Significant Queensland land tax amendments in 2023

With effect from the Queensland 2023 land tax year (which ends on 30 June 2023), Queensland land tax will be calculated using a taxpayer’s total Australian landholding rather than using just their Queensland landholding. 

The inclusion of interstate landholdings is unique to Queensland and will result in a higher land tax burden for taxpayers that own land across multiple states or territories, where one of the states is Queensland.

How is land tax currently imposed in Queensland?

The Queensland government currently imposes land tax on the taxable value (i.e., unimproved value) of a taxpayer’s landholdings in Queensland (subject to exclusions such as those covering one’s primary residence and certain land used for primary production) as at 30 June of each year.

The rate of land tax is progressive and varies depending on the character of the taxpayer (e.g., individual, or non-individual). Excluding any foreign surcharges, the maximum rate of land tax is 2.75%, which applies to every dollar value of land above $10,000,000 owned by a non-individual.

Currently, the rate of land tax payable by a taxpayer is determined solely by reference to the aggregate value of Queensland land owned by that taxpayer – that is, the higher the aggregate value of land owned in Queensland, the higher the rate of land tax.  Up to and including land tax assessment for the 2022 land tax year, Queensland does not take into account any land owned by a taxpayer in another state or territory.

What is changing?

The Revenue Legislation Amendment Act 2022 (Qld) (the “Act”), which received Royal Assent on 30 June 2022, will (inter alia) amend the Land Tax Act 2010 (Qld) to introduce a new methodology for calculating the rate of land tax applicable to land in Queensland, applicable from 30 June 2023. 

Specifically, while land tax in Queensland will still only be payable on the taxable value of a taxpayer’s Queensland landholdings, the applicable rate will be determined by reference to the aggregate value of the taxpayer’s landholdings Australia-wide.

This approach, which departs from that followed in all other states and territories will result in a higher land tax liability for taxpayers who own land both within and outside of Queensland, some of which may not have previously been liable for land tax.

In announcing the change, the Queensland Treasurer described this new method as a “fairer land tax system”, though it is interesting that Queensland remains the only jurisdiction that has implemented this approach.

How will it work practically?

The methodology effectively requires the calculation of a notional quantum of land tax based on the taxable value of a taxpayer’s aggregate landholdings Australia-wide, followed by the pro-rating of that quantum to the taxable value of the taxpayer’s landholdings in Queensland.

The same exemptions that would apply to land in Queensland generally apply to interstate land and the methodology applies for the purposes of the 2% foreign owner surcharge. 

The following example illustrates the potentially significant impact of the Act:

Mr. X owns the following properties across Australia:​​

  -   Principal place of residence in Queensland with a taxable value of $900,000;
  -   Investment property in Queensland with a taxable land value of $800,000; and
  -   Investment property in New South Wales with a taxable value of $700,000.

Under the current rules, Mr. X’s annual land tax liability in Queensland would be $2,500[1].

However, assuming the same taxable land values as at 30 June 2023, next year’s annual land tax liability would increase significantly to $6,800[2].  

What else?

Taxpayers who own interstate land must notify the Queensland Revenue Office of their interstate landholdings and their respective values:

• Where a land tax assessment notice is issued before 30 September 2023, within 30 days of the date of the assessment notice; and
• Where a land tax assessment notice is used after 30 September 2023, on or before 31 October 2023.

Landowners who fail to declare interstate landholdings could, under the Taxation Administration Act 2001 (Qld), be subject to the following:

• Penalties of up to 75% of any shortfall amount; 
• Significant unpaid tax interest; and
• An offence, attracting a civil penalty of up to $14,375.

While the ostensible solution may be to simply hold different landholdings through separate land-owning entities (e.g., Company A in Queensland, Company B in New South Wales, etc.), the Act’s introduction potentially brings into question the longevity of this option.

Please reach out to Sam Mohammad (Director – Indirect Tax) if you would like to discuss the Act’s implications for your specific circumstances.