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Land Tax Reforms in Queensland – Land Tax will now be assessed on Interstate Properties

By Evelyn Marcou, Partner

The Revenue Legislation Amendment Bill 2022 (Qld) (the Bill) was introduced following the announcement of land tax reforms in the 2021-22 Budget Update. The Bill was passed on 24 June 2022, with the changes commencing on 1 January 2023 and applying to Queensland land tax assessments in the 2023-24 financial year.

The amendments have been implement to close what has been referred to as a “land tax loophole” where interstate investors with a number of properties in different States that have access to tax-free rate thresholds.  The Queensland government has announced that by closing this ‘loophole’ it provides a ‘fairer system’ whereby interstate investors will be treated the same as Queensland investors.

Prior to the changes, land tax in Queensland has been calculated on the value of landholdings owned within Queensland only if the value of those landholdings exceeds the tax free threshold (ie $600,000 for individuals other than absentees and $350,000 for companies, trustees and absentees).

However, under the new framework, land tax will now be calculated on the total value of all land owned by that taxpayer throughout Australia.

Calculating land tax with interstate land

The land tax rate that applies depends on what  type of owner you are and the value of your land. This rate (and surcharge, if applicable) is applied to the total value of your Australian land. Then this figure is applied to the Queensland portion to get the annual land tax liability.

Example

On 30 June 2022, Evelyn owns land in Queensland with a taxable value of $745,000. Her land tax is calculated using the rates for individuals.

Taxable value of land: $745,000

Calculation
= $500 + (1 cent × $145,000)
= $500 + $1,450
= $1,950

The Revenue Office will issue an assessment notice for $1,950 for the 2022–23 financial year.

On 30 June 2023, the value of Evelyn’s land in Queensland has not changed. But Evelyn now also owns land in Victoria valued at $1,565,000. The total value of Australian land owned by Evelyn is $2,310,000, which means the land tax is calculated using a higher rate for individuals.

This is how Evelyn’s land tax will be calculated:

Taxable value of Australian land: $2,310,000

Calculation
= $4,500 + (1.65 cents × $1,310,000)
= $4,500 + $21,615
= $26,115

This amount is applied to the Queensland portion of Evelyn’s land (i.e. ($745,000 ÷ $2,310,000) × $26,115)).

The Revenue Office will issue an assessment notice for $8,422.37.

Surcharge

If you are an absentee or foreign company or trust, a surcharge of 2% is added when calculating land tax. This applies to the total value of your Australian land.

Excluded land

For land in Queensland, you may be eligible for a land tax exemption depending on the ownership and use of the land.

If your interstate land meets certain eligibility requirements, you can apply to have its value excluded from the land tax calculation.

Mostly, the eligibility requirements for exemptions that are available in relation to land in Queensland will apply for the exclusions available in relation to interstate land with generally equivalent requirements applying in some circumstances. Some exemptions will remain limited to land in Queensland only.

Exclusions available for interstate land:

  • Home (principal place of residence)
  • Primary production
  • Supported accommodation
  • Moveable dwelling (caravan) park
  • Retirement village
  • Transitional home
  • Charitable institutions
  • Aged care

Exemptions available for Queensland land only

  • Government land
  • Port authority land
  • Societies, clubs and associations

The Queensland Government will in due course provide more information on exclusions and how to apply for them will follow.

Notification obligations

To assist the Queensland Revenue Office in determining other Australian landholdings and the statutory value of those landholdings, amendments to the Act require Queensland landholders to provide further details by way of notice in an approved form (including property description, statutory value and interest) generally by 31 October each year or, if a Queensland assessment notice is issued before 31 October, within 30 days of receiving the assessment. Failure to comply with notification obligations will be an offence.

Practical implications

It is likely that the increase in land tax will be felt by commercial tenants, as landlords seek to pass through their increased liability (where permitted by law) and we may see this point brought up in many lease negotiations going forward.

If you require any assistance, please contact Evelyn Marcou on 0409 384 025 or evelyn.marcou@mst.com.au.