Raine & Horne Chairman Angus Raine looks at a new tax uptick could take the shine out of the sunshine state for property investors

Queensland’s recently released 2021/22 Mid-year Budget update makes for astonishing reading. Tucked in between updates on taxation and royalties, the Budget announces that interstate investors with property in Queensland will be slugged with additional land tax.

The Palaszczuk government is planning to establish a ‘total national taxable’ land value for each Queensland landholder (excludes principal place of residence). This total value will then be used to determine the land tax rate that will be applied to the Queensland portion of an investor’s overall landholdings.

Under this approach, an investor who owns a property worth, say, $600,000 in Queensland and a $400,000 investment asset in New South Wales, would pay $2,700 in land tax in Queensland[i] compared to $500 at present.

The timing of this reform will be subject to its passage through parliament. However, as the Real Estate Institute of Queensland (REIQ) puts it, not only is the Queensland State Government dipping into the piggy bank of property owners (yet again), but it is also delivering a slap in the face to the sector that is propping up the economy.

While the Queensland Government claims this step will close a tax loophole, REIQ CEO Antonia Mercorella, asks “How can the Government possibly justify slugging property investors with tax for land they own that isn’t even within our state borders?” She adds that it’s utter nonsense to suggest there’s a loophole to close.

The fact is, the Queensland State Government has done very nicely out of a huge stamp duty windfall. It has pocketed $5.38bn in transfer revenue this financial year, a figure expected to increase to $19.93bn over the forward estimates.

 Apart from obvious questions like how the State Government will access the data to work out an investor’s total landholdings nationally. This latest sting on interstate property investors, which REIQ has dubbed a ‘double tax’, could very easily come back to bite the Queensland State Government.

The REIQ points out that property investors are “tired of being the ATM for the State”. The added holding costs of a property with this new tax system, together with the flagged second wave of rental reforms, could see existing investors bail out of the Queensland market, with new investors deterred from buying there in the first place. The likely result would be fewer rental properties, leading to rising rents for Queenslanders.

Yes, Queensland is a great state to invest in. But this latest announcement by the Palaszczuk government could take the shine off the sunshine state for investors. And that would be a shame for the people of Queensland.

[i] https://s3.treasury.qld.gov.au/files/2021-22_Budget-Update_web.pdf