Queensland land tax loophole set to close with new tax rules

In December 2021 the Queensland government announced amendments to land tax targeting investors from interstate. 

Until now, interstate investors with real estate assets across multiple states were able to use tax-free or discounted thresholds in each state and territory. 

As land tax is administered by state governments, some interstate landholders exploit tax-free thresholds in different jurisdictions to minimise their tax obligations. Landholders with all of their landholdings in Queensland end up paying more land tax than their interstate counterparts despite Queensland’s generous system. 

The Queensland government proposal would consider the value of an investor’s real estate assets outside of Queensland to determine a land tax bill for their local investments. 

For example, an individual with taxable landholdings of $1 million in Queensland would pay $4,500 in land tax (or an average rate of 0.45 per cent). Another individual landholder with $600,000 in taxable land in Queensland and $400,000 in New South Wales, would only pay $500 in land tax in Queensland and no land tax in New South Wales at current thresholds. 

This inequity, or loophole, will be addressed by amending the current land tax arrangements to account for the value of land held interstate when assessing taxpayers’ land tax liability. 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. 

Under this approach, an individual with $600,000 in taxable land in Queensland and $400,000 in New South Wales would pay $2,700 in land tax in Queensland, an average rate of 0.45 per cent on their Queensland landholdings, being the same rate as the landholder with all their landholding in Queensland. 

 Treasurer Cameron Dick said the land tax adjustment – which would only affect interstate investors with a number of properties in different states – would make the system “fairer and more equitable” “This closes a loophole that is unfair on Queensland’s first home buyers,” he said. 

The announcement caught the property sector off guard and sparked swift anger. “How can the government possibly justify slugging property investors with tax for land they own that isn’t even within our state borders?” Real Estate Institute of Queensland CEO Antonia Mercorella said. 

Additional land tax will only apply to the taxable Queensland landholdings of individuals who own land in multiple jurisdictions. Landholders who only own land in Queensland will not be affected by this change. Landholders will continue to be able to access all available exemptions, such as the principal place of residence and primary production exemptions. 

The timing of commencement of this reform will be subject to the passage of appropriate legislative amendments.

References: 

• Budget Queensland Announcement [Page 25]. 
• Interstate properties and land tax. Queensland Government.
• Queensland government slugs interstate property investors with 'new land tax'. RealEstate.com.au. 
• Qld to close land tax loophole for interstate investors. The Australian Financial Review.