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Are you a Queensland property investor or are you considering investing in Queensland?
Well, hold onto your hats!
In what could only be described as an extraordinary cash grab, the Queensland Government is making the most astonishing changes to land tax.
Once you are over the shock it should have you up in arms, but it has barely been raised by the media – mainstream or otherwise.
From 30 June 2023, an owner’s liability for land tax will be determined based on the total value of their Australia-wide landholdings that are not exempt, rather than solely on their non-exempt Queensland landholdings.
That’s right, if you also happen to own one or more properties interstate, in the same entity, your new Queensland land tax bill will include the statutory value of your interstate land.
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.
Here are my thoughts:
QLD Land Tax
To be clear, not everyone who owns property in Queensland will be up for the 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.
But the land tax threshold in Queensland remains very low, meaning most investors will get caught.
The 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, 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 in any other capital city.
Individuals
Companies and trusts
You can read more about land tax essentials on the QLD Government Website.
The new regulations
Qld Government will now seek to assess all properties in your portfolio under the same entity when calculating your land tax bill.
An example below of how this will work has been obtained from the Qld Government Website under Interstate Properties and Land Tax.
As of 30 June 2022, Lena will receive a Land Tax bill of $1,950, and only 12 months later that Land Tax bill will now rise to $8,422.37.
That will of course be in addition to the land tax bill for her Victorian asset!
Who will it hurt?
In my mind, there is only one clear winner – the Government of Queensland.
On the other hand, there is a range of people that will be detrimentally affected.
People who own an investment property in Queensland are the more obvious ones.
Imagine your land tax bill jumps threefold or more, the mere thought of it may be enough to consider selling.
Others will be forced to sell due to soaring land tax costs adding to higher interest rates and inflation.
It could also be a major issue for Renters with landlords looking to pass on costs.
If the recent boom was anything to go by, rental homes that were sold over the last 12 months were purchased by home buyers, meaning that property did not return to the rental market.
With rental vacancies tightening to record levels, this may cause a greater fall in supply and will again be yet another hurdle for those looking to rent.
Investors are often jeered as being “greedy” but are often overlooked for the key role they play in providing housing to the community.
Something the Governments at all levels are struggling to offer.
Advice
For those that now find themselves locked in under these changes, it is important to seek advice from a professional.
It is important to understand what these implications will mean for your personal circumstances.
At Metropole, we’ve already helped several clients make a more strategic decision, rather than a mere knee-jerk reaction.
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 with a professional structuring and tax so you can avoid these changes and still invest with confidence.
I know Ken Raiss from Metropole Wealth Advisory assists our clients with the appropriate advice.
We often joke that Ken takes the Tax Act on holidays with him as he is an incredible asset to have on your team.
Has there ever been a more blatant grab for cash than this?
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