Queensland’s “generous” tax system will soon be reformed to level the playing field between local and interstate investors.
As noted in the 2021-2022 Budget Update – Mid-Year Budget and Economic Review, the Queensland government plans to close the ‘loophole’ in the state’s property tax system, which allows interstate investors , especially those who hold investments in other states, bear less responsibility.
As part of the “fairer” property tax regime envisioned in the budget update, tax provisions will be amended to reflect the total value of land held interstate when assessing property tax payable.
Here is an excerpt from the budget update:
A total national taxable land value will be established for each landowner in Queensland, which will continue to exclude exempt land such as primary place of residence.
The national assessed value will determine the appropriate tax rate which will then be applied to the Queensland proportion of the value of the individual’s or entity’s land properties.
Under the current system, a local investor owning a $ 1 million property would pay $ 4,500 in property tax, which is significantly higher than the $ 500 fee required for an investor owning a $ 600,000 property in the country. Queensland and a $ 400,000 property in New South Wales.
With the new approach, the interstate investor will now have to pay a land tax of $ 2,700 in Queensland.
The state government has assured that the change will not affect investors who only own land in Queensland.
Additionally, the state said investors could still access all available exemptions, even with an expected policy that legislates reforms.
Tax reform a slap in the face for the sector
Real Estate Institute of Queensland (REIQ) CEO Antonia Mercorella said the announcement of the property tax changes is a “slap in the face” to the sector supporting the local economy.
“This treatment of real estate investors as a never-ending financial sinkhole is outrageous – the government is racking up a huge stamp duty windfall, then relying on private investors to provide the lion’s share of the housing supply, and now they are slapping new investors with new taxes, ”Ms. Mercorella said.
The state’s mid-year budget so far showed $ 5.38 billion in stamp duty revenue for the current fiscal year, with an expected final figure of around $ 16.53 billion at 19 , 93 billion dollars.
Ms Mercorella said the government failed to consult relevant groups of real estate stakeholders on this new property tax regime, which was the wrong decision at the wrong time.
“From a practical standpoint, it’s also confusing how the hell they intend to get this data in order to double the tax on investors who already pay this tax elsewhere,” she said.
“There is no other state or territory that takes this approach, and by treating real estate investors with contempt like this over and over again, investors may very well be pulling stumps.”
These reforms, Mercorella believes, would scare off potential investors and dramatically increase the costs of holding existing investors, leading to higher rents.
“This shows that the government does not have the capacity to think outside the box and come up with alternative and innovative solutions to find new sources of income,” she said.
“One need only look at the timeline of this explosive law reform to see that the government is clearly trying to get this under the radar at a time that most people have timed for the year.”
Photo by @frankbusch on Unsplash.
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