Land Tenure

Land Tenure

Issue:
Despite the excellent tenure reforms of 2014, only 30 per cent of Queensland is freehold land. Freehold land is a prerequisite to attract many forms of investment. It offers far greater security to landholders, with the removal of the risk of excessive, even ridiculous, annual rent increases, as has been seen in the past.

With most perpetual leases transitioning to freeholding, it is the term lease estate that requires further attention if the State is to encourage continued good management, as well as the viability of the estate, industry and its surrounding rural communities, and to continue the good work that was legislated in 2014. It is time to turn our collective attention and thinking into how to provide the best possible tenure security to the term lease estate, which comprises over 50 per cent of Queensland.

Solutions that AgForce advocates:
That the state government's Department of Natural Resources, Mines and Energy implement with AgForce and traditional owners, a research and reform body to share information, where possible, to guide additional legislative reform and make additional recommendations with industry.

Rural Leasehold Land
Policy Position (endorsed by AgForce State Council 2012)


Rural lessees require a large capital asset to be able to generate farm income and the value of those assets are not realised until sold. The methodology for calculating rent based on capital value may be disproportionate to the income generated from those assets. AgForce's policy on leasehold land is outlined below.
  1. Rural leases are unique in requiring their lessees to provide land management activities for the State/community, whilst operating a sustainable grazing enterprise – this should be reflected in the rental methodology, and in particular they should:
    a.    Not rise substantially without concurrent rises in farm income and/or technological advancements which have lowered costs or increased production significantly;
    b.    Acknowledge that in order to achieve the social, environmental and cultural objectives of government policy (e.g. Land Act 1994, Delbessie), lessees must have the financial security to do so;
  2. Lessees, like all business owners, require planning certainty and changes to state taxes and charges should be introduced gradually, smoothing out radical change;
  3. Where the government's changing policies on leasehold land affect the lessee's ability to generate profit from leasehold land, these impacts should be reflected in leasehold rent;
  4. Rural leases are unique in requiring their lessees to provide land management activities for the State and community, whilst also operating a sustainable grazing enterprise – this should be reflected in the leasehold rent; and
  5. That any data used in calculating leasehold rentals be objective, robust, repeatable and used at an appropriate scale.
Issue
Approximately 60% of Queensland is owned by the State Government and managed by rural lessees via an array of grazing lessees administered under the Land Act 1994. The conditions, renewal process and rents payable upon this land has been subject of many reviews and has changed significantly over time to reflect the desires of the lessor, the State of Queensland.

Background
Historically, leasehold rents have been calculated as a nett rate (a factor of the carrying capacity of the land); but more recently as a set percentage of the unimproved value (UV) of the land as it was considered that UV was a reflection of the productivity of the land. However, in the 2000's, exceptional growth in the values of land in Queensland resulted in increases of UV's of 300-800%. This increase in value was not accompanied by any concurrent rise in commodity prices or farm income but resulted in skyrocketing leasehold rents. Through subsequent reviews and research, AgForce advocated for an overhaul of the rental methodology to reflect capacity to pay however whilst the methodology was ultimately lowered in 2014, the current rental methodology remains UV-based.

In 2008, AgForce became partner to the Delbessie Agreement – the framework of environmental legislation and policies which supports the renewal process of these grazing leases. In 2011, over 50 leases had been reviewed and renewed under the framework, with over 80% being assessed as in good condition despite poor climatic conditions. Despite these good results, AgForce supported government's scrapping of the program in 2014 based on these good results and encouraged government to use their plentiful existing legislation and remote sensing capability to identify and deal with any land management issues in a proactive manner rather than through and expensive, compliance-focussed way.

As a comprehensive solution to the issues noted above, AgForce has pushed for a large-scale tenure reform which saw legislative changes in 2014 supporting the freeholding of perpetual leases based on a Net Present Value sum. AgForce continues to advocate for a viable pathway to freehold remaining term leases (approx. 50% of the State).

Other Relevant Documents
Parliamentary Inquiry Report into Land Tenure Across Queensland
https://www.cabinet.qld.gov.au/documents/2013/Aug/Land%20Tenure/.../Report.pdf


Land Tenure

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