Queensland Land Tax Shock may await Absentees and Trustees

Working Overseas for extended time

Land Tax Shock is a real concern, particularly with individuals working overseas for a number of years and being deemed Absentee for land tax assessments.

What is Land Tax?

  1. Land Tax is a state based tax calculated on the freehold land value (Taxable Value) you own in Queensland as at midnight the 30th June each year.
  2. Qld Valuer-General provides statutory land valuations for all rateable properties across Queensland in accordance with the Land Valuation Act 2010.
  3. The Rateable land value can be seen on each respective properties rates notice.
  4. Once your aggregate land value exceeds the threshold, you will be subject to land tax.

Ownership Interest Types

  1. Individual ownership
  2. Absentees – non residents -either working overseas for an extended time, or foreign investors.
  3. Trustees or Company Holdings

Land Tax Thresholds per Interest Types

Individuals ownership of land has the highest land tax threshold

Individuals owing land

Individuals

1.    Total taxable valueRate 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 and over$62,500 plus 1.75 cents for each $1 more than $5,000,000

Example:- Taxable land value of $680,000 as individual.

Total taxable value of $680,000
Tax band is $600,000–$999,999.
Tax calculation = $500 + (1 cent × $80,000 excess)
=  $500 + $800
Tax payable = $1,300

Company or Trust ownership of land has lower tax thresholds

Company or Trustee Land Owner

Companies & Trustees

Total taxable valueRate of tax
$0–$349,999$0
$350,000–$2,249,999$1,450 plus 1.7 cents for each $1 more than $350,000
$2,250,000–$4,999,999$33,750 plus 1.5 cents for each $1 more than $2,250,000
$5,000,000 and over$75,000 plus 2.0 cents for each $1 more than $5,000,000

Example:-  Taxable land value of $680,000 as a Trustee or Shareholder in Company

Total taxable value of $680,000
Tax band is $350,000–$2,249,999.
Tax calculation = $1,450 + (1.7 cents × $330,000 excess)
= $1,450 + $5,610
Tax payable = $7,060

Working overseas may deem you a absentee for land tax

Working Overseas for extended time

Absentees for Land Tax

If you do not usually live in Australia or an external territory, you may be an absentee for land tax purposes.

As an absentee, you are liable for land tax if the total taxable value of your freehold land at 30 June is $350,000 or more.

The land tax rates for companies, trustees and absentees (and from 2017–18, the absentee surcharge of 1.5%) will apply to the land you own.

Similar to other types of owners, you will be assessed only on the land you own, which includes the value of your share in any land owned with others.

Example:- Taxable land value of $680,000 as an Absentee

Total taxable value of $680,000
$7,060 as per rate for company or trustee, plus

$4,950 as per rate 1.5% absentee surcharge

$12,010 Total Payable

How is Land Tax Calculated?

Qld Depart of State Revenue will collate all the land you own in Qld as at the 30th June 2017 to determine if you are subject to land tax.

Land may be owned in various entities – as an individual, as a trustee of a trust, or in the name of a company you own via your shareholding in the company.

Once the land values exceed the relevant thresholds for the relevant entity type, Qld Government will issue a land tax assessment notice, which may come as a shock for the first time.

Land Tax Valuation Factors that may effect land values.

Land Tax Valuation Factors to Consider

Example of Multiple Ownership interest

Mary owns various land holdings in Qld as at the 30th June 2017 as following –

  • Individually Mary owns land with a taxable value of $500,000 (representing two rental properties owned in her personal name
  • As Trustee for the Mary Property Family Trust with a separate taxable value of $700,00 (presenting a number of commercial shops)
  • As a director and shareholder in a company with land holdings – Mary Property Holdings Pty Ltd, Mary’s shareholding is 50% of the company, with the land taxable value of $1,100,000, of which Mary will be accountable for $550,000, being her 50% interest in the company.
  • Mary’s Land Tax Assessment for 2017-18 will be as following
  1. Individual land holdings are below the individual threshold, so no land tax.
  2. In the trust, as the land value is above $350,000 land tax threshold, May will receive a Land Tax Assessment for the Trust of $7,400.00
  3. Mary’s Property Holding Pty Ltd land value is also above $350,000 will also receive a Land Tax Assessment of $4,850.00

 

Land Tax Planning Considerations in Queensland

Land Tax Planning Considerations

Tax Planning to Consider

  • Keeping individual land holdings below $599,000, mindful of allowing for increases in land values. Expensive to transfer land holdings to others, will be subject to stamp duty.
  • Consider limiting land holding to1 or 2 residential properties in the Brisbane Area, particularly if they have a high land value.
  • Consider buying units or apartments, as they have much lower underlying land value for land tax.
  • Consider buying extra land holdings in the name of a Trust; however be aware of the lower threshold of $349,000 versus $599,000 for individuals.
  • Consider investing in landholdings in other states to allow for fresh land tax thresholds.

If you would like further information to structure future and current land holdings please contact our office.

 

Qld Land Tax Calculator Link

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