Land tax hikes as the absentee surcharge rises in Queensland
Following the recent announcement by the Palaszczuk government that the absentee surcharge in Queensland will rise to 2.0% from 1.5%, experts consider the potential impact on the local property market.
As of July 1st, 2019, land taxes for foreign investors in Queensland has risen. The absentee surcharge has been lifted to 2.0% from the previous level of 1.5% by the State Government.
When the Queensland State Treasurer handed down their latest budget, of particular note for property investors was a change to the absentee surcharge.
The absentee surcharge is effectively a tax on any investors not holding Australian Citizenship or a Permanent Residency Visa if the value of their taxable land is $350,000 or higher.
SMATS Group Executive Chairman, Steve Douglas was disappointed in the move by the Palaszczuk government as he fears it could drive away much needed foreign investment dollars.
""Many owners are already feeling aggrieved with the high land tax from the combination of lifting values and the new surcharge, so this will be very unwelcome,"" said Mr. Douglas.
Prudentia Legal Principal, Fei Wang expressed his concern in the decision believing that the tax hike may deter foreign investment.
""Queensland attracted significant numbers of foreign investors in the residential market over the past several years, especially during 2013 -2015, as Queensland is a very popular tourist destination for international visitors.
""Simply increasing the surcharge may push foreign investors further away and place existing investors in a more difficult situation,"" said Mr. Wang.
Weighing in on the debate, prominent Brisbane buyers agent, Melinda Jennison suggests that reduced demand from this sector may impact the inner city market; however, believes it is unlikely to be significant.
""The number of absentee landowners in Queensland is the greatest on the Gold Coast and Inner City Brisbane, followed by areas on the Sunshine Coast and South Brisbane.""
""These areas are dominated by higher density development. In the Brisbane market especially, we have seen a softening of prices in the inner city unit market over recent years due to oversupply, and these new announcements will certainly impact on an 'investor's net yield, which will likely impact on some foreign 'owner's investment return.
""It is possible that this may have a further flow-on effect in the inner city unit market, although there is growing demand in these areas due to accelerating population growth,"" said Mrs. Jennison.
Mr. Wang suggests that a wiser reform could see the Queensland government impose a vacant residential land tax (as named in Victoria), instead of increasing the absentee surcharge.
""The focus should be on whether the property has been put on the rental market, and the deterrent should be directed towards those not doing so.
""Lowering or abolishing the absentee surcharge while imposing a vacant 'penalty' may be helpful for a healthier rental property market and a stable and more confident second-hand property market,"" said Mr. Wang.
For those potentially impacted by the changes, Mr. Douglas suggests you check your current legal requirements carefully but still believes there is further upside in the Queensland market despite the higher surcharge.
""We remain confident, however, that the Queensland market seems set for some improved performance in the near future, largely on the back of an upswing to the population growth.""