Revenue Update
Changes to Queensland Land Tax
On 9 December 2008, the Treasurer, Mr Andrew Fraser, released the Major Economic Statement 2008-09 incorporating the Mid Year Fiscal and Economic Review (“Statement”).
The Government unveiled more than $450 million in tax increases in this Mini-Budget, as part of its strategy to dig the Budget out of deficit.
The land tax surcharge for net land holdings with an unimproved value over $5 million will increase, raising $93 million a year.
Following the Queensland Budget released on 3 June 2008, the amount of tax payable at the land tax threshold was to be reduced from $1,200 to $500 for resident individuals and reduced from $2,250 to $1,450 for companies, trustees and absentees.
The following table extracted from the Statement provides an interstate comparison of land tax thresholds and maximum land tax rates applicable in 2008-09.
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Land tax thresholds and maximum rates – resident individuals, 2008-09 |
|
|
QLD |
NSW |
VIC |
WA |
SA |
TAS |
|
Threshold |
$600K |
$359K |
$225K |
$300K |
$110K |
$25K |
|
Maximum rate[1] |
1.25% |
1.6% |
2.5% |
2.3% |
3.7% |
2.5% |
|
N.B: [1] The maximum rate is the rate applying to the highest value landholding band. |
From 1 July 2009, a 0.5% surcharge will apply where the aggregate value of all land (for land tax purposes) exceeds $5 million.
The surcharge will apply only to the portion of the value exceeding $5 million.
As a result of this adjustment, land tax schedules for resident individuals and companies, trustees and absentees will be as outlined in the following tables.
This change is expected to impact around 1,800 companies, trusts and absentees and around 130 resident individual taxpayers. This measure is expected to provide an additional $93 million in 2009-10.
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Land tax schedules for 2009-10 – resident individuals[1] |
|
Unimproved Land Value |
Rate |
|
$600,000- $999,000 |
$500 + rate of 1.00% |
|
$1,000,000-$2,999,999 |
$4,500 + rate of 1.65% |
|
$3,000,000 - $4,999,999 |
$37,500 + rate of 1.25% |
|
$5,000,000 and above |
$62,500 + 1.75% |
|
2 Rates are marginal. |
|
Land tax schedules for 2009-10 – companies, trustees and absentees[1] |
|
Unimproved Land Value |
Rate |
|
$350,000 - $2,249,999 |
$1,450 + rate of 1.70% |
|
$2,250,000 - $4,999,999 |
$33,750 + 1.5% |
|
$5,000,000 and above |
$75,000 + 2.00% |
|
3 Rates are marginal. |
The Government also introduced aged care facilities exemptions together with amendments to the principal place of residence exemption from land tax.
Speaking to the legislative codification of the changes introduced by the Mini-Budget, the Honourable Member for Clayfield, Mr Tim Nicholls, made the following pertinent comments:
“The Land Tax Act is amended via part 8 of the [Revenue and other Legislation Amendment Bill (No. 2)] bill to provide an exemption for aged-care facilities. This completes the legislative implementation of a promise made in the 2008-09 budget to provide a land tax exemption for land used for the purposes of an aged-care facility by an approved aged-care provider. Together with announced changes to the concessions for retirement villages, the cost of this initiative is anticipated to be $5 million to the budget’s bottom line in the current financial year.
Other provisions amending the Land Tax Act deal with circumstances where land is not continuously used for residential purposes. Under current provisions, in order to obtain the principal place of residence concession for land tax, it must be used continuously by a resident as their principal place of residence, as the name suggests.
However, there are sometimes circumstances where the resident is unable to use the land continuously for residential purposes during the assessment period. For example, if someone is sick, is under care or has to look after someone else at their place, there may be periods of extended absence from the property, which would mean that they do not qualify for the principal place of residence concession. So this amendment is a sensible and overdue amendment to the Land Tax Act.”
Changes to New South Wales Duties
The New South Wales Government has also recently made a Mini-Budget Announcement on 11 November 2008. The Government issued a financial statement that introduced the following measures, amongst others changes:
Landholder duty
‘Land rich’ duty is currently paid on the acquisition of a ’significant interest’ of a private company, a private unit trust or wholesale trust, where more than 60 per cent of its property is land.
