Land Tax Act repealed
On 19 May 2022, the REIQ provided a submission to Queensland Treasury in response to a confidential consultation paper relating to proposed changes to the Land Tax Framework in Queensland.
By way of background, Queensland Treasury proposed to reform the land tax framework in Queensland by introducing an ‘interstate land tax model’ ‘the Model’. Under the Model, the amount of land tax to be paid by a landowner would be calculated based on the total value of their non-exempt Australia-wide landholdings rather than solely on their non-exempt Queensland landholdings.
It was proposed that the value of a landowners non-exempt Australia-wide landholdings would be used to determine whether the landholder exceeded the tax-free threshold for land tax. If it did, the applicable rate of land tax would then be applied to the Queensland proportion of the value of the landholder’s Australia-wide landholdings to calculate the landholder’s liability for land tax. Treasury proposed to practically implement the Model by “identifying owners potentially impacted by the land tax changes and proactively engage with them to provide information on the measure, the applicability of their situation, and inform them of their declaration obligations.”
Despite only being given 10 days to respond to a highly complex yet brief consultation paper, the REIQ’s submission advocated fiercely against the implementation of the Model. The REIQ’s submission strongly recommended that Treasury postpone the introduction of the proposed changes in order to obtain proper legal and taxation advice from suitably qualified stakeholders.
In its submission, the REIQ highlighted the significant ramifications which the Model could’ve had for the Queensland property market, including:
- The impracticability, time and expense associated with identifying applicable landholders under the Model given the Queensland Revenue Office cannot readily access details relating to the value of a landholder’s interstate landholdings;
- The unreasonable and excessive compliance burden placed on landholders to provide land valuations at the appropriate time each financial year, and to incur the cost of the requisite professional advice about the correct treatment of their interstate land and exemptions;
- Punishing renters and exacerbating the current Queensland rental crisis by causing:
- landlords of residential property to pass additional land tax costs on to tenants by increasing when entering new tenancy agreements or conducting renewals;
- landlords of retail shops to increase rents payable under new tenancies to absorb additional costs; and
- landlords of commercial property to pass the amount of land tax directly on to tenants depending on the terms of their leases;
- Further contributing to the ongoing exodus of frustrated investors in Queensland selling their properties in both residential and commercial markets.
- Adverse practical implications for growing population of interstate migrants to Queensland still holding property in other states;
- Deterring interstate investors from investment in Queensland;
The REIQ also called into question the constitutional validity of the Model given the Queensland Government was proposing to raise tax based on value of property held outside Queensland.
The REIQ’s submission identified four key elements of the proposed Model as impractical, burdensome and unnecessary. Those being:
- How the value of properties would be ascertained;
- Existing thresholds and rates of land tax;
- How exemptions were to be applied; and
- How joint ownership and complex structures were to be assessed.
In its submission, the REIQ pointed to key differences between the way states and territories calculate taxable value for landholdings which would make it extremely difficult to ascertain the accurate taxable value of interstate land at the necessary time for assessment under the Model. The REIQ is of the view that if taxable land value is being used by Treasury to assess land tax in Queensland, there should be coherency as to how it is calculated for fairness and transparency. This would be practically impossible given how the relevant mechanisms and legislation operate independently in their own States and territories.
The REIQ’s view is that the additional step of using the total value of non-exempt Australian-held property to determine if the land tax threshold in Queensland is met and thereafter applying the applicable rate of land tax to the proportion of that value held in Queensland was devoid of purpose. The rationale behind the Model was to capture taxable land in other jurisdictions which Treasury considered the Queensland landholder was somehow avoiding paying land tax for. However, such rationale is baseless given landholders already pay land tax under the relevant interstate jurisdictions for the proportion of property they hold property in that jurisdiction.
The REIQ also submitted that Treasury’s intention under the Model that land tax exemption applicable in Queensland would generally apply to interstate property in the same way Queensland land was unfair and impractical. Imposing exemptions on interstate land that are not congruent with the exemptions in their jurisdictions is inequitable in that landholders would be incurring the costs and administrative burden of assessing whether the relevant exemptions under Queensland legislation apply.
The REIQ also expressed concern with the Discussion Paper’s failure to address how joint holdings and complex structures would be addressed by the Model. The REIQ’s position is that this should have been considered a salient issue given the prominence of interstate landholdings being held by joint parties, in company or trust structures varying in sophistication.
Disappointingly, and without further consultation, the Revenue Legislation Amendment Bill 2022 (‘the Bill’), which introduced the land tax regime was passed on 30 June 2022. Following this, and in the face of widespread industry uproar, the REIQ continued its campaign against the new land tax regime. During September 2022, the REIQ pushed on with its campaign in the following ways:
- Requesting a meeting with the Treasurer;
- Issuing a media release calling for the repeal of the land tax regime;
- REIQ CEO Antonia Mercorella joining the Opposition Leader and Shadow Treasurer at a media conference at Parliament House where the REIQ again reiterated its call for repealing the land tax regime;
- Undertaking dozens of interviews with print and broadcast media in Queensland and across Australia during September;
- Forming a growing coalition of voices with our partners against the land tax regime such as REA Group, PCA, PIPA and UDIA;
- Being a key spokesperson throughout the Courier-Mail’s ‘Hitting Home’ campaign, which resulted in the Housing Summit being called to address housing supply issues and pressure continuing to mount regarding repealing the new land tax regime; and
- Calling for the repeal of the land tax regime at the Queensland Housing Roundtable on 16 September 2022.
Eventually, on Friday 30 September 2022, the Premier intervened and announced the land tax regime would be shelved.
The land tax regime was officially repealed with an amendment moved in Parliament on 9 November 2022.
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