An important feature of Feastudy is its ability to calculate, in one of several ways, projected recurrent property rates and taxes charges for a developer during the estimated period that a development property, or part of it, is held by that developer as the real estate’s registered proprietor. For a Development feasibility file, Feastudy assumes that amounts for Rates and Taxes items are calculated for the period that starts from the earliest date of settlement in the Land Cost items and finishes on the last end date of the Sell-On Income items.
If the property for a proposed development is located in Australia, you can enter the name of an Australian capital city (e.g. Sydney or Canberra) in the Capital City field of the Development Identification window of Feastudy for loading the scales as databased in the Duties, Rates and Taxes Scales window for a Development file for Stamp Duty on Transfer, Stamp Duty on Mortgage, Council (Local Government) Rates, Water & Sewer Rates and Land Tax charges which are related to real property in that city. Unless these scales are in an edited state from user edits, they include, in all the current versions of Feastudy at the time of writing, suggested 2021-2022 scales for Stamp Duty on Transfer and Mortgage, Council Rates, Water & Sewer Rates and Land Tax for each Australian capital city, based on data obtained by Devfeas Pty Ltd for these charges from relevant authorities in August 2021.
Whether the suggested scales are edited or not, when an Australian capital city’s name is entered in the said Capital City field and “Use Tax Scales” is entered in a specific data entry field of a file for Stamp Duty on Transfer, or Stamp Duty on Mortgage, or Council Rates, or Water & Sewerage Rates, or Land Tax, then what is contained in the relevant scale for that particular duty, or rate, or tax, is used in the program's calculations for that file. Scales or an allowance for Emergency Services Levies (or similarly named levies), which are calculated using statutorily assessed property values as a base, are included in either the suggested (default) scales for Council Rates or Water & Sewerage Rates for all relevant Australian capital cities. (As at 1 August 2021, Queensland and NSW did not use statutorily assessed property values as bases for these levies and the Northern Territory did not have such a levy.)
The calculations that our software, Feastudy Professional, uses to deal with Rates and Taxes for Development. Investment and Develop-and-Hold (D&H) Investment files, are set out in some detail as follows
Rates and taxes that are direct and recurrent statutory charges over real estate can be calculated by Feastudy applying:
For a Development file, the three kinds of default Assessed Values for Rates & Taxes that can be used by the program are defined as follows:
For an Investment file, the three kinds of default Assessed Values for Rates & Taxes that can be used by the program and they are defined as follows:
For a D&H Investment file, the program uses the Assessed Values for Rates & Taxes for the Develop Period from relevant data entered in the source Development file but, for the Hold Period, the program can use three kinds of default Assessed Values for Rates & Taxes and they are defined as follows:
For Development Analysis, the default or entered AUV is escalated at the beginning of each financial year after the end of the first financial year of the cashflow, by the relevant Rent/Land Escalation Rate factor, the Development Reference Date having a base Rent/Land Escalation Rate factor of 1.0000, with monthly factors being calculated on a compound interest basis. Default values for the ACV and AAV are increased, at the beginning of each financial year in the cashflow, as a direct result of any relevant escalation of the default or entered AUV and increases in expenditure on Construction Costs and Consultant Costs.
For Investment files, the default or entered AUV, ACV and AAV are escalated at the beginning of each financial year after the end of the first financial year of the cashflow by the relevant Inflation Rate factor, the Investment Reference Date having a base Inflation Rate factor of 1.0000 with monthly factors being calculated on a compound interest basis.
For D&H Investment files, the default or entered AUV, ACV and AAV are escalated at the beginning of each financial year after the end of the first financial year of the Hold Period cashflow by the relevant Inflation Rate factor, the first month of the Hold Period having a base Inflation Rate factor of 1.0000 with monthly factors being calculated on a compound interest basis.
The Rates and Tax scales, as data-based in the Duties, Rates & Taxes Scales window, for real estate in an Australian State or Territory's capital city, can be used as a default to calculate relevant charges. The scales that are relevant for a particular Australian capital city can be loaded for a file by the entry of that city in the Capital City selection box in the Development or Investment Identification window and these scales can be used for the calculation of rating and taxing charges as they relate to the subject property’s AUV, ACV and AAV.
The entry of a Lump Sum amount or a percentage of the entered or default (and potentially escalated) AUV, ACV or AAV can be used to calculate real estate rating or taxing charges, too.
The unescalated annual value of a Rates and Taxes item, for which a Lump Sum is entered, is escalated: for Developments, by the relevant Rent/Land Escalation Factor for each month in which payment for the item occurs; and, for Investments, by the relevant Inflation Factor for each month in which payment for the item occurs. When the Investment Sale Price for an Investment is calculated by the Capitalisation of Rent Income method, the unescalated annual value of each Lump Sum Rates and Taxes item is escalated by the Inflation Factor for the final month of the Investment period for the purposes of such capitalisation.
Any Rates and Taxes items entered in the source Development file of a D&H Investment file are compulsory for and uneditable in the D&H Investment file. Also, no new Rates and Taxes items can be entered into a D&H Investment file.
For the purposes of Rates and Taxes calculations (and interest calculations) for a D&H Investment file, it is assumed that all Sell-On Income in that file’s source Development file occurs one month after the end of the Develop Period.
Selection of the frequency of the rating or taxing charge can be made either monthly, quarterly, semi-annually, or annually.
Feastudy’s calculations of all recurrent property Rates and Taxes are directly related to the Developer’s ownership of the Development site or property through the settlement of the relevant feasibility data file’s Land Cost item(s) and the proportion of the site which is retained following the settlement of Sell-On Income items. To calculate the monthly Rates and Taxes liabilities of the Developer, reference is made by the program to the Developer’s monthly Ownership Factor. When all Land Cost items have been settled and no income from Sell-On Income items has occurred, the Ownership Factor is 1.0000 but it is 0.5000 when all Land Cost items have been settled and half of the total value of all positive Sell-On Income items has been settled.
If a default or statutorily assessed property value is entered by the user as the basis of a rating or taxing charge, then the liability for any month of the Development’s cashflow for that charge is calculated by multiplying the product of:
If a Lump Sum is entered by the user as the basis of a rating or taxing charge, then the liability for any month of the Development’s cashflow for that charge is found by multiplying the relevant Ownership Factor by one-twelfth of the relevant (potentially escalated) annual Lump Sum.
After the program has calculated each month’s liability for each Rates and Taxes item, it cashflows the relevant amounts with respect to:
When a period of liability to pay a Rates and Taxes item is truncated by one or more positive Sell-On Income item settlements, the pro rata portion of the relevant charge is either cashflowed in the month of the relevant settlement or the next normal month of payment for that Rates and Taxes item.
Where a Development file becomes a source Development file for a D&H Investment file, all Sell-On Income items in that source file are assumed to occur one month after the last End Date of the source file’s Construction Cost items for the purposes of Ownership Factors and Rates & Taxes calculations for the Develop Period of the relevant D&H Investment file.
(The detailed discussion of Feastudy’s Rates & Taxes calculations ends here.)
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Mark Andrews
Managing Director
Devfeas Pty Ltd
16/12/2021