5 million. A contrived valuation that bears no resemblance to the market or the real-world when the underlying dispute is really about land tax VCAT members Mark Dwyer and Justine Jacono ISPT objected, saying the GPO's site was worth $1 as its heritage status meant it couldn't be developed for a higher and better use. The property fund used valuers m3property to determined the GPO's value. The group's director Grant Jackson said their valuation used the most common industry "hypothetical development" approach to come up with the $1 figure.

ISPT took the dispute to the Victorian Civil and Administrative Tribunal, where the Valuer-General intervened saying the council's valuation was "flawed and unreliable", instead putting a value on the site of $29.1 million. But the Valuer-General, usually the ultimate arbiter of a property's value, was overruled because his office applied a valuation approach more common in NSW, which recognises a property's commercial potential despite its heritage restrictions. Tribunal members Mark Dwyer and Justine Jacono ruled in favour of ISPT's $1 valuation, but said in a scathing observation the valuation rules were "inelegantly drafted", anachronistic and in need of reform. "It is forcing parties into complex and costly litigation about the artificiality of a contrived valuation that bears no resemblance to the market or the real-world when the underlying dispute is really about land tax," they said. Mr Jackson said the property industry was surprised the tribunal was "offering gratuitous advice" about regulation. "They're there to decide on the evidence a matter of law," he said.