Dangerous precedent in land tax grab
THE cash-strapped Queensland government’s decision to tax both Queenslanders and nonQueenslanders holding investment or holiday residences in other states may trigger a national land tax over and above state taxes.
In essence, if you own property in Queensland you will be taxed at a rate that takes into account the properties you own around the nation, even though those properties may already be subject to state land taxes. Everyone knew this tax would hit the value of Queensland residences, including the Gold Coast, as many interstate investors flee the sunshine state’s new tax.
But it comes at a time when global and Australian interest rates are rising sharply, so hapless investors in Queensland holiday and rental property now know they face new dangers.
But longer term, the implications for the national residential property investment sector are even more serious.
Most of the other states are also desperate for cash and every state premier and treasurer will look at the Queensland experience and, once the Queensland property market settles down (albeit at a lower level), will be greatly tempted to follow its revenue harvest. Accordingly, this is going to make property less attractive for investors and will push up rents because the supply of investment capital will decline.
Under the Queensland plan, if a person is a resident of any other state and owns Queensland holiday or investment properties then all their nationwide investment properties will be taken into account in assessing the tax on their
Queensland property.
And of course, Queenslanders also holding properties in other states will, in reality, be taxed on their interstate properties.
While the impact on Queensland will be severe, that will not stop other states saying that if Queensland is harvesting national property then we should join the game.
Almost all states outside WA have a debt problem and desperately need money. If every state follows Queensland, then in essence we will have multiple taxes around the country and that will force some form of rationalisation driven by the Commonwealth, but the end result will be a completely new tax – a national land tax that goes over and above state taxes.
The Queensland decision represents the first long-term tax change and it comes as states face the horror of what they have done to their balance sheets.