30 June each year is an important date for Queensland land owners.
Ownership of land in Queensland as at midnight on 30 June is relevant for determining what, if any, State Land Tax a property owner might have to pay to the Office of State Revenue for the ensuing year – from 1 July until the following 30 June. It does not matter that the property owner might sell the property on say 10 July because as the property was owned as at midnight on 30 June, the property owner will get the land tax assessment for the whole year (ie. for the 365 days despite the fact that ownership was only 10 days).
Most Queenslander land owners do not pay land tax because the value of their land is not high enough. Also the land on which your principal place of residence is constructed is exempt from land tax. However for property investors, land tax can be a real ongoing expense that has to be considered when property is purchased.
Note that land tax is precisely that – a tax on the land value, so fixtures or improvements (eg homes, sheds or other buildings) are excluded and the value of the land is the only relevant issue in determining liability for the tax.
The current thresholds for determining if land tax is payable annually are:
– For individuals, the value of all of their lands (aggregated) has to be $600,000 or higher;
– For companies or trusts, the value of all of the entity’s lands (aggregated) has to be $350,000 or higher.
Therefore consideration must be given to the ownership (individual/s or entity/s) when contracting to buy investment property. Note that if the property is liable for land tax, this is not a one-off tax (like stamp duty), it is an annual tax which will continue during the whole of the period of ownership.
With proper planning, (such as considering the ownership at the time of purchase), the tax can sometimes be minimised or even totally avoided. Legal advice should be taken on the issue of land tax before embarking on the purchase of investment property and before any contract is signed.