Queensland Land Tax Changes are coming – What you Need to Know!
Significant changes to the calculation of Queensland Land Tax liability have been given the green light following the Revenue Legislation Amendment Act (Qld) 2022 being assented to on 30 June 2022. This will impact Queensland landowners from 30 June 2023.
This article will explain what Queensland Land Tax changes are coming and how they are likely to impact property investors who have landholdings in Queensland, as well as other States.
The Queensland Land Tax changes impact landowners who have holdings in Queensland and other states around Australia. Even if the current holdings in Queensland alone sit below the current threshold for land tax in this State, those landowners will be impacted because of the way the Queensland Government will calculate land tax from 30 June 2023.
Changes to the Land Tax Act 2010 (Qld) mean assessment of Queensland land tax liability will consider the value of interstate landholdings from the changeover date. Ultimately, this will mean an increase in the land tax liability for anyone who owns land in Queensland as well as non-exempt property in another State or Territory. These changes do not impact landholders who only hold property within this State.
Queensland is the only jurisdiction to introduce this type of aggregation rule to include Australia-wide holdings, although other states could follow suit in the future.
Queensland Land Tax – Prior to 30 June 2023
Up until 30 June 2023, Queensland land tax is calculated based on the value of all non-exempt landholdings in this State. Non-exempt landholdings include an individual’s principal place of residence as well as other lands such as outlined by the Queensland Government. The assessment date is June 30 each year.
There are no proposed changes to these thresholds with the new land tax changes.
Queensland Land Tax – After 30 June 2023
For all landholdings assessed as of 30 June 2023, the new Queensland Land Tax assessment will apply. Therefore these changes will apply for the land tax year commencing 1 July 2023.
Based on wording within the legislation, for the land tax year commencing 1 July 2023 and subsequent land tax years:
- the Queensland Revenue Office (QRO) will use the total value of a taxpayer’s ‘Australian Land’ in calculating land tax. This will include the value of both ‘Taxable Land’ and ‘Relevant Interstate Land’
- the total value of ‘Australian Land’ calculated will then be used to determine the rate of land tax that will be applied to the ‘Queensland Proportion’ of landholdings.
What this means is that taxpayers will still be taxed only on the value of their Queensland landholdings, but in determining the ‘rate’ of land tax that they pay, the total statutory value of their ‘Australian Land’ will be used. This will push Queensland landowners into a higher land tax bracket.
The process will be as follows:
- Calculate the total value of ‘Australian Land’ owned by the taxpayer
- Use the tax rate applicable to the value of all ‘Australian Land’ , not just the value of Queensland ‘Taxable Land’ (Note this will be a HIGHER tax rate then if only the Queensland portion was used for this calculation)
- Apportion the total land tax amount to the value of Queensland Land (ie: apply the higher rate of tax to the Queensland portion only)
Queensland Land Tax – Current position
Tom Brown owns land in Queensland with a taxable value of $1,000,000 at midnight on 30 June 2022. His land tax payable for the year 1 July 2022 to 30 June 2023 is $4,500. This is calculated as follows:
- the applicable land tax bracket for land with a taxable value of $1,000,000 is the bracket for land values between $1,000,000 – $2,999,999
- land tax payable for land within that bracket is $4,500 plus 1.65 cents for each $1 more than $1,000,000.
On 30 June 2022, Tom Brown also owns land in New South Wales with a statutory value of $2,000,000. However, the value of that land is NOT relevant to the calculation of land tax in Queensland under the current calculations.
Queensland Land Tax – New position
As of midnight on 30 June 2023 (i.e. the following year), the taxable value of Queensland land holdings of Tom Brown remains unchanged at $1,000,000, as does the statutory value of its land holdings outside Queensland ($2,000,000). Under the new position, the value of ‘Australian Land’ owned by Tom Brown as at 30 June 2023 is $3,000,000.
Tom Brown’s land tax payable for the year 1 July 2023 to 30 June 2024 is $12,500. This is calculated as follows:
- the applicable bracket for land with a taxable value of $3,000,000 is the bracket for land values between $3,000,000–$4,999,999
- land tax payable for land within that bracket is $37,500 plus 1.25 cents for each $1 more than $3,000,000
- this calculation equates to a land tax of $37,500.
- this amount is applied to the ‘Queensland Portion’ of the ‘Australian Land’ owned by Tom Brown, i.e. ($1,000,000/$3,000,000) x $37,500 = $12,500.
Therefore, in this example, with all other variables equal, the land tax payable by Tom Brown will increase by $8,000 under the new position.
This is a significant increase for property investors who hold properties across multiple states within Australia.
These changes impact individuals as well as companies, trustees and absentee landholders who hold property within the same entity across multiple states. The current ability to obtain the benefits of a new land tax threshold for each separate entity in Queensland remains unchanged. Therefore, getting advice up-front, before you buy, is essential to ensure that you understand all tax implications associated with your investment purchase.
What does this mean for Property Investors in Queensland?
This change obviously impacts the holding costs for many property investors who own Queensland land, as well as other land holdings across Australia within the same entity or under the same name. This will have an immediate impact on the holding costs for those investors from 1 July 2023.
This may be a further deterrent for people looking to invest in Queensland where they already own property in other states outside of their principal place of residence. Because of the retrospective nature of this decision, it may also result in some investors offloading their properties before these additional costs come into effect.
Ultimately it could further impact the number of investors who want to add to Queensland’s rental supply. This may, in turn, further reduce the number of available rental properties at a time when vacancy is already at critical levels across a lot of the State.