The Queensland state government has introduced a sudden shock increase on taxes for property investors. It’s come under immediate criticism from real estate institutions and from economists, many who are calling it a cash grab to try help the government achieve budget surpluses.
Today we’re going to look at exactly what the tax is, what it would mean for the real estate industry and what some of the reactions have been to it.
What is Queensland’s New Property Levy?
Queensland passed a new tax law on 24th June that will allow the government to calculate land tax based on your property holdings across Australia, not just in Queensland.
If you only own property in Queensland, this law won’t affect you. But if you own a property in say Melbourne or Sydney, you’ll need to declare this, describing the land, the value and your percentage of ownership. Then you’ll pay tax on:
- The total of your taxable land located in Queensland
and - the statutory value of your interstate land.
The law has been passed through parliament and will apply from June 2023.
The Effect of the New Laws
The levy is destined to have wide ranging effects on different parts of the real estate industry, even those who don’t own property interstate.
The most concerned at this stage will be Queensland property investors who own land in other parts of Australia. Take this example:
A case study on the state government’s website offers an insight into how this could affect property investors. Basically, if an individual owns $745,000 worth of land in Queensland and $1,565,000 worth of land in Victoria, their tax bill will increase from $1950 to $8422 thanks to the new laws.
There are other knock on effects. For a start, investors who have higher tax costs every year are going to want to recoup the money somehow, and the obvious way is to increase their rent.
Take Sydney-based investor and director of buyers’ agency Right Property Group, Victor Kumar for example. He said, ““It’s certainly going to significantly increase my holding cost in Queensland. I will obviously increase my rent at any opportunity I have to mitigate that cost.”
The tax is also likely to trigger further decline in house prices, with many investors likely to offload Queensland properties to avoid paying the excessive tax. This will create an abundance of supply on the market.
Investors are also less likely to put anything towards new dwellings, which would mean less stock on the market for tenants looking to rent. This will add to the woes of an already extremely tight rental market.
This all comes at a bad time for Queensland, as prices are starting to decline and the rental shortage gets worse. Here’s what various parties have to say about the law.
Responses to the Queensland Property Tax
The property industry isn’t happy with the laws, and campaigns have begun to have them repealed. Antonia Mercorella, chief executive of the REIQ (Real Estate Institute of Queensland), believes the law was passed without the necessary legal or tax advice. She went so far as to call it “a slap in the face for the very sector that is propping up the economy.”
“All this is doing is deterring people from investing in Queensland and instead, opting to invest where no multi-jurisdictional land tax applies,” she said.
University of New South Wales economics professor Richard Holden likened the laws to a “money grab” and called it “double taxation”. He acknowledged lower prices would make it easier for those entering the housing market for the first time, but stated:
“To do something which could crater the interstate investment market in order to lower prices so that existing owners are worse off to try and make it easier for first home buyers, it’s a pretty odd way to try and increase housing affordability.”
Speak to Brisbane Real Estate Expert Henry Wong
This law is only set to come into effect in June 2023, but already people are saying its influencing the local property market. If you’d like to chat about it and how it could affect you, please get in touch with The Henry Wong Team®. Henry is here to answer your questions about the real estate market and provide guidance on your own property situation.
