Recent changes to land tax in Queensland have introduced additional ways in which land tax is calculated. This article will provide a summary of the current status of the tax, as at the date of publication.
For background, land tax is a tax payable if the total taxable value of an owner’s interest in Queensland freehold land exceeds $350,000 for a company, trust or absentee individual, or $600,000 for an individual. The taxable value of land is usually calculated on the statutory land value (i.e. the value that’s noted on your Rates Notice) and not the value of the land with its improvements included. You are only in proportion to your interest in the property, so if you own a ½ share in a property with a taxable value of $400,000, then for land tax purposes your interest is calculated at $200,000.
There are some exemptions to this tax. The two most common exemptions are for an individual’s principal place of residence or if the land is used solely for primary production purposes. An application will likely need to be made to the Office of State Revenue to claim this exemption. A discount is also available to certain land developers.
There are different rates of land tax depending on the total value of that individual or entity’s property holdings and vary from 1% to 2.75%. The exact formula for calculating land tax for individuals is available here, and for companies and trusts here.
Some of the recent changes to land tax in Queensland have also introduced additional taxes for absentee individuals as well as foreign companies and trusts.
An absentee individual – i.e. a foreign person who does not ordinarily reside in Australia – will now be required to pay an additional 2% surcharge on their land tax. Australian citizens or permanent residents are not required to pay this ‘absentee rate’ even if they do not ordinary reside in Australia.
Similarly, a foreign company or a foreign trust is now required to pay an additional 2% surcharge on their land tax. A foreign company is a company incorporated outside Australia or if foreign persons have 50% or more of the controlling interest in the company. A trustee of a foreign trust is one where the trust interest is not held by an Australian citizen or permanent resident, is a foreign company, is the trustee of a foreign trust, or is a related person to any of these.
To put this into practice, an absentee individual with property holdings totalling $1,000,000 in taxable value would be required to pay $12,500 in land tax plus a $13,000 surcharge – for a total of $25,500 – each financial year. A foreign company with property holdings totalling $5,000,000 in taxable value would be required to pay $75,000 in land tax plus a $93,000 surcharge – for a total of $168,000 – each financial year.
Even if you are Australian, land tax is not insignificant – on a property holdings totalling $10,000,000, the yearly land tax charge for an individual would be $150,000 and for a company or trust would be $187,500.
This post is general information only. It is not a substitute for legal advice from a lawyer. If you have a legal issue, you should always contact your lawyer to obtain advice that is relevant to your circumstances.