The Revenue Legislation Amendment Bill 2022 was recently introduced following the announcement of land tax reforms in the 2021-22 Queensland State Budget Update. The changes will apply to Queensland land tax assessments in the 2023-24 financial year.
Regardless of the relative merits and arguments supporting (or challenging) this change, the Queensland State Government has made a fundamental shift to the way it calculates land tax that has the outcome of an increased land tax paid by some property investors. Specifically, property investors who own investment property in Queensland and investment property in other Australian states, may be impacted and as such we want to ensure that you are aware of the changes.
Prior to the changes, Land Tax in Queensland was calculated on the value of landholdings owned within Queensland. Land Tax has been payable if the value of those landholdings exceeds the established tax-free threshold, with the exclusion of the principal place of residence.
However, under the new framework, the total value of Australian investment landholdings will be used to calculate the rate of land tax, which will then be applied to the Queensland portion.
Let’s look at an example:
Between them, a married couple Brad & Jennifer (not their real names) own the following investment property portfolio:
A Queensland investment property with a land value of $180,000(Brad owns 100%)A New South Wales investment property with a land value of $156,000(50/50 Joint Owners)A Victorian investment property with a land value of $960,000(50/50 Joint Owners)
Prior to the changes, no land tax would be payable in Queensland as their total Queensland landholdings are $180,000 (below the land tax threshold of $600,000 for individuals). The New South Wales and Victorian investment properties were disregarded when calculating Queensland land tax.
The recent changes mean that all of their Australian landholdings will now be taken into account. Using the example above, the New South Wales and Victorian investment properties will be aggregated with the Queensland property. Our couple now has total Australian landholdings of $738,000 (Brad) and $558,000 (Jennifer). Land Tax will initially be assessed on this whole amount and then apportioned to Queensland property as per the example below.
Step 1: Establish the total Taxable value of Australian landholdings
Step 2: The tax is then apportioned between the Queensland and non-Queensland properties using the tax scales established by Queensland Treasury.
As we are not able to foresee future changes in government policy and given that each individual’s financial situation is unique, if you are concerned about these changes we recommend you seek professional advice from a qualified Property Investment Advisor or Tax Accountant.
You can also get more information here on the payable Queensland Land Tax.
If you are an Empower Wealth client and are concerned specifically about the impact this change may have on the future cash flow modelling contained in your Property Portfolio Plan, please reach out to your Advisor for feedback about the implications for your future plans. Depending on your circumstances, you may also consider undertaking a formal review of your plan.
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