Queensland Land Tax Changes: The Proposal

Recently, there was a proposal that Queensland land tax would increase in June 2023. There will be new measures that will affect small to medium sized businesses, and even those with multi‑jurisdictional landholdings. What do you need to know and how is this going to affect you or your business?

What you need to know

The proposal states that starting 30 June 2023, Queensland will start taxing entities on the basis of their total Australian landholdings. This means land tax will be calculated on the entity’s total Australian landholding using the present Queensland thresholds and land tax rates. The proportion of the Queensland land value bearing the total Australian land value will then be taxed.

Hence, there will be a significant increase in the Queensland land tax bill for entities with landholdings in Queensland.

How will it affect your current landholdings?

  1. First thing to do is to identify whether you have multi-jurisdictional land holding entities having a taxable land value amounting to or in excess of
  • $350,000 for companies, trustees, and absentees; and
  • $600,000 for individuals
  1. Are there any kind of exemptions available to you? You need to determine whether you can receive an exclusion for the value of your interstate land from land tax computation.

    The exemptions are as follows:
  • Home Exemptions
  • Care Accommodation
  • Primary Production Land
  • Moveable dwelling Parks
  • Transitional Homes
  • Retirement Villages
  • Aged Care
  • Charitable Institutions

If any of these are unavailable and if you still have enough time, you may restructure your landholdings into a silo holding structure. This may include utilisation of the present duty exemptions, and CGT rollovers and concessions.

Ways to plan strategically

In cases where the duty concession or CGT rollover is absent, here are the things you need to do:

  1. Determine the tax costs of implementing a restructure and then compare it to the current increase land tax cost of Queensland property ownership
  2. Determine if that cost is justifiable for the implementation of the restructure. If not, you need to decide if broader disposal is needed for the investment asset.

You should be meticulous and diligent when implementing the restructure, as the Queensland Land Tax Act is very particular about their anti-avoidance provisions for schemes entered into for the sole or dominant purpose of obtaining a Queensland land tax benefit. Ensure that there is asset protection and commercial reasons for the implementation of any restructure.

Some of the other strategies you can do are as follows:

  • Deduction for site improvements – diminish the value of site improvements made to the land during the past 12 months. This is to reduce the overall land valuation.
  • Valuation objection – disputing your land valuation to lessen the value of your Queensland landholdings. Be reminded that any objections to land valuations need to be lodged by 30 May each year. This is important, because land tax assessments are not usually issued until August each year, which is after your valuation objection period has expired. 
  • Someone else pays – finding out whether the increased land tax can be passed on to your tenants. Of course, this will depend on your lease terms and whether your lease is subject to certain consumer protections in residential and commercial tenancies legislation that prevent the passing on of Queensland land tax.

The impacts on your future property investments

Queensland Land Tax
It is important to always think about what you are buying, and why you are buying it. You have to consider multiple factors before making future property investments such as administration costs, asset protection, and how it fits into your overall financial structure.

Generally speaking, you need to buy new Queensland properties in clean entities. It does not matter if it’s a trust or company – but you should make sure that they are not entities with existing interstate landholdings to acquire new Queensland land.

For trust entities, you have to seek advice on the structuring and terms of the deed as well as its appropriateness for the investment. Off the shelf trust deeds with broad object clauses are no longer suitable for these types of acquisitions. Here are the reasons why:

  1. Payroll tax – If there are associated businesses involved, the broad beneficiary clauses may cause the trust’s assets to become the subject of enforcement action for unpaid payroll tax.

    Even if there are provisions for minimal land tax groups in QLD, there are extensive payroll tax grouping provisions making group members liable. 
  2. FTDT – When a family trust election is required for the asset owning trust, a small class of beneficiaries may limit the distribution outside the family group and in the future.
  3. Duty and AFAD – Broad classes of beneficiaries get the risk of incurring additional foreign acquirer’s duty in QLD.
  4. Practical implementation – broad all-encompassing beneficiary clauses with subsequent poorly drafted exclusion clauses for foreign beneficiaries can lead to practical difficulties where family members cease to reside in Australia or marry non-residents.

Actions you should take

Landholders should review their current landholdings to see whether or not the proposed changes to land tax will affect them. If they do and the increased land tax impediment is significant, restructure options should be explored. Consider possible restructuring options and how they fit into a broader asset protection/estate planning strategy.

Keep an eye out for your annual land valuation on March 31, 2023. If it is excessive, You have until 30 May 2023 to inform the Australian Taxation Office of any objections you may have, or any tax deductions for site improvements.

On 31 October 2023, or 30 days after receiving your 2023 Queensland Land Tax Assessment result, you will have to set up an online account with QRO and declare your interstate landholdings. BloomWealth Tax Accountants can help you review your financial situation, land acquisition, or future property investments. We’ll sit down with you to determine the effects of these changes, and we’ll build strategies and offer options for you. Please contact us, we’re excited to work with you.

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