Tax Tip 436: How to Work out the New QLD Land Tax Amounts

As you probably know by now QLD will be taxing investors with QLD property by assessing the land that they own throughout Australia.

It is still early days and I haven’t come across a specific formula yet but there is an example listed in the Explanatory Notes to the Revenue Legislation Amendment Bill 2022


Example:

An individual (Taxpayer A) owns taxable land with a taxable value of $745,000. Under the current land tax framework, Taxpayer A is liable for land tax at the second tier as set out in Schedule 1 of the Land Tax Act ($500 plus 1.0c for each $1 more than $600,000 up to $999,999). Taxpayer A also owns relevant interstate land with a total value of $1,565,000. Adding this to the taxable value of Taxpayer A’s taxable land, the total value of Australian land owned by Taxpayer A is $2,310,000. Under the new framework, Taxpayer A will be liable for land tax at the third tier in Schedule 1 of the Land Tax Act ($4,500 plus 1.65c for each $1 more than $1,000,000). After applying the rates in the third tier, to the total value of Australian land owned by Taxpayer A, the result is $26,115. This is then applied to the taxable value as a proportion of the total value of Australian land ($745,000/$2,310,000). The outcome is that Taxpayer A’s liability under the new framework will be $8,422.37.

See page 9 at https://documents.parliament.qld.gov.au/tp/2022/5722T896-6533.pdf

From this we can work out the way that the new land tax will be calculated:


Step 1: Ascertain value of QLD land – excluding exempt land such as the PPOR.

Step 2: ascertain value of all other land in other Australian states and territories – excluding exempt land such as the PPOR.

Step 3: Add them together

Step 4: If this is under the threshold there should be no land tax

Step 5: If this is over the threshold there will likely be land tax payable

Step 6: work out the land tax based on total Australian land owned

Step 7: Work out the percentage of QLD land out of the total Australian land

Step 8: Multiply the percentage worked out in Step 7 and times this by the total land tax in step 6

Step 9: To work out how much extra this would be work out the current land tax on QLD land only using https://www.qld.gov.au/environment/land/tax/calculation/land-tax-estimator

Step 10: deduct the figure worked out in Step 9 by the figure in Step 8 and that is how much extra your land tax will be, per year.


Example

Going off the Government’s example

Step 1: Homer owns a QLD property with land value of $745,000

Step 2: Homer also owns relevant interstate property with land value of

$1,565,000

Step 3: Add them together and you get $2,310,000

Step 4 and 5: It is over the threshold which is $600,000 for Homer

Step 6: work out the land tax based on $2,310,000 which comes to $26,115 (use https://www.qld.gov.au/environment/land/tax/calculation/land-tax-estimator)

Step 7: Work out the percentage of QLD land out of the total Australian land would be $745,000/$2,310,000 = 32.25%

Step 8: Multiply the percentage worked out in Step 7 and times this by the total land tax in step 6

$26,115 x 32.25% = $8,422

This is how much the new land tax would be

Step 9: To work out how much extra this would be work out the current land tax on QLD land only using https://www.qld.gov.au/environment/land/tax/calculation/land-tax-estimator $1,950

Step 10: deduct the figure worked out in Step 9 by the figure in Step 8 and that is how much extra your land tax will be, per year. In Homer’s case it is $8,422 minus $1,950 = $6,472.

Homer now has to consider that his QLD property which is worth about $1.2mil generates an extra $6,472 expenses so is it worth keeping?

He also has to consider whether buying more property in other states should happen as this will increase this land tax further.

 

The example provided on the website for Lena seems to guide but it also indicates the complexity. What is painfully apparent is Lena will pay $6472.37 more QLD land tax despite not buying any further property or it changing in value . The increased effective rate of land tax for Lena has VASTLY increased by 331%.

Now lets further consider if Victoria also mirrored the QLD change with a identical process. Lena would ALSO pay a extra $11707 Vic land tax. So total land tax may increase from $5422 to $25702. A 374% increase.

I am currently looking at a excel based tool that also factors in each state threshold, rates etc. Bit messy. It may then show the base state tax and also the increased amount for QLD. I'm in no hurry as the land values and taxing period is still a year away. One danger I see is people making decisions based on present value

With the exception of the financing difficulties there may be some strategies that may assist to reduce this impact where individuals own ALL the interest in a property. In some cases IF they could dispose of 1% to a spouse who owns no investment property it may open a new threshold and allow a lesser overall tax rate apply. The costs of effecting such a arrangement may be minimal in terms of CGT and duty and legals v the possible land tax savings. This may be of limited benefit in states where value phases in and there is a low threshold eg Victoria

 

@Terry_w From your understanding, does the new assessment apply if the owner has land in QLD under the $600k threshold (now exempt), but land holdings outside QLD that would tip them over the $600k amount ??

It seems a little vague. From reading various things, some seem to think yes, others no. Of course the website does not cover this sort of scenario

 

Here it is, Clause 41 of the Bill

 

I have just discovered something else, the sneaky amendment of Schedule 1.

Currently it is


Column 1 'Total taxable value' is to be replaced with 'Total value of Australian land'

This means taxpayers could be paying on a higher percentage rate too in addition to being indirectly taxed on land in other states.

 

I think it is pretty clear now that even if the QLD land is under the threshold it can still result in land tax being payable if the total Australian Land is over the threshold.

 

Yes. No vagueness at all

 

Hence my example of 300+,%. Its their own example

 

These changes in the QLD land tax laws are going to be repealed. What a waste of money and everyone's time that was!

 

And dont forget the greens in QLD have introduced another time waster bill to impose land tax surcharges on all vacant property incl vacant land you cant even live on. I would wonder what it cost to draft and table. And then all the members time wasted. It has little to zero chance of becoming law. Its not even costed. They merely indicate it will raise more tax than it costs to administer.

And there is a parliamnetary precedent that new taxing laws are only normally introduced by the minister. So why are taxpayers paying for this waste ?