Land Tax for Commercial Property in Queensland
How is Land Tax Calculated for Commercial Property in Queensland?
Understanding how land tax is calculated for commercial property in Queensland is crucial for property owners and investors. Here’s a comprehensive guide to help you navigate the process.
What is Land Tax?
Land tax is a state tax calculated on the taxable value of land you own. It applies to all landowners, including individuals, companies, and trustees.
Who Pays Land Tax?
Land tax is payable by the owner of the land. Under certain leases land tax may be recoverable from a tenant as a chargeable outgoing.
Example Land Tax Notice
(click for larger image)
Who Calculates The Taxable Value?
In Queensland, the Valuer-General assesses and issues the statuatory values in accordance with the Land Valuation Act 2010.
When Is The Land Value Determined?
Land valuations are conducted annually, unless under unusual circumstances or if it is determined that limited movement in value has occurred in the market.
The Queensland Government website states: “Land values are assessed annually as at 1 October, with notices issued by 31 March in the following year. The new valuations take effect for local government rating or state land tax purposes (where applicable) on 30 June in the year the notice is issued.”
What Are The Land Tax Thresholds?
The amount of land tax you pay depends on the total taxable value of your land holdings. For commercial properties, the thresholds and rates are as follows:
– Individuals: If the total taxable value exceeds $600,000.
– Companies, trustees, and absentees: If the total taxable value exceeds $350,000.
Is Land Tax Chargeable on a Strata Titled Unit?
Yes land tax is chargeable on a strata titled unit if the applicable land value is above the land tax threshold (or if the cumulative value of all the properties held by the owning entity is above the threshold).
For strata titled units the value is first assessed on the total land for the community title. Each Lot within the community title will have a percentage of interest under the community title scheme. The applicable value for each strata titled unit is calculated by the percentage of interest (ie. ownership) under the scheme.
Let’s use a five unit complex as an example. If the community titles scheme has equal interest for each Lot (which could be expressed as 20/100) and the average value of the total land for the last three years was $1,000,000, then the assessable value for each Lot would be $200,000. In this instance this would be under the land tax threshold therefore no land tax would be payable. However, if this value was added to a larger portfolio owned by the one entity and the cumalative taxable value was above the land tax threshold, then land tax would be applicable.
How is the Land Value Determined?
The site value of the land is determined by considering various factors, including:
– Current market conditions: Analysis of recent sales of comparable properties.
– Land use and zoning: The designated use of the land and its zoning regulations.
– Physical attributes: Size, shape, topography, and accessibility of the land.
The Valuer-General is to use a systematic process and transparent process to ensure accurate and fair valuation.
Is Land Tax Calculated on the Current Statutory Land Value or the Three-Year Average?
Land Tax is payable on the total taxable value of all your freehold land at midnight 30 June. The ‘taxable value’ is the lesser of the:
A. Statutory land value as at June 30; or
B. Averaged land value (average of the current land valuation, plus the previous two financial years; or the current land valuation multiplied by the averaging factor if land valuations aren’t available).
For example, if the most recent land value was $1,500,000 and the preceding two years were $1,400,000 and $1,200,000 then the average land value would be:
Average Land Value = ($1,200,000 + $1,400,000 + $1,500,000) divided by 3 = $1,366,667
In this example the average value would be used as it is less than the most recent statutory land value.
What Are The Land Tax Rates in Queensland?
For ease, we have provided links to land tax estimator calculators at the bottom of this article. The following details the applicable land tax rates depending on what type of entity owns the property:
| Total Taxable Value | Rate of Tax |
|---|---|
| $0–$599,999 | $0 |
| $600,000–$999,999 | $500 plus 1 cent for each $1 more than $600,000 |
| $1,000,000–$2,999,999 | $4,500 plus 1.65 cents for each $1 more than $1,000,000 |
| $3,000,000–$4,999,999 | $37,500 plus 1.25 cents for each $1 more than $3,000,000 |
| $5,000,000–$9,999,999 | $62,500 plus 1.75 cents for each $1 more than $5,000,000 |
| $10,000,000 or more | $150,000 plus 2.25 cents for each $1 more than $10,000,000 |
| Total Taxable Value | Rate of Tax |
|---|---|
| $0–$349,999 | $0 |
| $350,000–$2,249,999 | $1,450 plus 1.7 cents for each $1 more than $350,000 |
| $2,250,000–$4,999,999 | $33,750 plus 1.5 cents for each $1 more than $2,250,000 |
| $5,000,000–$9,999,999 | $75,000 plus 2.25 cents for each $1 more than $5,000,000 |
| $10,000,000 or more | $187,500 plus 2.75 cents for each $1 more than $10,000,000 |
Example Calculation:
Let’s say you own a commercial property with an average site value of $1,366,667 as an individual:
- Subtract the threshold: $1,366,667 – $1,000,000 = $366,667.
- Apply the rate: $4,500 + (0.0165 x $366,667) = $4,500 + $6,050 = $10,550.
Note: The rates for absentees & foreign entities are different and are available from the Queensland Government website.
Are There Any Exemptions and Concessions?
Certain exemptions and concessions can reduce your land tax liability, such as land used for primary production, or land owned by charitable institutions.
How Do I Challenge a Land Tax Valuation?
An owner can challenge a land tax valuation if they believe it is incorrect. The owner must lodge an objection within 60 days from the issue of the land tax notice. Further details including online lodgement can be accessed HERE.
What Is a Land Tax Clearance Certificate?
As per the Queensland Government website, “a land tax clearance search will generally be required by your mortgagee and recommended by your solicitor when you are buying land in Queensland. This is to check that there is no land tax owing on the land before you take possession, because without it you may be required to pay the tax”.
You can see more information about a Land Tax Clearance Certificate HERE.
What Land Tax Exemptions Are Available In Queensland?
There are certain situations that may enable an exemption on land tax in Queensland. The categories for these extensions and their applicable exemption code are as follows:
- R – Residential home
- H – Residential home (no form required)
- T – Transitional home
- P – Primary production
- M – Moveable dwelling park
- A – Aged care facilities
- S – Supported accommodation
- D – Subdivider discount
- C – COVID-19 relief
- E – Other exemption
Further details on potential exemptions can be seen HERE.
Conclusion
Understanding and accurately calculating land tax is essential for managing your commercial property investments in Queensland. At Crew Commercial, our experienced commercial property managers and agents can provide detailed advice and support as to whether land tax may be a recoverable outgoings from a tenant. Contact us today to ensure you’re fully informed and prepared.
Useful Links
Crew Management – commercial property management services
Find your land valuation – Queensland
Find out your land valuation of a property – New South Wales
Land tax estimator – Queensland
Land tax estimator – New South Wales
Everything you need to know about outgoings
Disclaimer: The above information is to be used as a guide only. It is not tax advice, is most likely incomplete, and is not to be solely relied upon. We recommend you consult with your accountant with any matters in relation to this topic.
© 2024 Crew Commercial Property Pty Ltd. Author: Josh Wright
