Queensland’s “generous” tax system will soon be reformed to level the playing field between local and interstate investors.
As outlined in the 2021–22 Budget Update – Mid-Year Fiscal and Economic Review, the Queensland government is eyeing to close the “loophole” in the state’s land tax system, which allows interstate investors, particularly those who hold investments in other states, to bear less liability.
Under the “fairer” land tax system envisioned in the budget update, tax arrangements will be amended to account for the total value of land held interstate when assessing land tax liability.
Here’s an excerpt from the budget update:
A total national taxable land value will be established for each Queensland landholder, which will continue to exclude exempt land such as principal place of residence.
The national taxable value will determine the appropriate tax rate that will then be applied to the Queensland proportion of the value of the individual or entity’s landholdings.
In the current system, a local investor with a $1m property would pay $4,500 in land tax, significantly higher than the $500 duty required for an investor with a $600,000 property in Queensland and a $400,000 property in New South Wales.
With the new approach, the interstate investor will now be charged with a $2,700 land tax in Queensland.
The state government assured that the change will not affect investors who only own land in Queensland.
Furthermore, the state said investors would still be able to access all available exemptions even with an expected policy that would legislate the reforms.
Tax reform a slap to the sector
Real Estate Institute of Queensland (REIQ) CEO Antonia Mercorella said the announcement of the changes in land tax is a “slap in the face” to sector supporting the local economy.
“This treatment of property investors as an endless money pit is outrageous – the government is raking in a huge stamp duty windfall, then relying on private investors to provide the lion’s share of housing supply, and now they’re slapping investors yet again with new taxes,” Ms Mercorella said.
The state’s mid-year budget showed a $5.38bn stamp duty revenue so far in the current financial year, with a projected end figure at around $16.53bn to $19.93bn.
Ms Mercorella said the government had not consulted with relevant property stakeholder groups on this new land tax regime, which was the wrong move at the wrong time.
“From a practical standpoint, it’s also baffling to understand how on earth they intend to get this data in order to double-tax investors who are already paying this tax elsewhere,” she said.
“There is no other state or territory that takes this approach, and by treating property investors with contempt like this time and time again, investors may very well pull up stumps.”
These reforms, Mr Mercorella believes, would scare off potential investors and would significantly increase the holding costs of existing investors, which would then result in higher rents.
“It shows the Government lacks the ability to think outside the square and come up with alternative and innovative solutions to find new revenue streams,” she said.
“You only have to look at the timing of this bombshell legislative reform to see the government are clearly trying to sneak this in under the radar at a time most people have clocked off for the year.”
Photo by @frankbusch on Unsplash.