Tax for land owners will now be calculated using the total value of a property owner’s Australian land.
Changes to land tax liability in Queensland are set to take effect on 30 June 2023 following the assent of the Revenue Legislation Amendment Act 2022 on 30 June 2022. From this time, the total value of your Australian Land will be used to determine whether the tax-free threshold has been exceeded ($350,000 Companies, Trustees & Absentees [Foreign Individuals] / $600,000 for individuals) and the rate of land tax will be applied on the value of the Queensland Landholdings.
To put it simply, once the amendment takes effect, all the land you own in Australia will be used to determine whether the tax-free threshold has been exceeded and if so, calculate the rate of land tax payable by the property owner.
What does this mean for you?
If you only own land in Queensland, you are not affected by this change. However, if you own land in Queensland as well as interstate, you will be double-taxed following the latest changes to land tax laws.
Impacts will be different for each affected property owner, depending on their circumstances. For example, only non-exempt land owned outside of Queensland will be included. So if you have your Principal Place of Residence in New South Wales and one holiday apartment on the Sunshine Coast there should be no change to your Queensland land tax bill.
Considerations for interstate landholders
Investors and businesses with interstate land must provide further details to the Queensland Revenue Office (QRO) by way of notice through an approved form.
First, you need to set up a QRO Online account and complete the declaration. This will require you to provide details such as land description, value and percentage of ownership.
You need to complete this declaration within 30 days of the assessment notice date (if the notice is issued on or before 30 September in the financial year), or on or before 31 October. Interest and penalties will be imposed for failure to comply with the notification obligations.
How the new rule works
These will be the steps to be followed when the amendment takes effect:
- Calculate the total value of Australian land owned by the landholder.
- Calculate the land tax on the value of the Australian land as if all that land is in Queensland.
- Apply the total land tax amount to the Queensland proportion of the total value of Australian land owned.
Here is an example of how this would work.
Company XYZ Pty Ltd owns non-exempt land in Queensland with a taxable value of $850,000. It also owns a non-exempt property in Victoria with a taxable value of $1,700,000.
As of 30 June 2022, the land tax rate of XYZ Pty Ltd is $9,950 ($1,450 + 1.7 cents for each $1 more than $350,000).
By 30 June 2023, the total value of the land owned is $2,550,000. Since tax is only levied on the percentage of Queensland land over the total value of Australian land, the land tax rate will be $12,750 (33.33% of $38,250).
This is due to its total taxable value being pushed into a higher bracket when the land taxable value of the interstate property was added to the calculation.
Will all interstate land be included?
The exemptions in the Land Tax Act are still available in the new amendment. This means that home exemption, moveable dwelling park exemption, primary production exemption, etc., will be applied in the calculation of land tax. However, some exceptions will apply.
Can I pass on the increase to my tenants?
As a landlord, it is necessary that you review your current leases where land is being recovered (if permitted) and check the wording of the relevant lease clause to confirm if it will include interstate land.
The Queensland Revenue Office requires landholders to declare all their interstate landholdings by 31 October each year or within 30 days of a land tax assessment being issued.
Remember, tax is an important compliance obligation. It is important that you are well aware of these changes in order to assess whether you will be affected by the new changes. Be sure to properly declare all taxable land properties you may have to avoid interest and penalties.
If you need any more information or clarification regarding the Revenue Amendment Act or need more information specific to your individual circumstances, our specialist tax team at Elements Advisory Group will be happy to help. Send us an email at firstname.lastname@example.org or give us a call at 07 3878 9181.