Qld Govt Announce A ‘New Land Tax’ For Investors
Investors always seem to make easy targets, either when APRA wants to take the heat out of the market, or a government wants to make a bit more tax money out of a surging property sector.
And the latest state government to cash in is Qld, where it was recently announced that investors from interstate would be targeted with a tax hike.
Qld Treasurer Cameron Dick announced in the mid-year budget update that investors would be assessed on their portfolios on a national level when calculating land tax, rather than only on the portion of their portfolio located in Qld.
Basically, what that means is that previously, if you owned investment properties in Qld that were worth less than certain caps, say less than $600,000, you were under the tax-free threshold for land holdings, regardless of what you owned in other states.
If you owned $1 million of property based in Qld, you paid tax at a rate of 0.45%. But if your $1 million was split across other states too, you’d only pay the equivalent of 0.05% land tax.
Now, however, investors will have the value of their investment properties in other states assessed, when the tax they pay in Qld is calculated. Queensland owner-occupiers will not be affected.
But can they do that?
Short answer is yes. The tax they are charging you is on your Qld property, even though your portfolio is assessed at a national level.
Qld is in the midst of its first property boom in many years, and just like states in their position in the past, they are set to make a windfall from the usual taxes like stamp duty.
But for a long time, southeast Qld properties have been targeted by investors from Sydney and Melbourne and the government wants to be able to bring in extra income from down south too.
Or “close a loophole” as the Treasurer put it this week.
What are the flow-on effects?
First things first, investors don’t always just absorb the extra taxes they are stung for. Often, as long as the market is agreeable, landlords will pass the taxes on in the form of rent increases.
So it’s little surprise that some of those against the new rule are already dubbing it a tax on renters.
An investor with $600,000 worth of property in Qld and, say $500,000 worth in other states, would be looking at paying $3000 or more a year in land tax.
That’s close to $60 a week. That can take a property portfolio from positive cashflow to negative, so it would be foolish to think savvy investors would grin and bear it.
For all the vitriol aimed at investors, it should be remembered that they play a vital role in a functioning economic society. Landlords are needed to provide housing for the 25 to 30% of the adult population that need properties to rent.
Punishing investors over and over again runs the risk of prompting a bunch of them to sell up and move their money elsewhere.
And the next buyers of those properties might choose to be owner-occupiers or to lease them short term, like AirBnb. So, the risk is that the supply of rental properties would be lessened, which would also put upwards pressure on rental prices.
Walking a fine line
While the Qld govt may make tens of millions of dollars from interstate investors with this decision, they run the risk of lessening the supply of investment properties and also causing rental hikes for tenants.
And more pressure on the financially vulnerable at a difficult time could cause other problems for the government down the track.
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