Queensland property update: land tax and interstate properties and change to residential tenancy laws

Land tax

Background

From 30 June 2023, Queensland will calculate land tax based on the total value of all land in Australia owned by a taxpayer, not just the value of land located in Queensland.

Specifics

The value of interstate land will be combined with the value of Queensland land, with the total being used to calculate the relevant land tax rate to be applied.

The value of the interstate land is its statutory value, being the value calculated in accordance with each particular state’s valuation legislation.

Once land tax has been calculated based on the total value of the Australian land held by the taxpayer, a land tax assessment notice will be issued based on the proportion the value of the Queensland land bears to the overall Australian land holdings.

Example:

A taxpayer owns:

• land in Queensland valued at $900,000, and
• land in Victoria valued at $1,500,000.

Under the existing land tax rules, the taxpayer’s land tax in Queensland would be calculated as follows:

Total taxable value of land - $900,000

Land tax rate - $500, plus 1 cent for each $1 more than $600,000

Tax calculation - $500 + ($0.01 x $300,000) = $500 + $3,000

Land tax - $3,500

Under the rules to apply from 30 June 2023, the taxpayer’s land tax will be calculated as follows:

Total taxable value of land - $2,400,000

Land tax rate - $4,500 plus 1.65 cents for each $1 more than $1,000,000

Tax calculation - $4,500 + ($0.0165 x $1,400,000) = $4,500 + $23,100 = $27,600

Queensland proportion of land tax – ($900,000/$2,400,000) x $27,600) = $10,350

Exclusions

Similarly, to the current land tax provisions in Queensland, interstate land that meets eligibility requirements will be excluded from calculations.  The Queensland Revenue Office has indicated that, while further guidance is still to follow, the following properties types will be “excluded”:

• Principal place of residence
• Primary production
• Supported accommodation
• Moveable dwelling park
• Retirement village
• Transitional home
• Charitable institution
• Aged care

Further, there has been no broadening of the legislation at this point to capture related/associated entities as one entity for land tax purposes.  This means, for the meantime at least, groups that own property outside Queensland in a different entity to that of the Queensland land will not need to disclose the interstate holdings.

Requirement to notify

Taxpayers who own land in Queensland must notify the Commissioner for Revenue about interstate land owned by them by the earlier of 30 days of receiving a land tax assessment notice or 31 October.  A failure to notify is an offence under the Taxation Administration Act 2001, with the maximum penalty currently $14,375.

Effect on the industry

The property industry holds significant concerns that this increased land tax liability will dampen enthusiasm for investment by small/medium scale investors in Queensland, as well as raising queries about how exactly the legislation will be enforced given each state has its own separate register of landholdings.

The Property Council is continuing to advocate against these reforms.  Given the reforms do not commence for nearly another 12 months, it is possible there may be amendments to the legislation to deal with the concerns being raised.

Residential tenancy laws

Background

From 1 October 2022, significant changes to Queensland’s residential tenancy laws will commence, which provide additional protections for tenants.

From 1 September 2023 for new tenancies and 1 September 2024 for existing tenancies, landlords will need to ensure their properties meet minimum housing standards.

1 October 2022 changes

From 1 October 2022:

• Landlords will be unable to end a periodic tenancy without grounds.

Currently, it is very common for a tenant’s fixed term agreement to end without action by either party, which will result in the tenant becoming a “periodic” tenant.Until 1 October 2022, a periodic tenancy can be terminated by the giving of two months’ notice if the landlord relies on the reason for termination being without grounds.

After 1 October 2022, a landlord can only terminate a periodic tenancy under a specified set of reasons, such as the tenant’s unremedied breach or sale of the property.

If landlords do not want to renew a fixed term agreement, they can still give a notice to leave, subject to at least two months’ notice being given and the notice to leave being given before the fixed term agreement expires.

• Tenants will be granted additional termination rights, including:
  • if the notice is given within the first seven days, because the premises are not in good repair, not fit to live in, breach laws about health and safety or do not meet minimum housing standards
  • within the first three months of the tenancy commencing, by applying to the Queensland Civil and Administrative Tribunal for a termination order on the basis that the landlord or its agent gave the tenant false or misleading information about particular matters, such as matters that would likely affect the tenant’s quiet enjoyment, the condition of the premises and services provided to the premises.
• Landlords cannot refuse an application to keep a pet without relying on a reason permitted by legislation.

These reasons may include that keeping the pet would breach body corporate by laws or that the property is unsuitable for that type of pet (for example, there is no fencing and the requested pet is a dog that would be kept outside).

If a landlord does not respond to a request within 14 days, they will be deemed to have consented to the pet request.

From 1 September 2023 (new tenancies) or 1 September 2024 (existing tenancies)

From 1 September 2023 for new tenancies and 1 September 2024 for existing tenancies, landlords will need to ensure that prescribed minimum housing standards are met.  These standards are likely to include matters such as:

• fixtures and fittings being in good repair, as well as any provided laundry or kitchen being functional
• that the property structural sound and weatherproof, with no damp or mould
• the property being connected to drinking water supply, and appropriate sewerage systems
• doors and windows that could be accessed without a ladder are lockable
• windows must have privacy coverings unless a feature of the property obstructs viewing into that particular window (such as hedge or fence).

What next?

The new laws significantly increase the rights of tenants.  Concerns are being raised that the increased burden on landlords will reduce the number of homes available for rent, thereby increasing the current “rental crisis”.

Any landlord who continues renting out their investment property after the implementation dates will need to ensure that they, or their property manager:

• carefully diarise all relevant dates by which a notice will need to be given to a tenant or a response provided to a request
• prior to expiry of a fixed term lease, enter into a new fixed term lease with the same tenant or issue an appropriate notice terminating the fixed term lease on the expiry date
• review all photos and advertising material and ensure that this accurately represents the property in its current condition, and any future issue that might affect the tenant (for example, major works occurring nearby that the landlord is aware of) is disclosed to the tenant before the tenant enters into a tenancy agreement, and
• inspect the property and ensure it complies with the minimum housing standards.