Land Tax – Changes are coming

From 30 June 2023, the Queensland Revenue Office will be calculating landholder liabilities by aggregating the value of properties owned across Australia and not just in Queensland. While some interstate land may be excluded from the total value (because of an exemption, such as for a principal place of residence), landowners will have to apply to the Queensland Revenue Office to have this exemption applied. The land tax free thresholds remain unchanged at $600,000 for individuals and $350,000 for any other entity.

The land tax imposed is calculated on the Queensland proportion of the total value of land owned in Australia, but the rate of land tax paid is based on the total value of all land owned.

This is represented by the formula:
Land tax payable = G x (TL / AL)
Where:
G = the land tax amount for the total value of taxable land in Queensland + relevant interstate land
TL = the total taxable value of the taxable land owned by the taxpayer
AL = the total value of the Australian land owned by the taxpayer (which is the sum of all taxable land in Queensland and all relevant interstate land)

Worked Example:
Landowner owns an interstate investment property in their personal capacity which is worth $2,000,000. They now acquire an investment property in Queensland worth $1,500,000. The total taxable value of all Australian land is $3,500,000.
Under the current position in Qld, land tax would be calculated only on $1,500,000 ($4,500 plus 1.65 cents for each $1 more than $1,000,000) and therefore land tax of $12,750 is payable.
However, under the new proposal (which will take effect from 30 June 2023 for the 23/24 financial year), the applicable rate for all Australian land totalling $3,500,000 is $37,500 plus 1.25 cents for each $1 more than $3,000,000 (which is a total of $43,750). This must then be apportioned based on the percentage value of land held in Queensland. So, $43,750 x ($1,500,000 / $3,500,000) = $18,750 in land tax payable in Queensland. An effective tax increase of $6,000 even while ownership and statutory valuations have remained static.

How will the Queensland Revenue Office be identifying my interstate holdings?
On and from the 23/24 Financial Year, landowners in Queensland who own taxable land (i.e. not subject to an exemption, such as for principal place of residence) will be required to give a notice to the commissioner detailing what interstate property they own, even if that interstate property is subject to an exemption itself (for instance, if it was for primary production or a retirement village and those were exempt land in the other state’s land tax scheme). This notice is required to be given to the commissioner on or before the earlier of 30 days from receipt of an assessment notice and 31 October. This notice must be given in the first year and then each year after that in which there has been a change in the interstate holdings or the statutory value of those interstate holdings. This means, for many landowners who were not previously liable for land tax in Queensland (and who consequently have not previously and will not receive an assessment notice) they will have to give notice to the commissioner by 31 October 2023.

The notice to the Commissioner must include:
• the property description of the parcel;
• the taxpayer’s interest in the parcel (i.e. 100%, 50%, et cetera); and
• the statutory value of the parcel for the financial year or, if the taxpayer cannot ascertain the statutory value of the parcel for the financial year, the most recent relevant interstate value for the parcel that the taxpayer can ascertain.

Will I now pay more land tax in Queensland?
If you only own taxable property in Queensland, there is no change to your land tax liability. However, if you own taxable land in Queensland and non-exempt interstate land you will now pay more land tax in Queensland. This increased tax liability in Queensland does not affect interstate land tax liability. That is, there is no cross-jurisdiction credit granted.

What if I own my own home in Queensland but have an investment property interstate?
This will not trigger the obligation to notify and no land tax will be payable in Queensland, as the only property in Queensland is “exempt land” as that term is defined in the Land Tax Act 2010 (because of the principal place of residence exemption). No assessment notice would be issued to the landowner in this situation and the obligation on the taxpayer to notify of interstate land held would be contingent on the taxpayer owning taxable land in Queensland, which they would not.

However, they may still be liable for land tax in that other state.

What if I live interstate in a home I own, I own another investment property interstate, and I want to buy another investment property in Queensland?
In this situation the landowner will own taxable land in Queensland and will presumably also own land which is a “relevant interstate interest” being the interstate investment property. If the landowner owns and lives in an interstate property, which is “excluded land” for the purposes of that state’s land tax scheme (such as where it is their principal place of residence), that land is excluded from the total Australian land. While land tax will only be paid on the proportion of land which is owned in Queensland, the threshold when land tax becomes payable is calculated on the total value of all land owned in Australia.

Worked Example:
Landowner owns two properties interstate in their personal capacity, one of which they reside in and another which is worth $1,000,000. Their ‘home’ is likely not a relevant interstate land (because it is likely an excluded interstate land pursuant to an exemption). They now acquire a property in Queensland worth $500,000. The total taxable value of all Australian land is $1,500,000. The applicable rate for that value is $4,500 plus 1.65 cents for each $1 more than $1,000,000 (which is a total of $12,750) – but this must be apportioned based on the percentage value of land held in Queensland. So, $12,750 x ($500,000 / $1,500,000) = $4,250 in land tax payable in Queensland.
What if I own my own home in another state but have one investment property in Queensland?
Even though your own home might not be relevant interstate land (in that it might have a principal place of residence exemption available to it), you are still required to give notice to the commissioner of all interstate property held even where the end result of the calculation means you have no land tax liability in Queensland.

Worked Example:
Landowner owns two properties in their personal capacity, one of which they reside in which is interstate (and is worth $900,000) and another investment property in Queensland which is worth $550,000. Their ‘home’ is likely not a relevant interstate land (because it is likely an excluded interstate land). The total taxable value of all non-exempt Australian land is $550,000. The applicable rate of land tax for that value is $0. So, ($550,000/$550,000) * $0 = $0 in land tax payable in Queensland. However, this landowner will still be required to report their interstate home to the Queensland Revenue Office.

What if I continue to hold each property in separate entities?
The current ability to obtain the benefit of land tax free thresholds by holding properties in separate entities is unchanged. That is, if company ABC holds all Queensland properties and company XYZ holds all interstate properties, only the properties held by ABC are relevant to the Queensland land tax liability and ABC’s liability would be unchanged from the current system.

What interstate land will be excluded from my Queensland land tax liability?
If your interstate land meets certain eligibility requirements, you can apply to have its value excluded from the land tax calculation.
Exclusions which may be available for interstate land are:
• Home (principal place of residence)
• Primary production
• Supported accommodation
• Moveable dwelling (caravan) park
• Retirement village
• Transitional home
• Charitable institutions
• Aged care

Some exemptions will be reserved for Queensland land only, such as:
• Government land
• Port authority land
• Societies, clubs and associations

The Queensland government has signalled that further information about these exemptions will be available after 30 June 2023. This means that detailed information about the exemptions may only be given after the liability for land tax in the 23/24 financial year has occurred.
If you need advice on the changes above, please get in contact so that we can assist you with your specific circumstances.

This article was contributed by Mitchell Ablett-Nelson,  Nicholson’s Solicitors