Originally published 11 August 2022
Investors who own properties in Queensland as well as other states are set to be slugged with massive land tax bills following the introduction of a new tax regime in Queensland.
New legislation was passed on June 24, which allows the Queensland Government to include the value of investment properties owned in other states when working out how much land tax to charge on Queensland properties.
When announcing the proposed changes Queensland Treasurer, Cameron Dick said it would close a land tax “loophole”, but the property industry has slammed the move as a cash grab which will deter investment in Queensland and worsen the rental crisis.
The changes take effect from 1 January 2023 and will be applied to land tax assessments in the 2023-24 tax year.
Mr Dick said because some investors had portfolios spread across different states, they were able to avoid land tax by owning assets below tax free thresholds in different states.
He said the changes meant that people based outside of Queensland who own properties in Queensland would now be treated the same as Queenslanders.
He said if investors only own land in Queensland they will not be affected by the changes.
All who own investment properties in multiple states as well as Queensland will be affected by the change, whether they live in Queensland or another state.
Showing the deceptive double-speak for which politicians are renowned, Dick says: “You’ll only pay tax on the land you own in Queensland (i.e. we are not taxing your land outside Queensland. But if you own land in Queensland and in another state or territory, you will need to declare your interstate landholdings.”
Technically, he’s right – you don’t pay land tax on your interstate properties, but your interstate properties massively affect the rate of land tax you pay in Queensland. But the result is the same: you end up being hit with a massive increase in tax.
Here’s the State Government’s own example which shows that land tax charges are set to soar:
Before the regime an investor who owned land in Queensland with a taxable value of $745,000 and land in Victoria worth $1,565,000, would only be charged $1,950 land tax as the State Government only took the Queensland property into account.
Under the new regime the total value of that holding is $2,310,000.
The new calculation to work out land tax:
= $4,500 + (1.65 cents × $1,310,000)
= $4,500 + $21,615
This amount is applied to the Queensland portion of the holdings (i.e. ($745,000 ÷ $2,310,000) × $26,115)).
The result is a land tax bill of $8,422.37.
Real Estate Institute of Queensland chief executive Antonia Mercorella branded the change a “slap in the face” to the one sector which was propping up the economy.
She said the Government had not consulted with relevant property stakeholder groups.
“This treatment of property investors as an endless money pit is outrageous – the Government is raking in a huge stamp duty windfall, then relying on private investors to provide the lion’s share of housing supply, and now they’re slapping investors yet again with new taxes,” Ms Mercorella said.
“How can the Government possibly justify slugging property investors with tax for land they own that isn’t even within our state borders? It’s utter nonsense that there’s a ‘loophole’ to close.”
She said no other state or territory took this approach on land tax and she was concerned it would deter people from investing in Queensland.
“For those not scared off from investing in Queensland, and current investors brave enough to stick around, this tax will make their holding costs more expensive and the logical consequence of that is rent goes up,” she said.
Property Council Queensland Executive Director, Jen Williams, labelled it a tax grab.
“Not only will this new land tax see individuals penalised for owning property in Queensland, but they will also be taxed twice for any property owned in another state,” Ms Williams said.
“Given the state is in the midst of a housing supply and affordability challenge and is unable to fill critical skilled positions across the labour market, Queensland needs all the people and investment it can get.
“With the second highest land tax rates in the country and a penchant for finding new ways to tax the industry, Queensland faces the risk of detracting the core elements it needs to leverage the decade of opportunity ahead.”