News

Minister reveals lack of understanding in leasehold rent swipe

Beef Central, 11/11/2011

Queensland’s natural resources minister has angered rural leaders with comments that appear to reveal a fundamental lack of understanding about how leasehold land rentals work.

Rural lobby group AgForce is concerned about the impact that rising leasehold rents could have on farm profitability when current arrangements end from 2017.

In 2007 the Queensland government raised the percentage for calculating rural rents from 0.8pc of unimproved value to 1.5pc. At that time, a decision was made to cap annual rent increases to ensure they could not rise more than 20pc in any one year.

However, that arrangement ends in 2017. From then, as AgForce points out, rural rents have the potential to soar.

AgForce is encouraging its members to participate in an online survey so it can gather hard data on the impact of rental costs on agricultural enterprises.

AgForce CEO Robert Walker said that under the current system, leasehold land rents could increase by as much as 1100pc in 20 years, in line with rises in property values.

“However, just because land is more valuable, it doesn’t mean a primary producers’ profit will increase,” Mr Walker said.

In response, Queensland’s Natural Resources minister Rachel Nolan released a statement rejecting the view that "land rents represent an unreasonable imposition on pastoral leaseholders".

In the same statement she suggested that the 1.5pc rate paid by rural leaseholders was very low compared to other renters – but failed to point out that leaseholders had to pay full market value to secure the right to lease the property in the first place.

“The current rate of land rent means that a grazier can be sitting on a cattle property worth $7.5 million and pay only about $400 a week to its owner, the State, each year,” she said.

“On top of that the lessee has a strong tenure and a guaranteed rent price path for the next six years.

“In some cases lease holders are paying as low as 11 cents per hectare of land,” she said.

She also suggested that the general public would expect leaseholders to pay much more than 1.5pc. Commercial renters and charities paid up to 5pc and 6pc per year she said.

“Sure AgForce can survey their members and find that they think moving towards 1.5 per cent rent is too big an imposition.

“I think if we were to survey the 4.5 million Queenslanders who actually own this land and who expect at least some return for investment in public services, they might have a different view.”

AgForce said the Minister’s comments showed an unfortunate lack of understanding of the way rural industry works.

“The grazier in the minister’s example wasn’t simply handed that property for free, he bought it at market rates,” Mr Walker said.

AgForce is now seeking an urgent meeting with Queensland Treasurer Andrew Fraser to discuss the issue.

“The reason we are having a conversation about leasehold land rents is because the government has asked for our input, and now we’re being criticised for giving it,” Mr Walker said.

Its survey of landowners was being conducted to develop policy in preparation for the next government review of leasehold rents. The data being collected by the survey has never been gathered before, and AgForce said it was vital for all parties to have a full understanding of what rural rents mean for rural businesses.

“Some property owners have already told us they will face big hikes in their leasehold payments when rents rise to a full 1.5% of unimproved value in 2017. In 1999, one member was paying $2800/year in leasehold rent, but in 2017 his rent bill will jump to $32,000 a year, a big hike for any small business to have to bear.”
 

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