Land tax policy changes to watch in NSW & QLD

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Land tax and property ownership is an issue on the agenda of all Australian governments.
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Key takeaways

  • State governments in New South Wales and Queensland have both made recent changes to land tax policy.
  • Understanding land tax liability is important to help make informed decisions and structure real estate investments effectively.
  • Land tax is a politically sensitive issue and policies are changing so if you are buying or investing in property seek advice about your personal situation.

State governments in both New South Wales and Queensland have recently amended land tax legislation. Since property prices and cost of living are sensitive issues, both governments have found changes to be controversial.

Whether you are a property investor or first home buyer, it is important to get up-to-date advice to understand how changing policies may affect you.

NSW land tax changes to assist first home buyers proposed for 2023

New South Wales has now introduced legislation to implement the land tax and stamp duty reforms announced in the state budget earlier this year. The legislation was introduced in October 2022 and changes are due to commence in January2023.

If the scheme goes ahead as planned, an eligible first home buyer purchasing a property worth up to $1.5million may choose whether to pay an upfront amount for transfer duty (stamp duty) or an annual property tax.

New scheme to complement existing assistance schemes

The new scheme – First Home Buyer Choice – will sit alongside existing first homeowner assistance, including the:

  • First Home Owner (New Homes) Grant Scheme –which offers a grant of up to $10,000, and
  • First Home Buyer Assistance Scheme – which provides an exemption or reduction of transfer duty on the purchase of a home with a value of up to $800,000.

Who will be eligible?

The NSW scheme will be available to individual purchasers. You can buy property with other people, but not as a company or trust. You must also be over 18, at least one buyer must be an Australian citizen or permanent resident and you or your spouse must not have owned or co-owned residential property in Australia.

As the name suggests, the scheme is aimed at first home buyers, so you must also move into the property within 12 months and live in it continuously for at least 6 months.

This scheme will only apply to contracts entered into on or after 16 January 2023. However, first home buyers who sign a contract after the legislation passes and before 15 January 2023 will be able to opt in and apply for a refund of any transfer duty already paid.

What are my choices?

If you choose the annual tax option:

  • You will pay $400plus 0.3% of the land value of the property every year.
  • If you later use the property as an investment the annual property tax will increase to $1,500plus 1.1% of the land value of the property.
  • You will be issued a tax assessment for each financial year. If you sell the property you will receive a pro rata adjustment for that financial year.

If you choose to pay the upfront transfer duty:

  • The stamp duty you will need to pay will be calculated at a rate of $44,095 plus $5.50 for every $100 that the purchase price is over $1,089,000.
  • This means the duty payable on a property with a value of $1.5 million would be $67,375.

If you are eligible for a stamp duty exemption under the existing scheme, you would not choose to pay an annual property tax. However for someone only eligible for any concession or exemption, the annual property tax may be a better choice. You would also need to consider your own situation and plans for the property and advice from your accountant or financial planner.

Queensland changes to target property investment

Buyers and investors with property in Queensland and other states may have been watching planned changes to land tax laws in Queensland with some concern.

Changes to the law have passed and were due to commence on 30 June 2023.

Under the new laws, property owners in Queensland will have their liability for land tax in Queensland based on all property owned in Australia. Currently tax is calculated based on the value of land owned in Queensland over a certain threshold value.

Concerns raised over implications for interstate property owners

The effect of the changes would be that property owners in Queensland may pay higher land tax on that property if they also own land in another state.

There have been concerns about how the proposal might affect, for example, someone with an investment in Queensland and a family home in another state. While it appears owners would be able to take steps to exclude their principal residence, or to restructure investments, at least it would mean an increase in administration time ahead of June 2023.

The panned changes had put the Queensland Government under pressure on several fronts – including from the real estate industry. Other state and territory leaders had also indicated they would withhold land ownership information making the changes difficult to implement.

Policies are changing so watch this space

In response to pressure, the Queensland changes have been abandoned. For now.

In New South Wales, the legislation still needs to pass, any may face opposition in the upper house.

What is clear is that property ownership is an issue on the agenda of all Australian governments, and we are watching developments in all states closely.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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