“It was so outrageous that we assumed it would never pass,” was one comment passed on to Antonia Mercorella, CEO of the Real Estate Institute of Queensland (REIQ).
“I think a number of us were scratching our heads wondering who came up with this particular reform because I think it’s really taking tax to a new level, and it is concerning,” she told The Epoch Times.
Mercorella is referring to the Queensland government’s recent decision to expand land tax liability—one of four new taxes introduced in the Australian state’s most recent budget in what is considered an attempt to arrest fast-rising debt and public service costs.
Land tax in Australia is normally paid by investors—above a certain threshold—on residential and commercial holdings to the relevant state or territory government.
In turn, average investors may look to diversify their portfolio and buy properties across the country in different jurisdictions—taking into account the differing thresholds—in an effort to reduce their tax burden.
However, in an Australian-first, the Queensland government will charge land tax based on the total value of an individual’s holdings nationwide—a move now being watched closely by other state governments.
Mercorella warned the implementation would not be easy and questioned the logic behind the move.
“What is land tax used for? How can you possibly justify basing the value of land tax on property that’s not within your borders? It just beggars belief—it actually is illogical,” she said.
A Bad Deal for Renters
However, Queensland Treasurer Cameron Dick has framed the new policy as one where the government is stopping investors from sidelining young families from entering the property market.
“Young families in places like Logan and Ipswich face unfair competition from Sydney-based speculators who are flipping properties around the country at a furious rate,” he said in a December 2021 statement. “We’ll close that loophole while ensuring there are no land tax changes for Queenslanders who own land wholly within our state.”
But, Mercorella believes this is an oversimplification of the matter.
“I think that’s way too simplistic an argument to say that if you took away investors that renters could afford to buy. I think that’s failing to recognise that there are people in our community who choose and would prefer to rent,” she said.
Currently, the majority of rental properties (36 percent of Queenslanders rent) are provided by regular mum and dad investors, while social housing—backed by the state government—only accounts for three percent of the supply.
Further, investors contribute significantly to government coffers, including higher stamp duty fees and land tax (state-level), council rates (council-level), and capital gains tax upon sale (federal).
“It’s the cumulative effect of these things that we’re concerned about, there’s more money that you’re forking out, in addition to mortgage repayments and other rates and bills associated with holding a property,” Mercorella said. “The reality is that the extra costs an owner incurs will inevitably be passed on to tenants.”
This will compound pressure on prospective renters who are already finding it tough to find a place to live.
The Greater Brisbane area—the capital of Queensland—recorded a vacancy rate of just 0.7 percent (as opposed to a healthy vacancy rate of 2.6 to 3.5 percent), a situation that has driven up rental prices across the city, according to the REIQ’s Residential Vacancy Report for June.
The situation was pushed into overdrive during the pandemic after lockdown policies triggered mass interstate migration away from the more populous states of New South Wales and Victoria, with Queensland being the major beneficiary receiving around 80,056 net migrants between 2020 to 2021. Around 44,705 came from New South Wales, and 23,299 came from Victoria, according to the Australian Bureau of Statistics.
The surge of interest saw many owners decide to sell their property, which had the following consequences: First, the emergence of a new pool of cashed-up renters who had just sold their property; second, another pool of existing renters forced to vacate their property because it had been sold; and last, pressure on current renters to pay more and match rising rental prices.
Lack of Detail Suggests Troubled Future Rollout
Recent Budget Estimates hearings suggest the state Labor government still has plenty of work to do before it can implement the tax.
Leon Allen, Queensland’s Deputy Under Treasurer, conceded that there were no existing arrangements with other jurisdictions regarding data sharing on what properties a person might own. Further, he added that the success of the policy would be “highly dependent” on how much information could be obtained—all states and territories run their own land registries independent of the other.
“It is reliant on us utilising available information as opposed to any direct feeds from other state revenue offices. Our estimations [on the revenue to be gained from the expanded land tax] are very tentative at this point,” he told the Committee on July 26.
Allen was also unable to respond immediately to questions on what effect the policy could have on the state’s housing affordability crisis and whether the parliamentary tax committee knew of the initiative.
The State Treasurer Dick said he believed the government would need to hire just nine employees to get the program underway, also noting that it would have access to “alternative mechanisms” and “third-party providers” to find out what properties an individual owns.
In response, Mercorella questioned whether it was actually financially worth doing.
“I would have thought that the cost of administering, policing, and enforcing this policy is likely to be greater than any actual financial gain.”
A Government Spending Beyond Its Means
The expanded land tax is one of four new taxes introduced in the latest Queensland budget, including a higher gaming tax, the higher payroll tax for large businesses (a “mental health levy”), hikes to the state’s mining royalties—the latter sparking a direct response from the Japanese ambassador. On top of this the government upped the penalties for speeding, seatbelt and red light traffic offences.
“This is what happens when government spends beyond its means, the people pay, and they pay, and they pay,” Campbell Newman, the former Liberal-National premier of Queensland, told The Epoch Times. “They’ve thrown caution to the wind, and they just don’t have any financial discipline.”
“The government has massively increased the administrative side of the public service and yet failed to deliver better frontline services. As a result, the costs have gone through the roof, and they’re desperate to raise cash. That’s why they are mugging everyday investors.”
Current debt levels are expected to reach $127.4 billion (US$87.8 billion) by 2024-25.
Premier Annastacia Palaszczuk has faced criticism for public service wage rises, as well as her government’s decision to spend $198.5 million on building and leasing a 1000-bed COVID-19 quarantine camp in Wellcamp—144 kilometres west of Brisbane—and shuttering it just six months after opening. Only 700 people stayed at the facility during that period.
State opposition leader David Crisafulli said the costs equated to around $325,000 per guest.
“The state government could’ve bought a one-bedroom unit for each guest,” he said.
Newman also said high coal and gas commodity prices had contributed to the budget’s bottom line, essentially masking the need for financial discipline. But at some point, the Queensland government would need to rein in spending—which could be challenging in the lead-up to the 2032 Olympic Games.
“Rather than take advantage of high coal and gas prices to get things under control, they just kept spending—when the commodity cycle turns, they will have huge problems,” he said.
“As the tranches of debt mature, they will need to be refinanced,” he added. “The interest rates have gone up substantially, and that means rather than dollars going into police, ambulances, and hospitals, they’re going to interest payments to overseas financiers.”