Land Tax Rule Changes for Interstate Property Owners
Written by: Krystine Canny-Smith l Accounting Team
As a property owner, it wouldn’t surprise us if when we said the words “land tax” we saw your eyes start to roll into the back of your head. With land tax also comes having to pay your dues to the State Revenue Office. Landowners can be individuals, companies or trustees and you can also own land with others, however, regardless of the ownership structure, you would be classified as a joint owner of land according to the State Revenue Office.
There are changes on the horizon set to come into effect for those of us who own property that is interstate, in particular for those that own property within the state of sunny Queensland.
The land tax rules in Queensland are changing and these changes will have a significant effect on those who own properties in Queensland as well as other states. While there is also talk of the other states following this change, we wanted to make sure that if you are a Queensland property owner you are aware of the changes and what is to come.
How Does Land Tax Work?
In Victoria, you pay land tax if the total taxable value of all the Victorian land you own, whether that be individually or jointly, as at 31 December, is equal to or exceeds $300,000 or exceeds $25,000 for trusts.
There is land that is exempt from land tax and is not included in the total value of the land that you own. However, the rate of tax you pay depends on the total taxable value of all of your taxable land. land that is classified as ‘exempt land’ can be defined as:
- Your home – known as your principal place of residence
- Your farm – known as your primary production land
- Rooming houses; and
- Charitable institutions.
In terms of what land is taxed, you may have to pay land tax if you own, either individually or jointly with owners:
- Investment properties, including residential properties;
- Commercial properties, such as retail shops, office premises and factories;
- Holiday homes; and
- Vacant land.
Interstate Properties + Land Tax
From 30 June 2023, when the Queensland Government calculates land tax, they are going to use the total value of your Australian land. This includes your taxable land in Queensland as well as your relevant interstate land.
‘Relevant interstate land’ includes land that is located in another state or territory that is valued under interstate valuation legislation and is not excluded interstate land.
The total value of your Australian land will be used to determine:
- Whether the tax-free threshold has been exceeded; and
- The rate of land tax that will be applied to the Queensland proportion of the value of your landholdings.
In Queensland, the current tax-free thresholds are $600,000 for individuals (other than absentees) and $350,000 for companies, trusts and absentees. The only tax you will pay on your land is the land that you own in Queensland, you will not be taxed on the land that you own outside of Queensland.
For those that only own land in Queensland, these changes will not have an effect on you. You will continue to be able to access all available exemptions, such as the home, principal place of residence and your farm, and primary production land exemptions if applicable.
Interstate Land Value
If you own land in Queensland and interstate, the Queensland Government will calculate land tax based on:
- The total of your taxable land located within Queensland; and
- The statutory value of your interstate land.
The ‘statutory’ value of interstate land is determined by valuation in the state or territory and it does not include excluded land.
When you complete an interstate land declaration online, you’ll enter the value of each parcel of interstate land. For an interstate property you owned on 30 June 2023, you would enter the statutory value for that parcel of land as at 30 June 2023. If you don’t know the value of a parcel at the relevant 30 June, you will need to use the most recent value you can ascertain. if you get an updated value for your interstate piece of land, you can notify the Queensland Government to have your land tax liability reassessed.
It is important to note that averaging and the subdivided discount will not apply to interstate land. As well, if you are an absentee or a foreign company or trust, a surcharge of 2% is added when calculating land tax. This applies to the total value of the owned Australian land.
Calculating Land Tax with Interstate Land
The land tax rate that applies depends on the type of owner you are and the value of your land. This rate (and surcharge, if applicable) is applied to the total value of your Australian land. Then, this figure is applied to the Queensland portion to get the annual land tax liability.
For example:
On 30 June 2022, Taylor owns land in Queensland with a taxable value of $745,000. His land tax is calculated using the rate for individuals.
Taxable value of land: $745,000
Calculation
= $500 + (1 cent + $145,000)
= $500 + $1,450
= $1,950
The Queensland Government will then issue an assessment notice for $1,950 for the 2022-23 financial year.
On 30 June 2023, the value of Taylor’s land in Queensland has not changed. However, Taylor now also owns land in Victoria valued at $1,565,000. The total value of Australian land owned by Taylor is now $2,310,000 which means the land tax is calculated using a higher rate for individuals.
The taxable value of land in Queensland and Victoria: $2,310,000
Updated calculation
= $4,500 + (1.65 cents x $1,310,000)
= $4,500 + $21,615
= $26,115
This amount is applied to the Queensland portion of Taylor’s land (i.e. $745,000/$2,310,000) x $26,115)).
The Queensland Government will issue an assessment notice for $8,422.37.
Excluded Land
For land in Queensland, you may be eligible for a land tax exemption depending on the ownership structure and the use of the land.
If your interstate land meets certain eligibility requirements, you can apply to have its value excluded from the land tax calculation. Mostly, the eligibility requirements for exemptions that are available in relation to interstate land with generally equivalent requirements applying in some circumstances. Some exemptions, however, will remain limited to land in Queensland only.
Exclusions Available for Interstate Land
- Home (principal place of residence)
- Primary production
- Supported accommodation
- Moveable swelling (caravan) park
- Retirement village
- Transitional home
- Charitable instituion
- Aged
Exemptions available for Queensland land Only
- Government land
- Port Authority
- Societies, clubs and associations
Example…
DBA Company owns the following landholdings:
- Land in Queensland with a taxable value of $1,345,000
- Interstate land (including a farm in Tasmania) with a taxable value of $775,000
DBA Company applies for the farm in Tasmania to be excluded because it is being used for a primary production business. The exclusion is approved, reducing DBA’s interstate land value to $150,000.
This is how DBA’s land tax will be calculated using the rate for companies:
Taxable value of Australian Land: $1,495,000
Calculation
= $1,450 + (1.7 cents x $1,145,000)
= $1,450 + $19,465
= $20,915
This amount is applied to the Queensland portion of DBA’s land (i.e. ($1,345,000/$1,495,000 x $20,915)). The Queensland Government will then issue an assessment notice for $18,816.51.
If DBA did not apply for the exclusion, their land tax liability would be $20,010.05, based on its total Australian land value of $2,120,000.
Canny Accounting, The Accountants Geelong Trust
Our accounting team have been helping our clients, near and far, for over 60 years with their investment properties and ensuring that they are meeting all requirements of the State Revenue Office.
These are important changes that interstate land owners need to be aware of and how they will impact their tax position going forward. Get in touch with our team to have a chat about these changes and be on top of the new land tax rules.
For extra information about these changes, please visit the Queensland Government website.
