The Revenue Legislation Amendment Act 2022 (Qld) (Revenue Amendment Act) was assented to on 30 June 2022. This Act makes a number of changes to state revenue administration and collection.
Included are changes to the Land Tax Act 2010 (Qld) which will, on and from the land tax year ending 30 June 2023, require that the value of a taxpayer's total landholding in Australia (not just in Queensland) be taken into account in determining the taxpayer's land tax liability in Queensland. This change could lead to a significant increase in Queensland land tax for taxpayers who own land in both Queensland and other states and territories.
What is the current position?
The current position is that land tax is assessed on the value of all non-exempt landholding in Queensland (and not elsewhere) at midnight on 30 June each year. Differing thresholds and rates apply depending on whether a taxpayer is an individual, corporation, trustee or absentee. Types of land that are exempt from the calculation include land used as farming (in certain circumstances) and an individual's principal place of residence. The Revenue Amendment Act does not change these thresholds or exemptions.
What is the new position?
The changes will apply for the land tax year commencing 1 July 2023 (i.e. for land tax assessed on land values as at midnight on 30 June 2023).
Using wording from the legislation, for the land tax year commencing 1 July 2023 and subsequent land tax years:
- the Queensland Revenue Office (QRO) will use the total value of a taxpayer's 'Australian Land' in calculating land tax. This will include the value of both 'Taxable Land' and 'Relevant Interstate Land'
- the total value of 'Australian Land' calculated will then be used to determine the rate of land tax that will be applied to the 'Queensland Proportion' of landholdings.
Translated into practice, this means that taxpayers will still be taxed only on the value of their Queensland landholdings, but in determining the 'rate'of land tax that they pay, the total statutory value of their 'Australian Land' will be used. This will push Queensland landowners into a higher land tax bracket.
The new rule works like this:
- first calculate the total value of Australian land owned by the taxpayer
- then calculate the land tax on that as if all of that land is in Queensland
- then, apportion to the total land tax amount to the Queensland land by relative value.
ABC Pty Ltd owns land in Queensland with a taxable value of $1,500,000 at midnight on 30 June 2022. Its land tax payable for the year 1 July 2022 to 30 June 2023 is $21,000, this is because for companies:
- the applicable land tax bracket for land with a taxable value of $1,500,000 is the bracket for land values between $350,000-$2,249,000
- land tax payable for land within that bracket is $1,450 plus 1.7 cents for each $1 more than $350,000.
On 30 June 2022, ABC Pty Ltd also owns land in New South Wales with a statutory value of $5,000,000. However, the value of that land is completely irrelevant to its calculation of land tax in Queensland under the current position.
As at midnight on 30 June 2023 (i.e. the following year), the taxable value of Queensland land holdings of ABC Pty Ltd remains unchanged at $1,500,000, as does the statutory value of its land holdings outside Queensland ($5,000,000). Under the new position, the value of 'Australian Land' owned by ABC Pty Ltd as at 30 June 2023 is $6,500,000.
Its land tax payable for the year 1 July 2023 to 30 June 2024 is $25,096.15, this is because for companies:
- the applicable bracket for land with a taxable value of $6,500,000 is the bracket for land values between $5,000,000–$9,999,999
- land tax payable for land within that bracket is $75,000 plus 2.25 cents for each $1 more than $5,000,000
- this calculation equates to a land tax of $108,750
- this amount is applied to the 'Queensland Portion' of the 'Australian Land' owned by ABC Pty Ltd, i.e. ($1,500,000/$6,500,000) x $108,750 = $25,096.15.
Therefore, in this example, with all other variables equal, the land tax payable by ABC Pty Ltd will increase by $4,096.15 (being 19.5 per cent) under the new position.
Frequently asked questions
Will this change result in taxpayers paying more land tax in Queensland?
There will be no change to land tax liability for taxpayers who own land in Queensland only.
However, taxpayers who own land in Queensland and non-exempt land elsewhere in Australia will pay more land tax in Queensland. The increased tax liability in Queensland does not affect land tax payable elsewhere in Australia, i.e. no credit is given for the additional tax payable in Queensland.
How will the QRO know the value of my interstate land holdings?
The Revenue Amendment Act requires landholders to declare all their interstate landholdings (including the value issued according to the relevant state's or territory's land valuation legislation). The declaration must be lodged generally by 31 October each year (or if a land tax assessment issues earlier than 31 October, within 30 days of its issuing).
As an affected landholder, can I pass on the increase to my tenants?
Assuming a current lease permits recovery of land tax (and is not a retail shop lease or residential tenancy, as land tax cannot legally be recovered under such leases), it will be necessary to check the wording of the relevant lease clause. Some leases are very prescriptive in the manner in which land tax is calculated for the purpose of outgoings. For example, a lease that stipulates that land tax must be calculated "on the basis that the landlord owns no land other than the Premises" would arguably preclude the inclusion of interstate land in determining the amount.
In relation to future leases, it remains to be seen whether, during negotiations, tenants will seek to expressly exclude the inclusion of interstate land. Tenants and their advisors should certainly this where appropriate.
How does the foreign owner surcharge fit into this reform?
The 2 per cent surcharge to absentees and foreign companies or trusts will be applied to the land tax calculated using the new methodology, i.e. using the interstate land values.
What if each parcel of land owned by a taxpayer is owned by a different SPV or entity?
The current ability to obtain the benefit of numerous land tax free thresholds through using different land-owning entities remains unchanged. Therefore, if a person incorporates Company A to own land in Queensland only and Company B to own land in Victoria only, in most cases, Queensland land tax will only be calculated using the taxable value of Company A's land.
However, there is always the possibility that Queensland might enact broader tracing and aggregation rules, which could reduce or remove the benefit of this situation.
Is all interstate land to be included in the calculation?
No. 'Excluded Interstate Land' will be ignored when calculating land tax. Generally speaking, exemptions in the Land Tax Act will be available to interstate land in the same way as Queensland land. This will include the home exemption, supported accommodation exemption, moveable dwelling park exemption, retirement village exemption and primary production exemptions. However, some exceptions will apply.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.