2022-23 Queensland Finances – Property Taxes

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The
Queensland Budget for 2022-23 was handed down on Tuesday, with
a host of revenue reforms announced. Below, we provide a brief
summary of the key reforms introduced by the
Revenue Legislation Amendment Bill 2022 (Qld) (the
Bill) and their impact on individuals and
businesses across Queensland.

Land tax

Queensland’s method of calculating land tax will
significantly change with effect from 30 June 2023, and landowners
in Queensland who also own land in other jurisdictions can expect
not only a notable increase in their land tax liability but also a
significantly greater administrative burden in complying with their
land tax obligations.

The land tax reform that was announced in December 2021 in the
Mid-year Budget Update will be implemented such that the rate at
which land tax is levied on Queensland landholdings will be
calculated with reference to a landowner’s Australia-wide
landholdings (where previously, this rate was calculated with
reference only to Queensland-wide landholdings). Taxpayers who only
own land in Queensland will not be impacted, however those with
landholdings in Queensland and across Australia will feel the
pinch.

While this measure is touted as a method to close a loophole in
Queensland’s land tax rules, it will introduce notable
complexity to the State’s land tax regime and is inconsistent
with the approach taken in all other Australian jurisdictions. At
least the Queensland government appears to have recognised the
administrative difficulties this change will present for taxpayers
and have delayed the commencement of these changes by a year
– avoiding the absolute debacle that would have ensued had
they sought to introduce the changes with immediate effect as
initially planned.

Look out for our detailed analysis of these changes to be
released later this year.

Royalties

With the pre-existing 10-year royalty freeze for coal royalties
expiring on 30 June 2022, the amendments to the Mineral
Resources Regulation 2013 (Qld) adjust the coal royalty rate
structure by introducing additional tiers with substantially
increased royalty rates.

For coal sold, disposed of or used on or after 1 July
2022
, the new rates will be 20% on that part of the
average price per tonne above A$175, 30% for prices above A$225,
and 40% for prices exceeding
A$300. Based on how coal has recently been
trading, these new tiers will effectively see a large number of
resource companies paying 25% more in royalties at the top
bracket.

Importantly, these increases mean it is more critical than ever
to consider how resources clients structure their coal pricing
arrangements, and in particular how the average price per tonne of
coal is determined. With the significant impact this presents to
the resources industry, we will be releasing a focused alert
addressing these changes, and in the interim we can assist with
strategic advice about managing royalties liability and navigating
these commercial arrangements.

Amendments to the Duties Act

The small business restructure duty exemption was announced in
September 2020 as an administrative arrangement, with a further
extension of the exemption for certain discretionary trust
rollovers in June 2021. The exemption has been set out in Public
Ruling DA000.16.2. The Duties Act 2001 (Qld)
(Duties Act) will be amended to give legal effect
to the exemption, with retrospective effect back to the date of the
relevant Public Rulings.

As the exemption has been formalised as law and is no longer
merely an administrative arrangement, we expect that both taxpayers
and advisers are now more likely to be prepared to rely on it
(after what we understand was a very limited take-up under the
administrative arrangement). This is because taxpayers will now
have the benefit of objection and appeal processes if the exemption
is not granted, and the QRO will be legally required to allow the
exemption where the statutory criteria are satisfied. The
introduction of these provisions into law still falls short of what
many tax practitioners were seeking, with continuing uncertainty of
some of the basic concepts. For example, the small business
definition refers to a business with annual turnover of not more
than $5 million. However there is no definition of
‘turnover’ and no guidance on what will be included in
turnover for the purposes of this exemption. We expect that may be
addressed in an updated Public Ruling in due course.

Furthermore, in a welcome clarification to the Duties Act, the
exemption under section 124 which currently applies to certain
dutiable transactions that give effect to a distribution in a
deceased estate will be extended with retrospective effect to
certain transactions that involve a vesting of dutiable property
under the Succession Act 1981 (Qld) and the Aboriginal
and Torres Strait Islander Land Holding Act 2013 (Qld). While
this is really just a formality (because the QRO was not in fact
assessing these transactions to duty) it is good to see the
Queensland government finally addressing an issue that was
identified and acknowledged over five years ago and which has been
causing some angst among practitioners and their insurers.

Payroll tax

Lastly, the Government has followed Victoria and introduced a
mental health levy from 1 January 2023. The levy will apply to
large employers, or groups of employers, in Queensland that pay
Australian taxable wages in excess of $10 million annually. Those
employers will be required to be pay a levy of 2.5 cents for every
$10 of taxable wages paid over $10 million, plus an additional 5
cents for every $10 of taxable wages paid over $100 million.

The measure will generate meaningful funding for
Queensland’s mental health and wellbeing services, with the
Government predicting $1.64 billion to be produced by the levy over
the next five years. This funding is intended to enhance mental
health, alcohol and drug services to ultimately improve the suicide
prevention system. Employees with existing payroll tax exemptions,
such as charities, will not be affected by this change.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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