Q.
(a) With reference to Local Government Act 1976 (As amended), state five (5) basis for objections to the Valuation List. Give example for each. (10 marks)
(b) Determine the assessment of a newly completed double storey shop with a lettable area of 160 square metre located at Kulai Jaya, Johor Bahru.
Current rental of similar properties in the vicinity is RM25.00 per square metre per month (nett), while in 2013 the rental rate for similar properties was at RM20.00 per square metre per month (nett).
The rate of return of the property is estimated at 6% p.a., and the assessment rate is 0.27%. The Time of the List adopted by MBJB is at 1st January, 2013. (15 marks)
(25 marks, 2015 Q7)
(21.09.2015)
A.
(a) 5 basis of objection to valuation list.
Similar question was asked in earlier post -
Objection, Appeal and New Valuation List
Proposed Revision of Assessment Rates Explained
5 reasons for objection according to S.142 Local Government Act, 1976.
- Holding not rateable, e.g. a magical stone.
- Error or mistake in valuation list, omitted person's name etc.
- Rated below the value.
- Rated beyond rateable value.
- Should be valued separately, or jointly.
Ref:
S.142 Local Government Act, 1976.
(b) (Correction 12.07.2016)
The location is JB, so the assessment rate should be calculated based on Improve Value - the market value of the property, not the Annual Value - annual rental value.
The valuation list is as of 2013, hence the rental used is RM20 per sqm.
Assessment rate of 0.27% is levied on the Market Value (Improve Value) of the property. Market value is the selling price of the holding if there is a transaction. Therefore, we need to calculate the possible selling price of the house using the rental return of 6%.
Assume Y is the value of the holding, calculate the annual rental return at 6% =>
=> Y x 6% = 20 x 160 x 12 (RM20 per square meter x 160 sqm x 12 months)
=> Y = 38,400 / 6%
=> Y = 38,400 / 0.06 = 640,000
The value of the holding is 640,000
The rate should be levied on this value, therefore
0.27% x RM640,000 = RM1,728.
The assessment rate should be RM1,728 per year.
Ref:
Thanks to Angie (who verified the answer) and Joanna for discussion on this question.
Own account.