Property in Australia is often the hot commodity, who has it, where they have it and how much they got it for, are water-cooler and coffee table conversations nationally each week.
Since the Coronavirus pandemic the property market has certainly been a benefactor of low interest rates and excess cash reserves of many investors. With a surge in property values, one thing is an often-overlooked aspect of property taxation and planning, being State Government Land Tax.
Land Tax is, like many other areas, a straightforward area of tax made complex, and if handling it yourself seek advice first. The general process is simple, that all land owned by a person or entity inherently has value, which is reevaluated each year and adjusted (usually positively). When the value of the Land reaches the statutory land value limit, a separate Land Tax Assessment is issued each year.
The Queensland Land Tax Rates for Individuals are shown in the table below:
|Total Taxable Value||Rate of Tax|
|$0 – $599,999||$0|
|$600,000 – $999,999||$500 plus 1 cent for each $1 more than $600,000|
|$1,000,000 – $2,999,999||$4,500 plus 1.65 cents for each $1 more than $1,000,000|
|$3,000,000 – $4,999,999||$37,500 plus 1.25 cents for each $1 more than $3,000,000|
|$5,000,000 – $9,999,999||$62,500 plus 1.75 cents for each $1 more than $5,000,000|
|$10,000,000 or more||$150,000 plus 2.25 cents for each $1 more than $10,000,000|
If you are found to be eligible for a land tax, this is then levied, processed, and sent accordingly. Prima facie, this is about as simple as tax gets, and has a progressive tax rate not unlike what the Australian public is accustomed to regarding wages and other general taxes. However, deductions claimed, exemptions for principal places of residence, as well as increased tax rates for absentees, trusts, companies, and other entities, can make a simple structure into a complex process.
Furthering these complexities, the department may take due time in order to process the appropriate taxation, especially in instances where a Self-Managed Super Fund, Trust, partial ownership, or company are involved. Further consideration must be taken when purchasing or selling property, determining which party is liable to the cost, and often needs a solicitor or other party to obtain a Land Tax Clearance.
Ultimately, Land Tax forms a pivotal point in taxation planning, negative gearing, estate planning, and portfolio management. It resides in an often overlook area of property ownership, but one that is important to consider future taxation obligations that may arise as a result of Australia’s continuing rise in land value.
MJJ recommends, as in all areas of taxation planning, to be proactive of concerns regarding taxation of assets and future acquisitions, and to reach out with any queries that arise. If you are looking to purchase in the short term it is important that you structure your next acquisition correctly, with Land Tax a broad consideration as it can be a long-term cost which depletes your overall investment return.
For more information about Land Tax, contact us on 07 5451 1118 or email us.