The Queensland Budget for 2022-23 was handed down on Tuesday, with a host of revenue reforms announced. Below, we provide a brief summary of the key reforms introduced by the Revenue Legislation Amendment Bill 2022 (Qld) (the Bill) and their impact on individuals and businesses across Queensland.
Queensland's method of calculating land tax will significantly change with effect from 30 June 2023, and landowners in Queensland who also own land in other jurisdictions can expect not only a notable increase in their land tax liability but also a significantly greater administrative burden in complying with their land tax obligations.
The land tax reform that was announced in December 2021 in the Mid-year Budget Update will be implemented such that the rate at which land tax is levied on Queensland landholdings will be calculated with reference to a landowner's Australia-wide landholdings (where previously, this rate was calculated with reference only to Queensland-wide landholdings). Taxpayers who only own land in Queensland will not be impacted, however those with landholdings in Queensland and across Australia will feel the pinch.
While this measure is touted as a method to close a loophole in Queensland's land tax rules, it will introduce notable complexity to the State's land tax regime and is inconsistent with the approach taken in all other Australian jurisdictions. At least the Queensland government appears to have recognised the administrative difficulties this change will present for taxpayers and have delayed the commencement of these changes by a year – avoiding the absolute debacle that would have ensued had they sought to introduce the changes with immediate effect as initially planned.
Look out for our detailed analysis of these changes to be released later this year.
With the pre-existing 10-year royalty freeze for coal royalties expiring on 30 June 2022, the amendments to the Mineral Resources Regulation 2013 (Qld) adjust the coal royalty rate structure by introducing additional tiers with substantially increased royalty rates.
For coal sold, disposed of or used on or after 1 July 2022, the new rates will be 20% on that part of the average price per tonne above A$175, 30% for prices above A$225, and 40% for prices exceeding A$300. Based on how coal has recently been trading, these new tiers will effectively see a large number of resource companies paying 25% more in royalties at the top bracket.
Importantly, these increases mean it is more critical than ever to consider how resources clients structure their coal pricing arrangements, and in particular how the average price per tonne of coal is determined. With the significant impact this presents to the resources industry, we will be releasing a focused alert addressing these changes, and in the interim we can assist with strategic advice about managing royalties liability and navigating these commercial arrangements.
Amendments to the Duties Act
The small business restructure duty exemption was announced in September 2020 as an administrative arrangement, with a further extension of the exemption for certain discretionary trust rollovers in June 2021. The exemption has been set out in Public Ruling DA000.16.2. The Duties Act 2001 (Qld) (Duties Act) will be amended to give legal effect to the exemption, with retrospective effect back to the date of the relevant Public Rulings.
As the exemption has been formalised as law and is no longer merely an administrative arrangement, we expect that both taxpayers and advisers are now more likely to be prepared to rely on it (after what we understand was a very limited take-up under the administrative arrangement). This is because taxpayers will now have the benefit of objection and appeal processes if the exemption is not granted, and the QRO will be legally required to allow the exemption where the statutory criteria are satisfied. The introduction of these provisions into law still falls short of what many tax practitioners were seeking, with continuing uncertainty of some of the basic concepts. For example, the small business definition refers to a business with annual turnover of not more than $5 million. However there is no definition of 'turnover' and no guidance on what will be included in turnover for the purposes of this exemption. We expect that may be addressed in an updated Public Ruling in due course.
Furthermore, in a welcome clarification to the Duties Act, the exemption under section 124 which currently applies to certain dutiable transactions that give effect to a distribution in a deceased estate will be extended with retrospective effect to certain transactions that involve a vesting of dutiable property under the Succession Act 1981 (Qld) and the Aboriginal and Torres Strait Islander Land Holding Act 2013 (Qld). While this is really just a formality (because the QRO was not in fact assessing these transactions to duty) it is good to see the Queensland government finally addressing an issue that was identified and acknowledged over five years ago and which has been causing some angst among practitioners and their insurers.
Lastly, the Government has followed Victoria and introduced a mental health levy from 1 January 2023. The levy will apply to large employers, or groups of employers, in Queensland that pay Australian taxable wages in excess of $10 million annually. Those employers will be required to be pay a levy of 2.5 cents for every $10 of taxable wages paid over $10 million, plus an additional 5 cents for every $10 of taxable wages paid over $100 million.
The measure will generate meaningful funding for Queensland's mental health and wellbeing services, with the Government predicting $1.64 billion to be produced by the levy over the next five years. This funding is intended to enhance mental health, alcohol and drug services to ultimately improve the suicide prevention system. Employees with existing payroll tax exemptions, such as charities, will not be affected by this change.
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