Land Tax Changes in Queensland – Australian Expats Beware – Australian expats who own property in Queensland need to be aware that there’s been a recent amendment to the Land Tax Act 2010 (Qld) that received assent on 30 June 2022, changing the way the State Revenue Office in Queensland calculates land tax.
Where an individual (or entity) owns land in both Queensland and interstate, from 30 June 2023, their land tax liability will be calculated by a new method based on the total value of all their Australian landholdings.
Why have the tax changes been introduced by Queensland and how do they affect Australian expats?
The Queensland government have introduced the tax changes in a bid to target what they see as a loophole in the current legislation, where individuals who own land in both Queensland and interstate are able circumvent land tax.
While land tax would be imposed by other state revenues offices on land owned in that state, the liability is based on the state’s specific rules and regulations.
Where the land value held in another state is below the relevant tax-free threshold, there may be no land tax applicable based on their rules, allowing an individual to pay no land tax at all.
This scenario contrasts from an individual who may own multiple landholdings in Queensland only, and would therefore likely pay more in Queensland land tax as a result. The recent amendments aim to close this discrepancy.
How is the new land tax in Queensland calculated?
Currently, Queensland land tax is levied on the taxable value of land owned in Queensland by an individual, company, or trust at midnight on 30 June each year.
Where the total land value in Queensland is below the relevant tax-free threshold ($599,999 for individuals and $349,999 for companies and trustees), you do not pay land tax.
There are also exclusions from land tax where the land is your home (principal place of residence), or the land is used as primary production (list not exhaustive). It should also be stated that the new changes do not impact on the available exclusions.
If the total taxable value of your land in Queensland is above the tax-free threshold, you will begin paying land tax at a rate that increases with the total value of the land.
See rates for Individuals: https://www.qld.gov.au/environment/land/tax/calculation/individuals
See rates for Companies: https://www.qld.gov.au/environment/land/tax/calculation/companies
From 30 June 2023, when the Queensland State Revenue office next calculates your state land tax, they will use the total value of your Australian land.
This includes your taxable land in Queensland and your relevant interstate land. You will then pay land tax on the value of your Queensland land as a proportion of your total landholdings.
Below is a example of the new tax changes in Queensland would affect a Australian expat to illustrate how the calculation method will apply from 30 June 2023, and how it differs from the current calculation method.
Example of a Australian Expat
David is an Australian expat currently living overseas and has rented out two (2) of his Australian investment properties he owns in in his individual name.
The first property is in QLD where the land has a taxable value of $750,000, and the other is in NSW, where the land has a taxable value of $810,000.
As David is a Australian expat he cannot apply a land tax exemption as neither property is his main residence nor used for primary production.
Under the current legislation, David’s QLD land tax liability would be calculated as follows:
|Taxable value of QLD land on 30 June 2022||$750,000|
|Tax band||$600,000 to $999,999|
|Tax calculation for band||$500 + (0.01 x 150,000 excess)|
Therefore, David would receive an assessment notice from the QLD Revenue Office for $2,000.
Sidenote: David would also be subject to land tax with the NSW Revenue Office for land owned in NSW. However, as the taxable value of the land at David’s NSW property is below the current tax-free threshold in NSW of $822,000, he is not subject to land tax in NSW.
From 30 June 2023, assuming the land values remains unchanged, David’s land tax liability would be calculated as follows:
|Taxable value of Australian land on 30 June 2023||$1,560,000 (750,000 + 810,000)|
|Tax band||$1,000,000 to $2,999,999|
|Tax calculation for band||$4,500 + (0.0165 x 560,000 excess)|
|Queensland proportion||($750,000 ÷ $1,560,000) × $13,740|
David would receive an assessment notice from the QLD Revenue Office for $6,605.77 and will pay an additional $4,605.77 than he did last year due to the new change in land tax legislation.
Implications for the future and what it means for Australian Expats
Queensland is the first jurisdiction in Australia to seek to introduce land tax rules of this kind. However, it’s likely the other states will be watching closely and there is the potential they could look to follow suit.
To enforce the new changes, amendments to the Land Tax Act 2010 (Qld) require Queensland landholders to provide further details of their other Australian landholdings interstate and the statutory value of those landholdings, generally by 31 October each year. Failure to comply with notification obligations will be an offence.
The changes will naturally impact on the cost of owning Australian property, and care should be taken when considering an additional property purchase (particularly in Queensland), as the increase in holdings costs for property owners could be significant.
While the changes won’t come into effect until June 2023, it’s a good time for individuals who do own property to reassess their current asset holdings and ensure they can manage the additional cash flow expense.
We will likely see these additional costs passed on in part to tenants, but will nevertheless still be felt by the holders of property.
Australian Expat Planning opportunities
There may be opportunities to reduce exposure to the increased land tax levy by holding land in various entities, such as a company, SMSF or Discretionary Trust as each will be assessed individually for land tax.
However, the tax-free thresholds are generally lower on these entities and considerations need to be made for any change of ownership with regards to CGT and stamp duty.
From the standpoint of a non-resident Australian expat investor looking to buy or continue to hold Australian real estate, this change in legislation acts as another disincentive to be overexposed to the asset class, in addition to the Capital gains tax concessions disallowed (not discussed here).
It may be appropriate to consider alternative asset classes better suited to your personal circumstances to mitigate risk.
This isn’t the first time that a tax has been introduced in Queensland that unfairly targets property owners as we saw previously with the introduction and then removal of the Absentee Levy that caused many Australian expats to sell their properties.
If you would like to discuss how these changes may impact you and your financial position, please feel more than welcome to get in contact with us by emailing [email protected] or making an enquiry though the website. We’d be happy to help.