Another property boom, another investor tax
Another property boom, another investor tax
From APRA recently increasing their lending criteria, to all state governments looking at ways to tax investors due to a ‘booming’ property sector, it seems investors are always on the top of the list for a squeeze.
The most recent government to look at making changes that directly effects investors is Queensland, recently announcing an imminent hike in land tax for interstate investors.
In a measure penned to ‘tackle housing affordability’ QLD Treasurer and Minister for Trade and Investment, Cameron Dick said at the December budget update, that measures were being taken to ‘close a land tax loophole’.
“At the moment, interstate property speculators can claim the tax-free threshold and take advantage of lower land tax rates in multiple states.
“That means these investors can amass multi-state portfolios that fall below the land tax threshold in any single state.”
Current land tax rules ensure owners pay tax at 0.45% for $1million worth of Queensland property, compared to investors with $1million in property split across states paying only 0.05% in tax. Meaning interstate investors can capitalise on tax-free thresholds and take advantage of lower tax rates in multiple states. And with the number of investors particularly from VIC and NSW purchasing property in the Sunshine Coast over the last 12 months, this is sure to have an impact.
Looking at investor portfolios nationally instead of state-by-state to calculate land tax, this change will mean if you own property under certain caps in Queensland you are eligible tax-free thresholds regardless, if you own properties in other states.
Interstate investors will be charged tax on their Queensland investment/s based on their national portfolio worth. The change will not affect Queensland based investors.
“Queenslanders with their entire landholding in this state end up can end up paying more tax than these interstate investors.
“So young families in places like Logan and Ipswich face unfair competition from Sydney-based speculators who are flipping properties around the country at a furious rate.
“We’ll close that loophole while ensuring there are no land tax changes for Queenslanders who own land wholly within our state.”
Steve Douglas, Executive Chairman for Australasian Taxation Services thinks the proposed changes are outrageous.
“Investor activity is essential in any market, and to discourage investment in one state because of ownership in another is simply poor form.
“The same thing is happening with foreign investment and its’ been happening for years for Australian expatriates, until recently changed, as a way to gain more land tax revenue than ever before.”
Mr Douglas has been assisting clients for 25 years with understanding their tax obligations with Australian property investments and believes changes like these are just an avenue for revenue raising and not actually helping the sector.
“Land tax valuations were pushed up despite a low growth market, with governments benefiting greatly, should we not be asking where this extra money is going to?
“This is the same as stamp duty, why aren’t states reducing their stamp duty tax to be the ‘same per property’ instead of allowing this bracket creep to explode the cost of transferring property for buyers at the current price levels – it’s all just money grabbing at the cost to the investor”.
The shock announcement comes off the back of the State Government pocketing soaring stamp duty revenue with $5.38bn in transfer revenue this financial year, and it will increase overall from $16.53bn to $19.93bn over the forward estimates.
Real Estate Institute of Queensland CEO Antonia Mercorella said disappointingly the Government had not consulted with relevant property stakeholder groups on this new land tax regime, which was the wrong move at the wrong time.
“This treatment of property investors as an endless money pit is outrageous – the Government is raking in a huge stamp duty windfall, then relying on private investors to provide the lion’s share of housing supply, and now they’re slapping investors yet again with new taxes,”
“How can the Government possibly justify slugging property investors with tax for land they own that isn’t even within our state borders? It’s utter nonsense that there’s a “loophole” to close.” Ms Mercorella said.
With the announcement of Brisbane winning their bid to host the 2032 Olympics it will no doubt deliver a timely boost to the economy and housing market especially in the South East where properties have traditionally been targeted by Sydney and Melbourne investors.
Doron Peleg, CEO and co-founder of BuyersBuyers, said “Sydney and Melbourne have generally outperformed over the past decade, both from an economic and a housing market perspective and as a result South East Queensland has become considerably more affordable than the southern counterpart cities.
“South East Queensland has always enjoyed strong internal migration and is considered to be a highly preferred lifestyle area in coastal Australia. And the onset of the pandemic and the advance of working from home and flexible working arrangements have accelerated these trends.” Mr Peleg said.
With this property ‘boom’ well and truly coming to Queensland, with the Government set for huge windfalls from taxes including stamp duty is it any wonder why they might want to ‘close the loophole’ and bring in some extra tax dollars?
Income from stamp duty is forecast to hit over $5 billion this financial year due to the booming property market according to Mr Dick’s update.
And in another direction, what will the ripple effect of this be? Investors can’t just absorb extra taxes, when you can pass them through as a landlord to your tenant, will there be rent increases as a result of tax increases? And if investors are pulling out of purchasing, owner-occupiers may purchase and move it, again reducing rental supplies, potentially pushing rental prices up too.
The RBA reports* around 30% of housing loans are to investors, and based on CoreLogic estimates** investors own 27% of Australian housing stock by number and 24% by value available for the entire population. So almost a third of Australians rely on investors to provide housing.
The budget update also highlighted Queensland’s economic growth is expected to strengthen a further 3.25% in 21/22 with the year average employment growth to strengthen to 4.5% to strongest growth in 15 years. The Deficit is expected to be $1.492b and net debt is expected to be $7.2b lower than previously forecast.