In what can only be described as an extraordinary cash grab, the Queensland Government is making big changes to land tax.
From 30 June 2023, an owner’s liability for land tax will be determined based on the total value of their Australia-wide landholdings. This includes your taxable land in Queensland and your relevant interstate land. ‘Relevant interstate land’ includes land located in another state or territory that is valued under interstate valuation legislation and is not excluded interstate land.
The total value of your Australian land will be used to determine:
- whether the tax-free threshold has been exceeded
- the rate of land tax that will be applied to the Queensland proportion of the value of your landholdings.
Land tax kicks in for individuals when their rateable land value hits $600,000 or more, while assets in companies and trustees it is $350,000. In any case, a purchase of an investment grade house in Brisbane and there is a high chance you will be straight into Land Tax territory. From here on in, the rates of land tax ramp up faster than any other capital city.
You’ll only pay tax on the land you own in Queensland (i.e. they are not taxing your land outside Queensland).
So not only will the State Government in that respective state potentially send you a land tax bill, but you will also receive one from the Queensland Government.
In other words, this is a tax rate hike for all entities that hold land in Queensland as well as another Australian jurisdiction, but will have no impact on Queensland-only landholders.
It will have major implications for investors and also renters when it comes into effect.
To be clear, not everyone who owns property in Queensland will be up for land tax. There are exemptions for homeowners and for other uses of the land. Also, if you hold an investment property and you do not reach the threshold you will remain exempt. However, the land tax threshold in Queensland remains very low, meaning most investors will get caught .
Queensland and interstate land
If you own land in Queensland and in another state or territory, you will need to declare your interstate landholdings. You’ll need to set up a QRO Online account and complete the declaration, including land description, value and percentage of ownership.
From 30 June 2023, you will need to complete this declaration by the earlier of the following:
- within 30 days of receiving a land tax assessment notice
- on or before 31 October
Interstate land value
If you own land in Queensland and interstate, they will calculate land tax based on:
- the total of your taxable land located in Queensland and
- the statutory value of your interstate land.
The ‘statutory value’ of interstate land is determined by valuation legislation in that state or territory. It does not include excluded land.
When you complete an interstate land declaration online, you’ll enter the value of each parcel of interstate land. For an interstate property you owned on 30 June 2023, you would enter the statutory value for that parcel of land as at 30 June 2023. If you don’t know the value of a parcel at the relevant 30 June, use the most recent value you can ascertain. If you get an updated value for your interstate land, you can request your land tax liability to be reassessed.
Surcharge
If you are an absentee or a foreign company or trust, a surcharge of 2% is added when calculating land tax. This applies to the total value of your Australian land.
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, 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 x $145,000)
= $500 + $1,450
= $1,950
Lena will be issued an assessment notice for $1,950 for the 2022-23 financial year.
On 30 June 2023, the value of Lena’s land in Queensland has not changed. But Lena 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 x $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)).
Lena will be issued an assessment notice for $8,422.37.
It is important to understand what these implications will mean for your personal circumstances. For those looking to invest in Queensland, there is some good news in that the land tax will only be calculated on those assets in the same name/entity. That’s another reason to speak to us about structuring and tax so you can avoid these changes and still invest with confidence.
As usual, should you have any questions or need any help, please reach out to our team and we will endeavour to do our best to assist.
The Team at Rose Partners
