Friday, June 16, 2017

Queensland Budget taxes absentee land owners

The Queensland Government’s 2017-18 budget announced a number of key tax changes relevant to Queensland property investors.

New land tax surcharge for “absentee land owners” from 1 July 2017

  • A new 1.5% land tax surcharge is being introduced for “absentee” land owners with land holdings valued at $350,000 or more. 
  • Absentee land owners are already subject to higher rates of land tax (and lower land value thresholds) when compared with individual tax payers. Draft legislation released this week indicates the Government intends the new 1.5% surcharge to be introduced as an increase to the existing rates without any expansion of the existing concept of who is an “absentee” for land tax purposes.
  • The new surcharge rates will apply to land tax assessments issued on and after 1 July 2017, which will be based on a person’s Queensland landholdings as at midnight on 30 June 2017.  As a result, there is limited time to make any changes to property ownership arrangements before the new rules take effect.
No increase to Foreign Acquirer Transfer Duty Surcharge, but certain changes proposed to its application

In 2016, the Queensland State Government introduced an additional foreign acquirer duty surcharge (AFAD) which applies to transactions involving interests in what is called “AFAD residential land”.

In a welcome development, no changes have been announced to the existing Foreign Acquirer Transfer Duty Surcharge. The surcharge rate will stay at 3% (which is significantly less than the 8% and 7% surcharge rate that applies in New South Wales and Victoria, respectively).

However, the draft legislation proposes some additional changes to the operation of AFAD in Queensland.
·         The draft legislation expands the meaning of AFAD residential land to include “chattels” in Queensland which “can be directly linked to, or is incidental to, the use and occupation of the land”.  Currently, only residential land and not chattels attract the surcharge rate of duty.  The move to include chattels in the surcharge duty base is a response to Government concern about the way in which value can be allocated between land and chattels.  The changes remove any incentive for value shifting.
·         The draft legislation will expand the application of AFAD to certain agency transactions affecting AFAD residential land.  Currently, the agency provisions in the Qld Duties Act permit a foreign principal to avoid AFAD by using a non-foreign agent to enter into an agreement for transfer (i.e., when duty is originally assessed).  The proposed amendments effectively mean that, where a principal is a foreign person at the time the relevant transfer of AFAD residential land occurs, the agreement will need to be reassessed as if AFAD applied to the agreement. 
·         The draft legislation also proposes removing the ability of foreign companies (pre-incorporation) to acquire AFAD residential land without incurring an AFAD liability through the use of an Australian entity to enter into an initial agreement for the transfer of land prior to the foreign company’s registration.  Currently under the Qld Duties Act, the initial agreement for the transfer would not attract AFAD and the subsequent transfer to the foreign company (post-incorporation) would be exempt.  The proposed amendments will require such an agreement to be reassessed as if AFAD applies and the subsequent transfer will not be exempt unless the duty (including AFAD) has been paid.


Mel Brandle said...

Well at least they are only being taxed a higher amount rather than more drastic measures been taken. I would d read ot hear about property being confiscated and held "in storage" until a solution can be found by the owner to settle this absentee issue.

Greg Fogarty said...

The new land tax on "non residents" is completely unfair. I am an Australian citizen who resides overseas. My former primary residence is rented out. My land tax this year doubled, it is now more than 50% of my rental income. How is this fair? I was already paying through the nose with the lower threshold for non residents. It is an unfair move and infuriates me.

Greg Fogarty said...

The new land tax "surcharge" on non-residents is nothing short of a blatant rip off. I am an Australian citizen who happens to live overseas. My residence in Australia is rented out, and my land tax this year DOUBLED. It is now more than 50% of the rental income - how is this legal? I am an Australian Citizen - I'm not a foreign investor. I already paid higher land tax due to the lower threshold, and also pay far higher income taxes on the rental income than I would if I lived in Australia. Where is the outrage?


I am also a victim of the QLD Land Tax and Absentee Surcharge and an Aussie. I have been forced to return to Australia due to the brutally excessive taxes which has ruined my retirement and rehabilitation attempts. It has wiped a third of my net rental income stream I was using to live off and hence made my property investment unsustainable. I am unemployed as I am a medically discharged self funded retiree several years from retirement age.

Making matters worse, I purchased the property just 4 months before the 2017 Budget. There was no forewarning so I believed that I had carried out necessary due diligence and followed the advice of a property strategist who recommended I buy into the QLD market - Hence all of my cashed out Superannuation was piled into the property and to pay usual acquisition costs, buyers agent commission and an expensive renovation prior to leasing it out. I am now in a terrible bind because I cannot sell the property without suffering huge financial losses, so I need to hold on as long as possible to at least mitigate some loss by increased capital gains, but I also cannot afford to stay in Australia long term because my net income stream is not much better that a pension. But if I return overseas too long I pay the brutal punitive taxes instead, which year-on-year increase massively in line with land valuation increases. It has impacted on my health immensely.

Labor under the leadership of Anastasia Palaszczuk decided to also make this new set of taxes retrospective so I was also caught out as already being an absentee before I had even owned the property? How is that fair to be taxed on a property for a time period before I even owned the property?

On top of this pain, we of course also now face the removal of the Primary Residence CGT exemption to be replaced with the CGT at the Foreign Resident Rate and no CGT discount. We can thank the Liberal National Party under Malcolm Turnbull and the then Treasurer Scott Morrison for that one. Truly a disrespectful and heartless move on a small minority of non-residents - whose impact on the housing market is negligible, despite Morrison claiming these measures were all part of the strategy to reduce the housing bubble.

I have set up a Facebook support group page for all victims titled "Queensland Land Tax & Absentee Surcharge Victims's Support" and hope to accumulate members so as to have enough to lobby and approach media, plus put pressure on politicians.

Australia has truly become more aligned to a Socialist Communist set of governments. Palaszczuk's Absentee laws go one step further by placing a 6 month curfew on it's Australian citizens or face huge tax penalties, hence removing freedoms and limiting choices that are available to other States and Territories. QLD residents are therefore at a massive disadvantage as well due to opportunities and freedom of movement stifled.