When do they take effect?
The Revenue Legislation Amendment Bill 2022 (Qld) (the Bill) was introduced following the announcement of land tax reforms in the 2021-22 Budget Update. The Bill was passed on 24 June 2022, with the changes commencing on 1 January 2023 and applying to Queensland land tax assessments in the 2023-24 financial year.
The amendments will change how land tax will be assessed for individuals, companies, trustees and absentees who own land both in Queensland and interstate.
The changes have been implemented to close, as described by the Queensland Government, a land tax ‘loophole’ where interstate investors with a number of properties in different States have had access to tax-free rate thresholds. The Queensland government has announced that by closing this ‘loophole’ it provides a ‘fairer system’ whereby interstate investors will be treated the same as Queensland investors.
Land tax changes
Prior to the changes, land tax in Queensland has been calculated on the value of landholdings owned within Queensland only if the value of those landholdings exceeds the tax free threshold (ie $600,000 for individuals other than absentees and $350,000 for companies, trustees and absentees).
However, under the new framework, land tax will now be calculated on the total value of all land owned by that taxpayer throughout Australia.
An individual owns:
- a Queensland investment property valued at $400,000; and
- a New South Wales investment property valued at $700,000.
Prior to the changes, no land tax would be payable in Queensland as the individual’s total Queensland landholdings are $400,000 and thus below the land tax threshold of $600,000 for individuals. The New South Wales investment property was disregarded in working out Queensland land tax.
However, the recent changes mean that all of the individual’s Australian landholdings are taken into account. Using the example above, the New South Wales investment property and Queensland investment property will be aggregated. The individual now has total Australian landholdings of $1,100,000. Land Tax will initially be assessed on this whole amount but then apportioned to Queensland as per the calculation below.
Step 1: Taxable value of Australian landholdings = $1,100,000. Land Tax at the Queensland Rate = $6,150.
Step 2: The tax is then apportioned between the Queensland and non Queensland properties.
$6,150 x($400,000 (Qld Property)/$1,100,000 (Total Australian Property)) = $2.236.36.
Notification to Queensland revenue office
The Commissioner will issue pre-assessment notices to owners they identify as owning land in Queensland and interstate. Owners will be required to notify the Commissioner of their interstate land holdings by either confirming the pre-assessment notice issued or amending it to include any land they own interstate and its unimproved value (as per their interstate government valuations).
Notification of this information must be made to the Commissioner:
- within 30 days of the assessment notice date and where the assessment notice is issued before 30 September 2023; or
- on or before the 31 October 2023 where the assessment notice is used after 30 September 2023.
Owners may have interest and penalty tax imposed on them under the Taxation Administration Act 2001 (Qld) (the TA Act) if they fail to notify the Commissioner of their landholdings. Further, they may be subject to an offence under the TA Act (ie civil penalties of up to $14,375).
These changes apply to companies, individuals and trusts and are a significant change in the Australian land tax regime. Other jurisdictions will probably start looking at these changes with much interest.
Please contact us if you are concerned that these changes apply to you.
This article was written by John Caravousanos, Partner.