From 30 June 2023, Queensland will become the first state to have a land tax formula that considers a taxpayer’s entire Australian landholding when determining their land tax liability. These changes to the Land Tax Act 2010 (Qld) are ushered in by the Revenue Legislation Amendment Act 2022 (Qld). In turn, these reforms may increase in the land tax payable for landowners of Queensland and interstate properties.
Queensland’s Current Position
Queensland’s land tax formula currently assesses the value of all non-exempt landholding in Queensland as of midnight of 30 June each year. The classification of exempt land will remain unaffected and includes, for example, properties used for primary production (i.e. farming) and as their principal place of residence. Unlike the new reforms, the value of the non-exempt Queensland land determines the applicable rate of taxation that is applied depending on whether the taxpayer is an individual, corporation or trustee.
For example:
Company X owns:
- a Queensland property worth $745,000; and
- a New South Wales property worth $2,000,000.
Here, only the Queensland landholding is taken into account.
Step 1
Company X is not eligible for the tax-free threshold as its landholding value exceeds $350,000.
Step 2
As the Queensland property is valued at $745,000, it falls within the second tax bracket for companies. This means that the rate of taxation is $1,450 plus 1.7 cents for every $1 more than $350,000.
Step 3
Company X’s land tax payable in Queensland is, therefore:
$1,450 + ($395,000 x 0.017) = $8,165
Queensland’s New Position
With these reforms, Queensland’s land tax formula will be amended to calculate a taxpayer’s liability considering the value of their ‘Taxable Land’ (i.e. non-exempt Queensland landholding) and ‘Relevant Interstate Land’ (i.e. all other Australian non-exempt lands). Together these values combine to become the total value of the taxpayer’s ‘Australian Land’.
Notably, the taxpayer’s non-exempt ‘Australian Land’ will not be taxed, only their Queensland landholding. However, the total value of the taxpayer’s non-exempt Australian Land will:
(a) determine what rate of land tax is applied to the non-exempt Queensland land, and
(b) determine whether the value exceeds the tax-free threshold.
In effect, these changes will not affect taxpayers owning only Queensland land. However, taxpayers owning properties across Australia may be pushed into a higher tax bracket or may no longer fall within the tax-free threshold.
For example:
Company X owns:
- a property in Queensland worth $745,000; and
- a property in New South Wales worth $2,000,000.
The total Australian Land is valued at $2,745,000.
Step 1
Company X is not eligible for the tax-free threshold as its Australian landholding exceeds $350,000.
Step 2
As the total value of all Australian Land is considered, Company X falls within the third tax bracket. This means that the tax rate is $33,750 plus 1.5 cents for every $1 more than $2,250,000.
Step 3
The rate of land tax payable for all eligible Australian Land is, therefore:
$33,750 + ($495,000 x 0.015) = $41,175
Step 4
As this rate of taxation only applies to Queensland Land, the land tax payable becomes:
$41,175 x (745,000 / $2,000,000) = $15,337.69
How will this impact the land tax payable in other states?
These changes to Queensland’s land tax calculations will not affect the land tax payable in other states or territories. Taxpayers will still be subject to each state or territory’s individual land taxation regime, despite their interstate landholding affecting their Queensland land tax calculations.
What are the notification requirements for the Queensland Revenue Office (‘QRO’)?
From the 2023/24 financial year onwards, taxpayers must declare their interstate landholdings within 30 days of receiving a Land Tax Assessment Notice. If no notice is issued, taxpayers must ensure they declare their interstate landholdings on or before 31 October each year. This declaration can be completed by setting up a QRO Online Account.
If taxpayers do not know the value of their landholdings as at 30 June 2023 (for this coming financial year), they must submit the most recent value they can ascertain. If the taxpayer is notified of the value at a later date, they may have their land tax liability reassessed.
An entity’s failure to notify the QRO of their landholdings may result in interest and penalty tax being imposed on them under the Taxation Administration Act 2001 (Qld) (‘TA Act’). Additionally, entities may be subject to an offence under the TA Act.
What’s next?
It is important to be aware of these upcoming changes and how they may impact your land tax payable in the future. If you have any questions about how these reforms may affect you or your business, please do not hesitate to contact us.
Addendum:
On 30 September 2022, Annastacia Palaszczuk announced that the Queensland Government will no longer implement these changes. The reform’s reliance on self-disclosure by taxpayers and lack of cooperation among other states and territories is a likely contributor to the reforms being scrapped. Therefore, the previous method of calculating land tax will apply, meaning that only Queensland landholding is considered.