Land Tax: Contracts
What is Land Tax?
The state government imposes land tax on the owners of freehold land in Queensland as at midnight on 30 June each year. This is done under the Land Tax Act 2010.
Be careful extending your contract past 30 June!
You may pay land tax if the total taxable value of land you own in Queensland at midnight 30 June exceeds the relevant threshold.
The thresholds and land tax rates that apply depend on whether the land is held by a resident (someone who usually lives in Australia), an absentee (someone who does not usually live in Australia), a company or a trustee.
Adjusting Land Tax when Buying/Selling a property
If you buy or sell land during the year, the Office of State Revenue does not apportion the land tax between the buyer and seller – the owner on 30 June is liable for the entire financial year ahead.
As such, it is essential that adjustments for land tax are considered in every conveyancing transaction and adjusted upon at settlement if the seller pays land tax and the taxable value of the land is above the threshold.
Possible issues with extending a contract past 30 June
However, even though a seller pays land tax, if the land being sold does not exceed the relevant threshold for land tax then an adjustment will be unable to be done at settlement pursuant to the terms of both the REIQ House & Land and Commercial Contracts.
This is an important consideration, especially in circumstances where settlement is extended from 30 June to 1 July, because a seller will find that they will be sent a land tax bill for the seller’s total land-holdings which will include that land even though they no longer own it.
By continuing to own that land on 30 June the seller is not only liable for the land tax for the entirety of that year despite only owning the land for one day, but as it is assessed on a sliding scale the rate of tax may be assessed at a higher rate.