Queensland would likely sink deeper into the rental crisis as the new land tax regime takes effect next year.

The Real Estate Institute of Queensland (REIQ) renewed its calls to repeal what it believes to be an "illogical" policy on land tax.

REIQ CEO Antonia Mercorella said the state pushed for the land tax without proper legal and taxation advice from qualified stakeholders.

"There’s no other state or territory that charges state land tax based on the value of properties held across Australia and outside the jurisdiction where the tax is collected — it’s unprecedented and unheard of for a reason," she said.

"It is irreconcilable that the Treasury expects to legitimately raise tax on the basis of value of property held outside of Queensland, for the purpose of funding infrastructure within Queensland.”

How Queensland's new double land tax works

Under the new land tax rules, the state will include taxable land in Queensland and “relevant” interstate land when calculating the tax.

Relevant interstate land refers to land located in another state or territory that is valued under interstate valuation legislation.

The total value of a taxpayer’s Australian land will be used to determine whether the tax-free threshold has been exceeded. Currently, the tax-free thresholds are $600,000 for individuals and $350,000 for companies, trustees, and absentees.

Further, the overall value of the land a taxpayer owns will also be used to calculate the rate of land tax that will be applied to the share of Queensland land in the overall value of their landholdings.

This means that if someone has a $1 million property in Victoria, and $1 million property in Queensland, the state will calculate the tax rate based on $2 million worth of property.

These changes will be implemented by 30 June 2023.

"Nothing but a money grab"

Ms Mercorella said these changes will only have a detrimental impact on the appeal of investing in Queensland.

“The government has yet again used the stick, in yet another desperate money grab from the property sector — by the government’s own example this land tax change will see a 332% increase in land tax,” she said.

“There’s plenty of reasons to invest in the sunshine state, but with this land tax regime the Treasury has not only knocked the confidence out of Queensland property, it’s delivered a king hit."

InvestorKit head of research Arjun Paliwal said investors across Australia comprise up to 35% of property ownership, which means that many of them could potentially see their land tax bill rise by thousands or even tens of thousands of dollars.

“We could see more investors pulling out of Queensland or considering other parts of the country, which would have a negative effect on the sunshine state’s property market,” Mr Paliwal said.

“This puts even more pressure on rents rising.”

Rental crisis could get worse

Both Ms Mercorella and Mr Paliwal believe that this new land tax regime will hurt not just the landholders but also the would-be tenants in the state.

“Given we are living in the tightest rental market in the history of our state, and 36% of our population rent their homes with the vast majority of housing supplied by private investors, one would assume that it’s not the time to risk rocking the boat of private residential rental stock,” Ms Mercorella said.

“The Queensland Government should step in and get rid of it — we are going to see a rental crisis 2.0 in Queensland, where rents will boom further as investors might pull out of the area due to fear,” Mr Paliwal said.

A recent analysis from BuyersBuyers showed that Australia could be following Ireland into a severe rental crisis.

BuyersBuyers co-founder Pete Wargent said a series of measures to target landlords in Ireland resulted in a chronic shortage of rentals and massive queues outside properties for rent.

“It was recently reported that there are only 716 properties available for rent across the entire country as landlords leave the market in droves, reportedly due to increasing regulation and property taxes,” he said.

“Australia isn’t at such a crisis point just yet, but things are heading in that direction.”

The overall vacancy rate in Australia was 0.9% in August, the lowest on record according to Domain. Brisbane had one of the lowest vacancy rates over the month at 0.6%.

Mr Wargent said policy changes, including the land tax changes in Queensland, and the higher assessment buffer for new borrowers would make being a landlord incrementally less attractive.

“It’s the death of a thousand cuts for many small landlords at the moment,” he said.

BuyersBuyers CEO Doron Peleg added that population growth would likely be an added pressure on the rental market, especially with the likely immigration rebound.

“Unfortunately, in the current environment many landlords are likely to sell, further depleting the rental stock, and this will see asking rents continue to rise,” Mr Peleg said.

“As in some other countries, the increased use of short-term rental outlets such as Airbnb and other privately owned websites run may also have decreased the available rental supply advertised through the traditional real estate portals.”

Photo by Karolina Grabowska from Pexels.