HG Alert: Important changes to Queensland’s land tax system - Jun 2009

The Revenue and Other Legislation Amendment Bill 2009 was tabled in Parliament recently. It proposes amendments to a number of Queensland Acts, although the most relevant and extensive changes from a commercial property perspective are to the Land Tax Act 1915.

The amendments in the Bill affecting land tax are proposed to take effect on 30 June 2009, although transitional provisions are proposed for some matters.

The Bill was released in draft form for public consultation earlier this year but its progress to Parliament was delayed when the State Election was called in March. The Bill implements the final stage of the Office of State Revenue’s ‘Revenue Management System’.

On 16 June 2009, the Fuel Subsidy Repeal and Revenue and Other Legislation Amendment Bill 2009 was introduced into Parliament. From a land tax perspective, this Bill proposes to amend the Land Tax Act from 1 July 2009 to impose a 0.5 percent surcharge on that part of the aggregate value of a taxpayer’s land (for land tax purposes) exceeding $5 million.

Changes proposed to the Land Tax Act

Landlords may pass on the cost of land tax to tenants

An important proposal, which will no doubt be welcomed by commercial property owners, is to allow landlords to pass on the cost of land tax to tenants of commercial and industrial properties under new leases entered into after the Land Tax Act amendments are implemented.

Despite intensive lobbying by the Property Council of Queensland, the Treasurer recently confirmed that the prohibition will remain for residential and retail shop leases, and for existing commercial and industrial leases entered into before the amendments are implemented, and lease renewals under an option to renew in an existing lease. This prohibition will continue to apply even where existing commercial and industrial leases are drafted to allow recovery of land tax if it is permitted by legislation.

Land tax surcharge

The proposed 0.5 percent surcharge was announced late last year in the State Government’s Mid Year Fiscal and Economic Review. The Queensland Treasurer estimates the surcharge will raise an additional $93 million next financial year.

Obligation of mortgagees to pay land tax

The Land Tax Act obliges mortgagees to pay land tax on behalf of a landowner when the Commissioner requires. Minor amendments to this section confirm that a mortgagee’s failure to pay land tax will attract a maximum penalty of 20 penalty units ($2000).

Changes to the administration of land tax

The Revenue and Other Legislation Amendment Bill also proposes a number of amendments to the Land Tax Act, where some provisions of the Land Tax Act will be removed or amended, so that the Land Tax Act is read in conjunction with the Taxation Administration Act 2001 as a single Act.

Some of the amendments are:

  • to apply the provisions of the Taxation Administration Act to land tax and remove all provisions in the Land Tax Act relating to the administration of land tax, including;
    • to remove the existing provisions of the Land Tax Act which allow taxpayers the right to object to the Commissioner and/or appeal to the Land Court against a land tax assessment. The Taxation Administration Act allows taxpayers to object to the Commissioner of State Revenue against an assessment, with further appeal rights to the Supreme Court available. Judicial review is available in some but not all circumstances;
    • to remove the provision allowing taxpayers the opportunity to have all or part of their assessment waived in cases of hardship. The Taxation Administration Act does not have a comparable provision – taxpayers may only be offered an extended timeframe for payment, but with interest accruing;
    • to change the process and administration of interest and penalty tax under the Taxation Administration Act, which will apply to duties, payroll tax and land tax;
      to grant the Commissioner of State Revenue broad investigative powers, including the power to require information or documents to be provided, the power to require personal attendance, the right of entry to gather, seize and retain documents, and the right to authorise, conduct or assist interstate investigations; and
    • to require taxpayers to keep records for the later of five years after the record was made/obtained, or after completion of the transaction to which the record relates, to allow tax liability to be determined.
  • to oblige taxpayers to notify the Commissioner of the following changes within one month of the change taking place:
    • where land which was previously granted an exemption is no longer exempt;
    • where land which was previously entitled to a deduction is no longer entitled to the deduction;
    • where land has been purchased and/or sold (unless a Form 24 is lodged in the Titles Office within one month of the settlement); and
    • a change of address.

The impact of the proposed changes

  • Taxpayers holding property worth more than $5 million (for land tax purposes) will be required to pay the 0.5 percent surcharge from 1 July 2009.
  • Landlords will be allowed to pass on the cost of land tax to tenants, although this is limited to certain types of properties, and only for leases entered into after 30 June 2009.
  • The hardship relief provision in the Land Tax Act will be abolished, with no comparable replacement in the Taxation Administration Act.
  • Appeals against land tax assessments will become more costly for taxpayers, with the Supreme Court replacing the Land Court as the appropriate jurisdiction for appeals.
  • Taxpayers have increased obligations to keep records and to provide information to the Commissioner of State Revenue.
  • Failure by purchasers (or their financier or settlement agent) to lodge the transfer and Form 24 with the Titles Office within one month of settlement will place taxpayers in breach of their obligations under the proposed new requirements.
  • Under the Taxation Administration Act, taxpayers are obliged to advise the Commissioner if they have been underassessed. If proper notification is not given and a land tax reassessment is required which results in additional primary tax being payable, the Commissioner is entitled to charge penalty tax of 75 percent of the tax involved, and an additional 20 percent where the taxpayer failed to advise of an underassessment, or if the taxpayer hindered or prevented the Commissioner from becoming aware of the extent of their liability.
  • The penalties imposed under the Taxation Administration Act will generally be greater than those imposed under the Land Tax Act.

In summary

Although the proposal to allow a landlord to recover land tax from tenants is a positive move, it would be more beneficial if this was extended to all types of premises, or to existing leases which allow for recovery of such costs where tenants have already agreed to bear this cost. This would provide much needed relief for landlords who are presently absorbing the increasing cost of land tax, and are committed to long leases.

In conjunction with the introduction of the land tax surcharge, many taxpayers will be worse off as a result of the amendments.

It appears that the intention of the amendments is to streamline the existing systems for the major revenue streams operated by the Office of State Revenue into a single integrated system. Apart from the proposal above, the proposed changes to the Land Tax Act do not appear to benefit taxpayers, as they will face more onerous obligations, and lesser, more costly avenues of appeal.

If you would like any more information in relation to the amendments proposed by the Revenue and Other Legislation Amendment Bill, the Fuel Subsidy Repeal and Revenue and Other Legislation Amendment Bill or to the Land Tax Act, please contact HopgoodGanim’s Commercial Property team.