Currently, every state government charges land tax on the total value of taxable land held in their particular state. Each state has a threshold value that has to be exceeded before tax is charged. If the combined value of your land does not exceed the threshold, no land tax is payable. The value of your land is taken from the Valuer General’s assessment of ‘unimproved value’ – found on your annual rates notice – which is usually less than ‘market value’. Land tax is not applicable on your owner-occupied home or farming (primary production) properties.
The Palaszczuk Government in Queensland, however, has recently approved a new land tax law in the state, effective 30th June 2023, which will significantly affect property prices and property investors.
This piece of legislation states that from July next year, all land tax applicable properties owned in Australia will be included in the calculation for land tax payable for investment property held in Queensland.
Suppose you own investment property/ies in Queensland and across other Australian states. In that case, this new law will calculate the tax based on the total statutory value of your land located in Queensland AND the statutory value of your interstate land.
Types of owners for land tax
According to the Queensland Government website, you are considered a landowner and may have to pay land tax if you are:
- an individual/sole owner
- a joint owner
- a company – whether solely or part of a group of related companies
- an owner of company title units
- a trustee of any trust
- a beneficiary of a trust (that isn’t a special trust)
- a unit trust holder (in some instances)
- a society or organisation whose land is not exempt from land tax
- a trustee of a superannuation fund
- a lessee of crown or local council land.
The new land tax rate you will pay on your Queensland held properties will now depend on the total value of all your Australian property. This figure is then applied to the Queensland portion to get the annual land tax liability.
Although the Queensland Government is stating that they are not taxing land held in other states, by including the value of all taxable property held across all other states in Australia and adding it to the value of the Queensland held properties, they are effectively increasing the land value in Queensland, and therefore increasing the applicable tax.
This would appear to translate as taxing land across other Australian states. One also needs to ask: is this constitutionally correct?
Land tax calculations
The example given on the Queensland Government website is as follows:
Current land tax assessment notice amount:
On 30 June 2022, Lena 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 Queensland Government will issue an assessment notice for $1,950 for the 2022–23 financial year.
Revised land tax assessment notice amount:
On 30 June 2023, the value of Lena’s land in Queensland has not changed. But she now also owns land in Victoria valued at $1,565,000. The total value of Australian land owned by Lena is $2,310,000, which means the land tax is calculated using a higher rate for individuals.
This is how Lena’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 Lena’s land (i.e. ($745,000 ÷ $2,310,000) × $26,115)).
The Queensland government will issue an assessment notice for $8,422.37.
The Queensland land tax question that needs to be answered
In its own example, the Queensland Government will issue a tax assessment notice of $8,422.37 from next July, $6,472.37 higher than what was charged the previous year. The question we need to ask ourselves is whether this approved legislation is, in fact, constitutional. Each state is responsible for the applicable land taxes, so how has or can the Queensland Government charge for land owned in other jurisdictions?
Will investors invest in Queensland property?
The short answer is no. Why would investors buy property in a state that will essentially penalise them for having property in other states? And what will happen to the thriving Queensland property market?
One of Australia’s well-respected property publications, the Property Update, described this move by the Queensland government as “an extraordinary cash grab.” Although some exceptions and thresholds apply, it also highlights that you will still be liable for land tax in the state where you own property.
By our calculation, you will essentially be charged twice for the same property outside of Queensland.
Queensland-only landowners, however, will not be impacted by this new law.
What is also worth noting from Property Update is that the land tax threshold in Queensland remains very low, meaning most investors will get caught, and from now on, the land tax rates ramp up faster than in any other capital city.
The concern is that this approved piece of legislation has yet to be highlighted by the major news networks, so before you consider buying property in Queensland, speak to one of our financial planners.
As fully qualified, experienced financial planners, we can help you understand this new tax rate law and whether investing in Queensland is right for you.
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*https://www.qld.gov.au/environment/land/tax/calculation/individuals