It doesn’t matter if you are investing locally, interstate, or you are an ex-pat, it’s always important to be aware of your potential tax liabilities. Land Tax is one of those liabilities and unfortunately, it does discriminate between different categories of property investors. That’s why it’s so important to do your research before you commit to another investment property..
What Is Land Tax?
Land Tax is simply a tax on the value of the freehold land portion of investment property you own. It’s calculated each year. The Queensland Office of State Revenue (OSR) calculates land tax on the total taxable value of your freehold land at midnight June 30 each year. It’s important to remember this is purely the value of the freehold land component of the investment property (excluding dwellings) and not current market value for the whole property.
When Do I Have To Pay Land Tax In Queensland?
Purchasing investment property (land) in an individual name provides the most significant exemption from Queensland Land Tax as there is no land tax payable for land values under $599,999. Purchasing in other entities such as Companies, Trustees or as a foreign absentee, then the exemption is only up to $349,999 before there is a land tax liability. From June 30 2019, if you are an absentee, a foreign company or trustee of a foreign trust then a surcharge of 2% on taxable land valued at $350,000 also applies to your land tax bill.
What If I Own Investment properties In Different Entities eg Trusts or SMSF?
Land tax is assessed separately across each entity that owns the properties so in theory; you could own a property in an individual name, a company, as well as a trust and pay no land tax unless they meet the threshold for each category. It’s also important to remember that this is a state-based tax, so it does not affect properties owned in other states. Each state has different land tax thresholds and legislation.
It should be part of every property purchasers due diligence process to understand the land tax obligations in the state they are purchasing in, so they avoid a rude shock come June 30. If you are unsure of your land tax obligations always seek independent financial advice before you purchase.
It’s always better to know what your’s up for on the way in rather than receiving a nasty surprise in the mail.
For details on exemptions to Queensland Land Tax Click Here
Queensland Land Tax rates for individuals
$500 plus 1 cent for each $1 more than $600,000
$4,500 plus 1.65 cents for each $1 more than $1,000,000
$37,500 plus 1.25 cents for each $1 more than $3,000,000
$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
For more information on Queensland Land Tax rates for each purchasing entity, and definitions go to https://www.qld.gov.au/environment/land/tax
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