QLD State Revenue making me come back to Australia for one day - Absentee Surcharge

Well, the nightmare of Queensland continues for me and many others caught in the deplorable Absentee Surcharge with their accompanying Absentee rate Land Tax.

I came back to Australian in June 2018 and have been here since. It is now April so I have well and truly spent more than 6 months in Australia. In fact I am now into my 10th month here.

I contacted the QLD Office of State Revenue wanting to ascertain how long I can be overseas and avoid the Absentee surcharge and the special rate Land Tax.

I had an idea to travel from 1 April and remain overseas right up until just before the 6 months travel time limit imposed on QLD property owners had been reached - that is, come back before the deadline in December 2019. I then stated I would stay in Australia until June 30, 2020 so my 6 month limit was not exceeded. This was purely just a query and I had not formed any intention in my mind at that stage to confirm those ideas.

Initially OSR replied that I would need to seek legal advice. I responded that I had been informed to send them in this question (along with a few others) and that this was unacceptable (words to that effect).

As a result I received a further reply from an OSR officer who stated words to the effect that since I was inquiring about maximising my time out of Australia, I was therefore considered an Absentee and if I was to leave on 1 April, I would be taxed not only for the 2020 Financial Year but also for the 2019 Financial Year.
Therefore,because I would be out of Australia on 30 June, they would impose an Absentee Surcharge as well as the special Land tax (starts at $350,000 threshold instead of usual $600,000).

I have sent two emails (yes very upset over their decision to mind read me and decide I was an 'Absentee' because I wanted to maximise my vacation time out of Australia) asking them to confirm that if I flew back from overseas to Darwin for one day on 30 June, that I therefore would not be tax the Absentee Surcharge and Land Tax.

According to the QLD Land Tax Act it appears that if I am in Australia for more than 6 months in a financial year and am in Australia on 30 June then they cannot slug me the taxes, regardless if they think I want to reside overseas more than in Australia in a financial year.

This tax is totally and utterly F&^%$#. Invented by sadists.

Bottom line is that Queensland is an awful place to invest if you want/need to travel at various times of the year and have a property with land value over the $350,000 threshold.

You basically have to work around being in Australia on 30 June every year and under 6 months overseas. Otherwise you have to prove to them your residence is mainly Australia. From my experience and from others State Revenue will reject appeals and cause you to go through hell.

They even reminded me that I need to inform then upon arrival and departure and my intentions inbetween basically because if my status changes I could be faced with penalties for not letting them know. This is Gestapo stuff. Just wrong.

 

It wont get better. Sell and buy some shares or something? Dont see why you keep going with this. The rules are very costly to you. There are other games to play?

 

The tests seem a bit vague - if they aren't satisfied that you "mainly reside" in Australia, then you are an absentee if you were away for more than 6 months in a financial year, or at 30 June.

Determining absentee status
If you have lived outside of Australia during the financial year, we will consider several factors to determine if you usually live in Australia, such as the reason for your absence and the time spent in and out of the country. If we are not satisfied that you mainly resided in Australia, you will be an absentee if you:

• were away from Australia at 30 June or
• have been away from Australia for more than 6 months in total during the financial year before 30 June.

If you are an absentee, you cannot claim a home or primary production exemption.
​

I think I would be checking what the "financial year" is in this scenario - sounds like 30 June year end, but I'm not familiar with Qld land tax periods.

 

That is Victoria law

 

Thanks mate, I settled on the QLD property in Jan 2017, three months before the changes.
Improvement costs, stamp duty, legals, all the other costs involved, a falling market and being ripped off along the way, I cannot sell now without copping about $130,00 loss (based off last year's appraisals). My superannuation and life savings tied up in this. Otherwise mate I would have jumped ship and run. But the losses will set me back severely and stuff up my life. Don't know what to bloody do. I just don't know anymore.

 

They can choose one or the other or both basically. I am in a wrangle with QLD State Revenue. It is a financial year. You basically have to work your trips away to be back in Australia on 30 June each year if you want to make sure you won't be deemed an Absentee. My 10 months in Australia is now not enough. I have it in email reply from them.

