Increased Property Prices Lead to Increased Land Tax


Are real estate investments about to get more expensive in Queensland?

Australian real estate has long been the preferred investment type for many investors in Australia. Each investor will have their own personal preference when it comes to investing but the stability offered by bricks and mortar investments, the steady capital appreciation and rental income it provides, and the ability to claim a rental loss as a deduction in your tax return make it an appealing investment for many people.

But, with the strong capital growth experienced across this sector in recent years, is it still a tax efficient investment and are there additional tax costs new investors to the market may not be aware of?

Tax Transaction Costs

When you buy real estate in Queensland you generally pay Transfer Duty (stamp duty) on the purchase price at the date of settlement.

In addition to transfer duty, you may also be liable to pay land tax. Land tax is payable in most of the states and territories in Australia, with each State having a fragmented approach and setting out their own rules on how this tax is to be applied to investment properties. In Queensland, land tax is currently applied to the rateable value of freehold land as of 30 June each year.  In QLD, there are different land tax rates and income thresholds for individuals and companies/trusts. For an individual investor in QLD, you will be liable for land tax if the taxable value of your land holdings are $600,000 or higher. We note that there are exemptions from land tax for your principal place of residence and also for land used to conduct a primary production business.

In some local council areas that have seen high capital growth on property, the freehold land values (used for the calculation of the land tax threshold) have increased substantially in back-to-back years.  This has resulted in a lot more properties being assessable for land tax as of 30 June 2023. 

If you are assessed for land tax and your property is rented, this expense is deductible against the rental income in your tax return. Whilst land tax may be a tax deduction, it can be a significant cost and its impact needs to be considered as part of your overall investment.

As with all taxes, they are subject to change with taxpayers facing uncertainty not knowing whether Governments will modify, reform or reverse existing or announced regimes. The QLD Government announced proposed changes to land tax in 2022 that would have seen more investors liable for land tax in QLD. Whilst these proposed changes did not go ahead, it is important to be aware that land tax is being looked at and this may be subject to change in the future.

If you are thinking about investing in real estate in Queensland or interstate, contact your Hall Chadwick QLD advisor today to ensure your purchase is structured as tax efficiently as possible and you understand all your ongoing tax obligations.

Any information provided in this article is purely factual in nature and does not take into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product.

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