The Revenue Legislation Amendment Act 2022 (Qld) (Revenue Amendment Act) was assented to on June 30, 2022. This Act makes a number of changes to state revenue administration and collection.
Included are changes to the Land Tax Act 2010 (Qld) which will, on and from the land tax year ending June 30, 2023, require that the value of a taxpayer's total landholding in Australia (not just in Queensland) be taken into account in determining the taxpayer's land tax liability in Queensland. This change could lead to a significant increase in Queensland land tax for taxpayers who own land in both Queensland and other states and territories.
What is the current position?
The current position is that land tax is assessed on the value of all non-exempt landholding in Queensland (and not elsewhere) at midnight on June 30 each year. Differing thresholds and rates apply depending on whether a taxpayer is an individual, corporation, trustee or absentee. Types of land that are exempt from the calculation include land used as farming (in certain circumstances) and an individual's principal place of residence. The Revenue Amendment Act does not change these thresholds or exemptions.
What is the new position?
The changes will apply for the land tax year commencing July 1, 2023 (i.e. for land tax assessed on land values as at midnight on June 30, 2023).
Using wording from the legislation, for the land tax year commencing July 1, 2023 and subsequent land tax years:
- The Queensland Revenue Office (QRO) will use the total value of a taxpayer's 'Australian Land' in calculating land tax. This will include the value of both 'Taxable Land' and 'Relevant Interstate Land'.
- The total value of 'Australian Land' calculated will then be used to determine the rate of land tax that will be applied to the 'Queensland Proportion' of landholdings.
Translated into practice, this means that taxpayers will still be taxed only on the value of their Queensland landholdings, but in determining the 'rate' of land tax that they pay, the total statutory value of their 'Australian Land' will be used. This will push Queensland landowners into a higher land tax bracket.
The new rule works like this:
- First calculate the total value of Australian land owned by the taxpayer.
- Then calculate the land tax on that as if all of that land is in Queensland.
- Then, apportion to the total land tax amount to the Queensland land by relative value.
Practical example
Current position
ABC Pty Ltd owns land in Queensland with a taxable value of $1,500,000 at midnight on June 30, 2022. Its land tax payable for the year July 1, 2022 to June 30, 2023 is $21,000, this is because for companies:
- The applicable land tax bracket for land with a taxable value of $1,500,000 is the bracket for land values between $350,000-$2,249,000.
- Land tax payable for land within that bracket is $1450 plus 1.7 cents for each $1 more than $350,000.
On June 30, 2022, ABC Pty Ltd also owns land in New South Wales with a statutory value of $5,000,000. However, the value of that land is completely irrelevant to its calculation of land tax in Queensland under the current position.
New position
As at midnight on June 30, 2023 (i.e. the following year), the taxable value of Queensland land holdings of ABC Pty Ltd remains unchanged at $1,500,000, as does the statutory value of its land holdings outside Queensland ($5,000,000). Under the new position, the value of 'Australian Land' owned by ABC Pty Ltd as at June 30, 2023 is $6,500,000.
Its land tax payable for the year July 1, 2023 to June 30, 2024 is $25,096.15. This is because for companies:
- The applicable bracket for land with a taxable value of $6,500,000 is the bracket for land values between $5,000,000-$9,999,999.
- Land tax payable for land within that bracket is $75,000 plus 2.25 cents for each $1 more than $5,000,000.
- This calculation equates to a land tax of $108,750.
- This amount is applied to the 'Queensland Portion' of the 'Australian Land' owned by ABC Pty Ltd, i.e. ($1,500,000/$6,500,000) x $108,750 = $25,096.15.
Therefore, in this example, with all other variables equal, the land tax payable by ABC Pty Ltd will increase by $4096.15 (being 19.5 per cent) under the new position.
- Robert Lyons is a special counsel at Holding Redlich