If you cannot do the trip to arrive back in Oz on 30 June to remain from that point on, then, in my case I need to fly to Darwin for a day and fly out back to where I was outside Australia. Costly but cheaper than the many thousands of dollars in the taxes. Just such a stupid legislation.

 

The key issue that seems to be regularly overlooked is that three tests may apply

1. The Act refers to a person not ordinarily resident in Australia (rather than the website which incorrectly says "mainly resided" (s31(1)). This is a common law test for where a person lives, settles and makes their life. Arguing you need to make trips to come to Australia suggests you cannot be ordinarily resident.

2. Only if that test is not met does s31(2) apply. It says:

An absentee includes a person who:
i Is absent from Australia ON the taxing date (30 June) or
ii Has been absent for more than 6 months at the taxing date
s31(2)
​

There is an absence rule for government employees working overseas s31(3)(a) and also
for persons employed by an Australian employer overseas for a period of no more than 5 years s31(3)(b) provided they were employed for a test period prior to departure. Being paid by its offshore office will not meet this test.

The first key test is to satisfy the Commissioner using Form LT16 that you ordinarily reside in Australia. If that test is not met then the statutory tests apply.

I would argue that the law does prescribe a onerous requirement for some to return on 30 June and be capable of proving this. However that is the law. A person who is not ordinarily resident is then bound to pay a tax penalty for ownership of QLD property. The choice to fly back to save this tax surcharge is a basic avoidance rule that assists taxpayers who would otherwise be caught. I would consider that s31(2)(i) is actually a very generous option. Its not mirrored in any other land tax laws in the country.

A person who has to "work their trips" is probably not ordinarily resident and to avoid the tax is likely limited to s31(2)(i) as the only exception.

Note too that the travel expense remains non-deductible excepting a person with commercial property who may meet the revised laws for travel deductions for a property.

 

Yes if you are coming back to Australia for 1 day you would not be ordinarily resident in Australia.

 

Would a transfer of ownership to a single director company make any difference to the outcome or the consideration of the residency issue? Trigger a capital loss on transfer to the company, separate land tax threshold etc to consider.

 

That could pose a concern if the company is non-resident. A company must at all times maintain its place of central management and control in Australia or it is a non-resident company under tax law. It must have at least one ordinarily resident Director (and Secretary if it has one) at all times too.

A trustee must also be careful to remain resident at all times too.

The dutiable transfer to a company or a trust etc may be an expensive way to address the absentee tax (which may well be tax deductible) and create quarantined loss issues and more.

 

I would meet the Statutory tests in s31(2) i & ii. Spent 10 months in Australia for this financial year, as well as if I fly back to Australia 30 June. However I received an email from State Revenue in which it appears that even if I were to meed those two requirements in s31(2) I could still be deemed an Absentee based on 31(1).

What irks me is that I have been a full time resident in Australia for this 10 months. So it would have been just 2 months out of Australia this FYE. I have to cut short a trip overseas to fly back for a day. But even then I could still be taxed as an Absentee. State Revenue will not give me a straight answer, rather referring me to the legislation every time. So I am forced to make a decision and just hope it is the right one to avoid these massive taxes. It is like a Lottery.

All because I dared ask them the question to query how long I can be out of Australia and avoid the Absentee Surcharge was enough for them to then decide I am now not considered ordinarily a resident.

 

QLD do not have a private ruling system like NSW or VIC either so whatever you do you can't be 100% sure

 

That is one way to go about it - but albeit still being $130,000 behind in upfront costs, my property has made about $20,000 capital gains since I bought it. If I were to change ownership to a company, I would have to pay CGT, then stamp duty once again on the new market value and legals. Not a cheap exercise. It would allow me to avoid the Absentee Surcharge but not Land Tax, which would be reduced to the $350,000 threshold from $600,000. And that tax would still be charged every year if I was absent or not.

 

If you are making 20k you recoup the 130k, right? If you arent recouping it you wouldnt have a capital gain.

 

I was $130k over budget with the property. Yes, could claim capital expenses to offset the CGT component.

 

Does this help? (Terry's third post down, not the main thread post).

Tax Tip 96: QLD Land Tax for Non Residents