Settling after 30 June? Be prepared for extra Land Tax

Author: Kyleigh Crombie, Solicitor - Commercial


What is Land Tax?

If you’re the seller on a contract which is due to settle on or before 30 June, you might want to think twice before extending the settlement date.

Rural farm gate

The State Government imposes land tax upon the owners of freehold land in Queensland as at midnight on 30 June each year.

Pursuant to the Land Tax Act 2010, you may be required to pay land tax if the total taxable value of all land that you own in Queensland at midnight 30 June exceeds the relevant threshold.

The thresholds and land tax rates that apply depend upon 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 on Land Tax when buying/selling a property

If you buy or sell land during the year, the Queensland Revenue Office 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 that land tax is adjusted at settlement if:

(a) the seller pays land tax; and

(b) the taxable value of the land is above the relevant threshold.

Possible issues with extending a contract past 30 June

An important point to consider is that even though a seller may pay land tax, if the land being sold does not exceed the relevant threshold for land tax, then an adjustment will be unable to be completed at settlement. Land tax is calculated based on a seller’s total land-holdings, whereas pursuant to the terms of both the REIQ House & Land and Commercial Contracts, and contracts for Lots in a Community Titles Scheme, land tax is calculated on a single holding basis (i.e. as if it was the seller’s only land), which is why an adjustment cannot always be completed at settlement.

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 land tax is assessed on a sliding scale the rate of tax may be assessed at a higher rate.

If you need advice on a selling land or an existing contract of sale, our dedicated team of commercial lawyers are here to help. Contact us today.

Kyleigh Crombie

Solicitor - Commercial

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