by Hayden Groves
To apply from June 30 next year, the Queensland government has decided to apply a land tax to property investors that hold additional property outside that state.
This is a remarkable decision that relies on investors of Queensland property that is already assessable for land tax to self-disclose their additional property investments they own in other Australian states and territories.
The new tax regime comes off the back of recently passed tenancy laws that swing the pendulum of fairness towards tenants, effectively disincentivising property investors. Having been in Brisbane last week, property managers are telling me their clients are instructing them to sell and that investors have put away their cheque books. This new tax will add to the trend.
Tenants will be the ultimate losers
It could be that a property investor that predominantly owns property in other states and has, say, a rental apartment on the Gold Coast will be assessed for land tax as if all their investments where in Queensland. I would imagine the first thing this investor will do is sell their Gold Coast apartment to avoid paying the additional tax.
It is not uncommon for those living in the chillier southern east coast cities to buy an investment property in Queensland and rent it out with the view to relocating their one day. From next year, holding a single asset in Queensland and others elsewhere will no longer be as appealing. Pandemic-related changes to workplaces, Victorian lock-downs and migration movements has meant the flight to Queensland is already well underway. As a result, rental vacancy rates in Brisbane are at 1.0 percent and rents are already up 13.3 percent in a year; the highest increase in the nation.
This new punitive tax captures those investors that own Queensland property that is currently under the threshold value of $600,000 but who own property elsewhere across Australia. Currently, it could be an investor that owns a single property in each state that falls under that states’ threshold land value that would not be liable for any land tax.
As an example, an investor that owns land in Victoria valued at $1,565,000 and a property in Queensland worth $745,000 is currently paying $1,950 for land tax. From June next year, thanks to the aggregation rules of cross-state ownership, that same investor will receive a land tax bill of $8,422.
Administratively, managing cross-state Treasury departments’ mechanisms to ascertain land values and taxes will not be straight-forward. This will add significant cost to managing the new regulation and combined with the likely sell-off of Queensland investment stock, the new tax may not gather as much revenue as first thought.
Unfortunately, higher taxes on property investors leads to fewer investors which, in turn, means fewer homes which always leads to higher rents. Tenants will be the ultimate losers in Queensland’s land tax grab.
