Competitive Neutrality Statement

The Land Development Corporation (LDC) was established in 2003 by the Land Development Corporation Act (2003). Section 9(1) of the Act requires LDC to act in a commercial manner, unless otherwise directed under Section 9(2).

In 2011, LDC was designated as a Government Business Division under the Financial Management Act 1995.

As a Government Business Division, LDC is subject to the Northern Territory Government’s Competitive Neutrality Policy.

Competitive Neutrality aims to create a level playing field so that no net competitive advantage is held by government businesses as a direct result of public ownership.

LDC’s performance against the Competitive Neutrality Policy is considered as follows:

Pricing

LDC actively uses independent market valuations of all land that it sells, leases and licences.

Costing

In making business decisions, LDC takes into consideration both direct project costs as well as indirect costs such as employee costs, office rent and operating expenses, vehicle costs, insurance premiums, and legal and auditing expenses. In addition LDC is obliged to purchase a range of corporate and information technology services from Government. These costs are also factored into LDC’s business decision process.

Lending margins

LDC borrows funds from the Northern Territory Treasury Corporation (NTTC).

To reflect that the Northern Territory Government generally has a lower cost of borrowing than a private company, NTTC charges LDC a lending margin resulting in interest rates comparable to those offered commercially.

Return on equity

LDC is required to earn a return on equity.

This comprises a minimum hurdle rate calculated as a return on equity equal to the return available from virtually risk-free government bonds (the risk free rate), plus a margin to compensate for risk (business and financial).

LDC also adopts a target rate of return which seeks to match the return sought by private sector strategic land developers.

Community service obligations

In limited circumstances LDC may seek Community Service Obligation support where Government requires LDC to provide services which are non-commercial.

No support was received in the current financial year.

Financial reporting

LDC is required annually to report on its financial position in accordance with the requirements of the Land Development Corporation Act 2003 and the Financial Management Act 1995. This includes a report on commercial performance and the performance of any non-commercial activates.

Taxes

LDC is required to pay:

  • Local government rates on all land holdings;
  • Payroll tax and stamp duty to the Northern Territory Government;
  • GST and Fringe Benefits Tax to the Australian Taxation Office; and
  • In lieu of company tax, LDC pays the Northern Territory Government a Tax Equivalent payment calculated at 30 per cent of profit.

Equivalent regulation

LDC is subject to the same local, Territory and Australian Government regulations as a private sector business.

In particular LDC is subject to exactly the same planning, development and environmental regulations faced by any land developer.

Dividend policy

Each year LDC pays the Territory Government a dividend payment equal to 50 per cent of after-tax profit.

Capital structure

LDC’s capital structure was established in 2011 to broadly reflect the structure of private sector firms delivering strategic land. This included LDC inheriting $25 million of debt.

LDC’s capital structure is reviewed from time to time by the Department of Treasury and Finance.

Relevant policies

The following Land Development Corporation policies provided further detail of how LDC adheres to its obligation to act in a commercial manner and how it adheres to the Competition Neutrality Policy: