With the now-abolished land tax in Queensland, it is interesting to note that it was never going to have the same impact on commercial property compared to residential, according to
Ray White Commercial Head of Research, Vanessa Rader, said the Revenue Legislation Amendment Act 2022 which will see an increased land tax burden on investors shouldn’t directly impact commercial landlords.
“For many commercial owners, this change in land tax will not hold the same burden as residential investors,” she said.
“With many commercial leases ensuring the recovery of land tax outgoings as part of their lease (with the exception of retail leases), tenants will be the losers from the Queensland Government’s tax grab as small businesses will likely foot the bill from their landlords.
“Already pressuring businesses who have been impacted by interrupted trade during COVID-19, struggled through changing regulations regarding masks and vaccinations pressuring their customer and staffing levels, as well as those small businesses which were borne out of the pandemic by individuals who looked to survive during a time where job losses and reduced hours were a feature.”
Ms. Rader said the grab for land tax will likely fall on small businesses.
“Consideration for small businesses who bear the land tax obligations for their commercial landlords or residential tenants who have the threat of not finding a rental property if rents increase to recover this new or increased outgoing has not been made,” she said.
“There may be some assets come to market or investors revisit their ownership structures in response to the changes in legislation.
“Others ponder why they should invest into a state where their national investment holdings, which were made to spread risks and liabilities, should impact them in the calculation of a state-based tax.”
According to Ms. Rader, Queensland has been long associated with investment by interstate buyers, attraction to coastal areas in readiness for retirement and off-the-plan apartment sales has resulted in many investors capitalizing on affordable housing products.
“This has grown further during the COVID-19 period with high migration into the state highlighting the safe haven Queensland’s economy is to invest in,” she said.
“As a result, we have seen many buyers grow their housing portfolio capitalizing on low-interest rates and in some markets the lower barrier of entry.”
Ms. Rader said the changes will weigh on the residential sector most of all.
“For those investors who own property across the country, their Queensland land tax burden is now larger than ever before,” she said.
“This could conversely see investment assets exit the market as owners look to restructure their portfolios and shelter from this high outgoing.
“Furthermore, this will be a major hindrance in attracting investment into the state with buyers favoring other locations where their statutory liabilities will be less.”
