Investors – Who Will Be Caught Up In Land Tax Bracket Creep?
Queensland, Australia's Sunshine State, has seen a significant increase in land values over the past decade. Factors such as population growth, urbanization, and economic development have all contributed to this upward trend. While rising land values can translate into substantial gains for investors, they also bring with them challenges, particularly in the realm of land tax as many investors will come face to face this year with the looming issues of Land Tax bracket creep.
In Queensland, land tax is calculated based on the unimproved value of the land, which is reassessed annually. As land values rise, so does the amount of land tax owed by property owners. This can significantly affect investors, especially those holding large parcels of land or multiple properties.
As an individual, you are liable for land tax if the total taxable value of your freehold land (in Qld) —comprising land owned solely and your share in land owned jointly with others—at 30 June is $600,000 or more ( for company or trustees etc, the threshold is only $350,000). (there are some exemptions available which may include your principal place of residence)
These threshold limits were introduced back in 2008 – so that’s 16 years of growth without any corresponding adjustment by the government. Certainly, a windfall for them of late but at the expense mostly of mum and dad investors who own 1 investment home, who are trying to build a nest egg for their retirement.
The table below shows which are the 18 Sunshine Coast suburbs have a Median Land Value over $600,000 and 10 suburbs which are closest to the threshold. Interesting enough there were no Sunshine Coast suburbs that had a Median Land Value over $600,000 back in 2008.
|
Locality |
Previous |
New |
Change in |
Number of |
|
Minyama |
$1,050,000 |
$1,400,000 |
33.30% |
893 |
|
Buddina |
$780,000 |
$1,100,000 |
41% |
1,372 |
|
Shelly Beach |
$750,000 |
$1,050,000 |
40% |
383 |
|
Kings Beach |
$750,000 |
$1,050,000 |
40% |
170 |
|
Alexandra Headland |
$690,000 |
$970,000 |
40.60% |
765 |
|
Warana |
$650,000 |
$910,000 |
40% |
1,179 |
|
Mooloolaba |
$640,000 |
$900,000 |
40.60% |
1,669 |
|
Bokarina |
$610,000 |
$850,000 |
39.30% |
808 |
|
Moffat Beach |
$570,000 |
$800,000 |
40.40% |
980 |
|
Mudjimba |
$550,000 |
$720,000 |
30.90% |
788 |
|
Marcoola |
$455,000 |
$710,000 |
56% |
847 |
|
Parrearra |
$560,000 |
$700,000 |
25% |
1,207 |
|
Dicky Beach |
$500,000 |
$700,000 |
40% |
687 |
|
Wurtulla |
$510,000 |
$660,000 |
29.40% |
2,105 |
|
Point Arkwright |
$505,000 |
$655,000 |
29.70% |
108 |
|
Golden Beach |
$435,000 |
$630,000 |
44.80% |
1,875 |
|
Twin Waters |
$445,000 |
$620,000 |
39.30% |
931 |
|
Pelican Waters |
$405,000 |
$600,000 |
48.20% |
2,917 |
|
Battery Hill |
$405,000 |
$570,000 |
40.70% |
814 |
|
Caloundra |
$390,000 |
$550,000 |
41% |
633 |
|
Mount Coolum |
$365,000 |
$540,000 |
48% |
1,190 |
|
Maroochydore |
$425,000 |
$540,000 |
27.10% |
3,543 |
|
Yaroomba |
$395,000 |
$510,000 |
29.10% |
609 |
|
Peregian Beach |
$375,000 |
$510,000 |
36% |
402 |
|
Coolum Beach |
$395,000 |
$510,000 |
29.10% |
2,939 |
|
Birtinya |
$390,000 |
$510,000 |
30.80% |
877 |
|
Peregian Springs |
$375,000 |
$495,000 |
32% |
1,621 |
|
Buderim |
$370,000 |
$480,000 |
29.70% |
8,585 |
Click here for a full list of suburbs: 2024 Sunshine Coast Regional LGA Land Valuation Increase - Full list of suburbs
The increase in land tax may lead investors to reassess their investment strategies. Some may choose to sell high-value properties to reduce their tax liabilities, while others might look for opportunities in regions with lower land values or more favourable tax conditions.
Additionally, investors may shift their focus to properties that offer higher rental yields or to units instead of house. Generally, the much lower land content of a unit can allow an investor to purchase multiple properties and remain under the land tax threshold.
Also investing in property improvements can enhance the income-generating potential of an asset, helping to offset increased land tax costs.
Higher land tax bills can put a strain on an investor's cash flow. This increased tax burden can reduce the funds available for maintenance, improvements, and other operational costs, ultimately affecting the overall profitability of investments.
Effective tax planning is essential for managing land tax liabilities. Investors should work with tax professionals who are knowledgeable about Queensland's land tax regulations to identify potential deductions, exemptions, or deferral options. Staying informed about changes in land tax policies can also help investors make proactive adjustments to their portfolios.
So keep a keen eye on the Unimproved Capital Value on your next rates notices for an investment property you own an maybe have a chat to your state member about address this issue.
Property Owners Association of Queensland vice-president Alexandra Dapontes is petitioning the government, asking that the tax exemption threshold of $600,000 be raised to reflect the increase in Land Values since 2008. Click this link to open the E-Petition: parliament.qld.gov.au/Work-of-the-Assembly/Petitions/Petition-Details?id=4044. The E-Petition closes on 1/9/2024.
More information about who is liable to pay Land Tax, along with the breakdown of Land Tax brackets can be found on the State Revenue Office's website: qro.qld.gov.au/land-tax/about/.
To calculate your land tax obligations, the Queensland Office of State Revenue website has a calculator: amun.osr.qld.gov.au/sap/osrqld/wd_ltax_calc#.
