The Queensland Land Tax Has Changed – Here’s What Property Owners Need to Know About It
The Queensland government has made significant changes in its land tax laws. Discover what it means for you and your property portfolio.
Previously, if you owned a property in Queensland (QLD), the government would impose a land tax for land values greater than $600,000. So, if you own a property in QLD worth $745,000, you must pay $1,450 plus an upfront surcharge of $500. That would come up to $1,950 in total.
But that’s not how it works today.
The Queensland Government has put into effect a new land tax law. This requires QLD property owners to include the value of their non-QLD properties when filing for their land tax.
Now, despite a seemingly questionable regulation, let me tell you this:
There is no need to fear the QLD land tax changes!
In this article, we’ll unpack what the legislation is all about. We’ll also share with you practical tips on how you can navigate this new environment successfully so you can continue to thrive as a property investor.
QLD Land Tax Changes: Why it Happened
The new QLD Land Tax came into effect on July 1, 2022. But it was initially discussed as early as October 2021 as a way to deal with a balance sheet issue.
You see, the QLD State Government came into a bit of a cash flow problem. And since the Election Season was coming up at the time, they needed to think of a way to improve cash flow that didn’t impact their votes.
So they turned to the land tax.
State politicians usually turn to land taxes because it’s “an easy way to hit the back pockets of the people that can really afford it.”
In other words, the QLD State Government needed money… and they needed money fast! Hence, they passed a new land tax law.
QLD Land Tax Changes Explained
Now that the new QLD Land Tax rule is in effect, there’s a diminishing value calculation on the QLD land tax threshold based on what a property owner’s thresholds are and the worth of their property land holdings across Australia.
So in essence, what they’re saying is that if you only own properties in QLD, nothing changes. It’s business as usual.
But if you have a principal place of residence in your home state – let’s say your home state is in New South Wales – then your home is exempt from the new tax law. But your investment properties are affected.
Let me give you an example of how the calculation works.
Let’s say you own a property in QLD with a taxable value of $745,000. At the same time, you also have $1.57 million worth of taxable properties in Victoria. This takes your total land holdings to $2.3 million.
Now, the way the new land tax works is that the QLD Government will look at your entire portfolio – as if all the properties are located in Queensland. But to avoid double taxation, the QLD Government simply prorates the amount.
Here’s the thing though:
Despite the proration, you would still have to pay more under this new rule compared to the old one. Given the example above, you would now be required to pay about $8,500 in land taxes in QLD alone as opposed to only $2,000.
3 Things Property Investors Can Do to Offset QLD Land Tax Changes
1 – Keep your QLD properties in a trust
If you’ve already exceeded the land tax threshold in your own names, either husband and wife together 50-50, or in your own name separately, then putting your non-QLD properties in a trust would allow you to keep on paying the old tax rate.
How does this work?
The QLD government does not include properties under a trust when calculating an individual’s taxable land holdings. So essentially, if your non-QLD properties are under a trust, you would only have to pay the land tax rate of your QLD properties as an individual.
Keep in mind that there will be some costs involved if you will put your other properties in a trust. So, be sure to do your research and weigh your options.
This tip simply tells you that putting your other properties in a trust is a great way to mitigate this particular legislation.
2 – Plan for the future better
Property investors should never just randomly buy properties. You must have a clear plan for your portfolio’s future, regardless of the changes in regulations.
New legislation gets passed all the time. And if you have the right strategy in place, it’ll be easier for you to avoid pitfalls and take advantage of opportunities that will help you stay safe, gain wealth, and grow your portfolio.
3 – Budget to offset additional expenses
The macro-environment has changed right now. Interest rates have gone up, which affects nominal cash flows. Plus, the new QLD land tax rule is another thing you need to consider in your portfolio. So if your pockets are already hurting, then ask yourself this:
What do I need to do to offset some of the costs incurred by new laws and benchmarks?
Learn how to adapt. Find a different asset that could compensate for the additional costs of doing business until you no longer have to care about these new rules.
A Word of Caution
It’s inadvisable to simply ignore the new law and continue paying the old rate even if you have properties outside QLD. The thing is… this is exactly what the regulators want.
Because if you fail to pay your taxes accurately and on time, you will incur penalties. And these penalties plus interest just make the QLD government more profitable.
So, my advice? Learn how to calculate and pay your QLD land tax on time.
Whether you’re already a successful or an aspiring property investor, it will do you well to be familiarised with any and all changes in land tax laws.
Here’s the thing: You will most likely plan to buy properties in multiple states in Australia because of diversification.
Diversification remains one of the most reliable portfolio strategies for any kind of investor in any market around the world. That’s why it’s important that you stay updated on land tax changes, like the one in QLD.
QLD’s new land tax law is just one of the many things that could impact how well your property portfolio will perform.
So, take note of the ways you can offset the changes and continue to look for property investment opportunities within the country. Be diligent, consistent, and patient. In the end, your hard work will surely pay off.