The duty will move from 'land rich' to a 'landholder' basis effective from 1 July 2009, to assist with taxation harmonisation with other jurisdictions.
Under the ‘landholder’ model, the purchase of a significant parcel of shares or units in any entity that owns land above a threshold value is subject to transfer duty as if there was a direct purchase of land. Under this model the existing 60 per cent test is eliminated.
Land tax
Effective from the 2009 land tax year, a new premium land tax marginal rate of 2 per cent will apply to land tax payers with total taxable land holdings above $2.25 million.
Land holding below the premium threshold will remain subject to the 1.6 per cent rate and receive the 2009 tax free threshold of $368,000. The premium threshold will be indexed for the 2010 and following tax years.
The premium marginal rate will not apply to exempt land such as principal place of residence or primary production land.
Increase in stamp duties
From January 2009, duties payable for stamping documents, such as duplicates of contracts on which ad valorem duty has been paid, duplicates of trust documents on which ad valorem duty has been paid, a change of trustees of a trust and transfers or property pursuant to a will, will increase.
In particular, stamping of trust deeds will increase from $200 to $500. This initiative is expected to increase revenue by around $4 million in 2008-9.
Deferred abolition of stamp duties
The abolition of certain taxes listed for review in the Intergovernmental Agreement of the Reform of Commonwealth-State Financial Relations, has been deferred until 1 July 2012.
The taxes to be deferred are:
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Duty on unquoted marketable securities;
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Mortgage duty on business loans; and
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Transfer duty on non-land business assets.
This is a cyclical response to the deterioration in revenue and is expected to generate an additional $36 million in 2008-09.
Changes to First Home Owners Grant & Transfer Duty Concession in Queensland
The First Home Owners Grant Act 2000 (Qld) has been amended so that the grant may be available to buyers (who are of at least 18 years of age) where the unencumbered value of the residential land is no greater than $1,000,00.00. A transfer duty concession may also available to such buyers where the unencumbered value of the residential land is no greater than $500,000.00.
Eligible transaction
A buyer will only receive the grant if their sale contract is an eligible transaction. The meaning of ‘eligible transaction’ has also been amended so that a transaction is not an eligible transaction if the consideration for the transaction is $1 million of more.
Sale contracts, made on or after 1 July 2009, will not be an eligible transaction if the total of the unencumbered value of the home, or, the unencumbered value of the relevant interest in the land, on which the home is built or to be built, at the commencement of the contract is $1 million or more.
This also applies to comprehensive home building contracts for newly constructed homes and transactions for the building of a new home by an owner builder.
Unencumbered value
The meaning of unencumbered value has also changed. The unencumbered value of property is defined as the value of the property determined without regard to -
First Home Owners Grant Boost
If a buyer is eligible for the First Home Owners Grant generally they are entitled to receive $7,000.00. However, the Federal Government has announced a First Home Owner Boost, which supplements the Queensland Government funded First Home Owner Grant Scheme.
A first home buyer who purchases an established home will receive a boost of $7000 that will double the grant to $14,000. A first home buyer who builds a new home or purchases a newly constructed home will receive an extra $14,000 to increase their grant to $21,000.
A first home buyer will only be eligible for the First Home Owner Boost if the sale contract for the property is entered into from 14 October 2008 to 30 June 2009.
Transfer Duty Concession
A transfer duty concession may also available to such buyers where the unencumbered value of the residential land is no greater than $500,000.00, which could result in signifigant savings when acquiring a home.
In general, if a person buys a residence and lives in it as their ‘principal place of residence’, they may be entitled to a home concession. If they have never owned a home, they may also be entitled to an additional first home concession.
However, a trustee who occupies the home as their principal place of residence is not eligible for the concession, unless the transferees are trustees of a trust (other than a discretionary or unit trust), the beneficiaries are individuals, all of whom are under a legal disability, and the residence would be the home of all the beneficiaries if they were the transferees of the land. Companies are not entitled to claim home concessions.
For further information on how these items affect you, please contact us.
