On the 11th June 2019 the Treasurer handed down the 2019-20 Queensland State Budget. This article discusses the tax measures that apply from the 1st July 2019.
Land tax – companies and trusts
As you may be aware, land tax is a state tax calculated on the freehold land owned in Queensland at midnight on 30 June each year. Land tax only applies to investment properties and not properties that are used as the principal residence. The budget increases the land tax rates for companies and trusts by 0.25 cents for each dollar above $5 million from the 2019-20 assessment year. Land tax for individuals has not been affected in the budget. The rate increases are:
- properties worth more than $5 million will increase from 2.00% to 2.25% from 1 July 2019; and
- properties worth more than $10 million will increase from 2.50% to 2.75% from 1 July 2019.
Land tax – foreign surcharge
The Government’s budget will increase the land tax absentee surcharge rate from 1.55% to 2.0% from 2019-20. The surcharge will also be widened to include foreign corporations and trustees of foreign trusts. These measures are estimated to raise $540 million over 4 years.
Importantly, the determination for absentee status has also been changed so that Australian citizens and residents are no longer classed as absentees and will be exempt from the surcharge.
Payroll tax reform for jobs growth
Payroll tax is a state tax on the wages paid by employers. It’s calculated on the amount of wages you pay per month and collected in the state where the business is located. The Government is endeavouring to stimulate jobs growth in the state with a package of targeted payroll tax measures directed at small, medium and growing businesses. The new measures will include:
- a higher payroll tax exemption threshold ($1.1 million to $1.3 million);
- a reduction for payroll tax rates for regional employers that employ 85% or more local workers will receive a payroll tax discount of 1%; and
- a two-year extension (to June 2021) to the 50% apprentice and trainee rebates, and rebates to Queensland employees, will be available where employee numbers are increased (and is capped at $20,000 annually per employer).
The Government is committing $885 million over four years to these measures. This is partially funded by an increase in the payroll tax rate applying to employers with annual taxable wages above $6.5 million.
Additional revenue compliance program
To businesses complying with the fair trading law, the Government is increasing revenue compliance work undertaken by the Queensland Treasury. The program is expected to increase revenue by $220 million over four years, ending 2022-23.
While the payroll tax reforms are welcome with an estimated 1,500 businesses falling below the new $1.3 million threshold and regional discount combined with increased funding for, and job creation in, regional Queensland, will see an estimated 13,000 businesses better off.
However, it is property owners bearing the increased burden of taxes on property. The Property Council of Australia (PCA) is particularly critical of the negative impact the increased taxes will have on the tourism, manufacturing, trade and logistics sectors in the state. The PCA’s Chris Mountford noted in response to the budget that the Queensland Government, since October 2016, has introduced or increased nine (9) taxes, being:
- a new additional foreign acquirer duty on residential property;
- increased the additional foreign acquirer duty from 3% to 7%;
- introduced a land tax surcharge on absentee landowners;
- increased the land tax surcharge from 1.5% to 2% for absentee landowners;
- extended the land tax to include foreign companies and trusts;
- introduced a new land tax category for aggregated holdings over $10 million;
- increased rate of land tax for holdings over $10 million from 2.5 cents to 2.75 cents (companies); and
- increased the rate of land tax for holdings over $5 million from 2.0 cents to 2.25 cents.
Read our 2019-20 Federal Budget Alert.