As foreshadowed by the Queensland Government's Mid-Year Economic and Fiscal Outlook announcement in late 2021, significant changes to the Queensland land tax regime were given the green light with the assent of the Revenue Legislation Amendment Act 2022 (Qld) on 30 June 2022.
Changes to the Land Tax Act 2010 (Qld) in respect of the interstate land tax model will come into force from 30 June 2023, and will see entities or individuals liable to pay land tax on Queensland landholdings calculated with reference to their Australia-wide landholdings. This could mean an increase in Queensland land tax liability for anyone who owns land in Queensland as well as non-exempt property in another State or Territory.
Under the new provisions:
- The land tax payable by a landowner in Queensland will be quantified by reference to the total value of all Australian 'non-exempt' landholdings as at midnight on 30 June (starting from 30 June 2023). Specifically, land tax will be calculated as the landowner's notional land tax multiplied by the landowner's Queensland landholdings as a proportion of their Australia-wide landholdings.
- The total value of Australian land includes both:
- The taxable value of Queensland land
- The statutory value of interstate land, being the relevant valuations applied under the relevant State and Territory legislation
- Landowners should be able to continue accessing all available exemptions, such as the home (principal place of residence) and primary production exemptions. The increased tax liability in Queensland should not affect the taxes payable by the landholder in other States and Territories.
- Queensland landholders will need to declare all interstate landholdings (including land description, statutory value and percentage of ownership) generally on or before 31 October each year (beginning in the 2023/24 financial year) or, if a Queensland assessment notice is issued before 31 October, within 30 days of receiving the assessment. Failure to comply with these notification obligations will be an offence.
- Landholders who only own land in Queensland will not be affected by the changes.
Under the current regime (which will remain in effect for the 2022/23 financial year), land tax liability is assessed in Queensland by reference to the value of the taxable land owned in Queensland as at midnight on 30 June each year, with different thresholds and rates applicable based on the class of landholders (i.e., individuals, corporations, trustees and absentees). Exemptions are available for certain classes of landholdings. This means that any land owned in any interstate location was effectively ignored.
The current tax-free thresholds are AUD 600,000 for individuals (other than absentees) and AUD 350,000 for companies, trustees and absentees. If you are an absentee or a foreign company or trust, a surcharge of 2% is added when calculating land tax.
How will land tax be calculated under the new regime?
From 30 June 2023, the total value of a landowner's Australian land will be used to determine:
- Whether the tax-free threshold for Queensland land tax purposes has been exceeded
- If so, the rate of land tax that will be applied to the Queensland proportion of the value of the landholdings
Then to calculate the amount of Queensland land tax payable, the following formula will be applied:
How will value be determined?
There is no change to the method of determining the taxable value of Queensland land. To determine the total value of Australian land, this will be a sum of the taxable value of Queensland land and the statutory value of all relevant interstate land. The statutory value for a relevant financial year will be determined under the corresponding land valuation legislation of that jurisdiction as at 30 June of the immediately preceding financial year.
While the Commissioner may accept the amount as notified by the taxpayer in determining the relevant interstate value, the Commissioner may also work this out using:
- Other information provided by the taxpayer when they give notice about their interstate land (see below regarding notification requirements)
- Any information available when assessing the taxpayer's liability for land tax or at a later date after the taxpayer's land tax liability has already been assessed
A taxpayer may object to a land tax assessment that includes interstate land. However, any challenge to the value of the interstate land needs to follow the process under the relevant state or territory's land valuation framework. If the interstate value is lowered (i.e., due to a successful objection to a valuation which has retrospective effect), the updated amount is taken to be the relevant interstate value for that year if the Commissioner (upon being notified) is satisfied that it would be appropriate in the circumstances. A reassessment of the taxpayer's land tax would then be made to take the relevant interstate value into account.
What about exempt land?
Land that is exempt from Queensland land tax is excluded when determining whether the tax-free threshold is exceeded for the applicable rate.
Under the new regime, the existing Queensland land tax exemptions will generally be available to interstate land. That is:
- Following an application by the landowner, the value of an eligible interstate land may be excluded from the land tax calculation provided the eligibility requirements for the Queensland exemption are also met for the interstate land. Examples of generally equivalent exemptions include principal place of residence, primary production, retirement village and exemptions available to charitable institutions.
- However, some exemptions will remain limited to land in Queensland only (i.e., government/port authority land and exemptions available to societies, clubs and associations).
Queensland Revenue Office will provide more information on the exclusions and application process after 30 June 2023.
Are there new notification requirements?
The new regime will integrate with the existing land tax assessment model. The Commissioner will identify owners of both Queensland and interstate land who are potentially liable for land tax, and these landowners will then be provided with a pre-assessment indication based on the interstate landholding information available to the Commissioner.
Currently, Queensland landowners are required to notify the Commissioner if their land is no longer exempt or if their address for service has changed. In addition to these notification obligations, owners of both Queensland and interstate land will be required to notify the Commissioner of particular information about their interstate land (including interstate land ownership, the extent of interest and statutory value) either by confirming the information in the pre-assessment indication or by amending or by updating it.
Notifications are required to be made generally on or before 31 October each year (beginning in the 2023/24 financial year) or, if a Queensland assessment notice is issued before 31 October, within 30 days of receiving the assessment. Failure to comply with these notification obligations will be an offence.
To illustrate the economic impact of this new regime, imagine the following situations for two individuals who both currently own land in Queensland:
- Individual A owns a land in Queensland with a taxable value of AUD 2 million.
- Individual B owns a land in Queensland with a taxable value of AUD 745,000.00 and another property in New South Wales with a statutory value of AUD 1,255,000.
Despite the two individuals both owning land with values totaling AUD 2 million:
- As of 30 June 2022 (i.e., under the current regime), Individual A will pay AUD 21,000 in Queensland land tax and Individual B will pay AUD 1,950 in Queensland land tax.
- As of 30 June 2023 (i.e., under the new regime), Individual A's land tax assessment will remain unchanged. Individual B will have to pay AUD 7,822.50 in Queensland land tax (being an increase of AUD 5,872.50), however, despite the value of their land in Queensland remaining unchanged.
The introduction of a 'total value of Australian land' component to the Queensland land tax formula will result in more land tax being paid for many taxpayers who own taxable land in Queensland.
All taxpayers who own interstate land should be mindful of the land they own in other states to ensure compliance with the new notification requirements, as well as how the statutory valuations of these land will affect their land tax liabilities in Queensland going forward from the 2023/24 financial year. As objections to assessments based on valuations of interstate land are restricted, taxpayers must be increasingly aware of any changes in their statutory valuations. Taxpayers should also be conscious of ensuring that exempt land is properly recognised as exempt by the Queensland Revenue Office and make appropriate applications.
Despite Treasury's intentions to introduce the new land tax model to provide a 'fairer and more equitable' land tax liability on all Queensland taxpayers, it is likely that the increase in land tax will be primarily felt by tenants in Queensland, as landlords typically seek to pass through their land tax liability where permitted by law.