(ARTICLE PUBLISHED ON MEDIUM WEBSITE 6 OCT 2018. DUPLICATED HERE AS BACKUP)
In my previous articles I have expressed the injustice of Queensland Labor’s Land Tax and Absentee Surcharge implementation since the 2017 State Budget.
It is necessary however to further analyse the justification attempt made by QLD Labor’s Treasurer at the time Curtis Pitt, as to why they implemented the surcharge. Specifically, one needs to ask why were Australian citizens targeted?
Released to the public was a document titled “The Parliament of Queensland Revenue Legislation Amendment Bill 2017 Explanatory Speech”, that was “Circulated by the Authority of the Treasurer, Minister for Trade and Investment the Honourable Curtis Pitt, MP”
On page 6 of the document under the title of “Why are we doing this?”, the response given is:
“
The surcharge ensures absentee owners of land are making a fair contribution towards taxes that are used to deliver and maintain a high standard of services and infrastructure in Queensland. Absentee owners benefit, such as through the capital appreciation of their land holdings, from the high standard of services and infrastructure delivered and maintained by a broad range of taxes in Queensland generally borne by resident taxpayers.”
“Fair Contribution towards taxes” —
Curtis Pitt indicates that Absentees are not making a fair contribution unless they are ‘resident taxpayers’.
So what is it that Absentees are not contributing?
Let’s firstly see what Absentees are contributing to. As a Queensland property owner, regardless of being an Absentee or a resident, there are a raft of taxes paid by both categories of people.
I will also include Commonwealth taxes — as the Queensland government, like every other State and Territory are given a slice of that revenue per annum as part of their budget allocation. These taxes are incorporated into the following:
* Council rates — the same is paid by both.
* Water & Sewer connection rates — the same is paid by both.
* Insurance — the same taxes apply to both — Home and Contents insurance as well as Landlord insurance.
* Property management fees (if investment property leased) — the same taxes apply to both. However, unlike a non-Absentee who may be able to self manage the property as the landlord, Absentees are employing local real estate agents overall; therefore contributing to the employment of local people and helping businesses thrive.
* Listing, letting, advertising fees (if leasing an investment property) — the same costs apply to both.
Income tax — the same is paid by both, unless the absentee is also classed by the Commonwealth tax law as a ‘non-resident’. In that case they pay more income tax on Australian derived income, with no tax-free threshold & at the Foreign Resident tax rate.
* Maintenance fees — the costs of employing trades-persons, replacing parts and equipment and/or repairs — the same costs apply to both in general. However, in many cases absentees are also contributing more to the employment of local QLD people as they cannot carry out repairs or replacements that they may have been able to do themselves — this pays for local QLD people’s wages and help their businesses thrive.
* Mortgage fees — which may or may not be distributed to local, interstate or national based financial institutions — but the same costs apply to both.
* Motor vehicle registration — Absentees who own a motor vehicle in Australia are most likely going to keep it registered, the same as a resident. They are both also more than likely going to also pay for motor vehicle & Greens Slip third party insurance.
* Good and Services Tax (GST) on all the above — the same costs apply to both.
No unfair advantage to Absentees owning QLD property — only disadvantages.
Unlike other investment classes — for example: shares that pay dividends, property does not offer any potential tax advantage to an Absentee who is also deemed as a non-resident. There are only disadvantages in respect to QLD taxes as well as Commonwealth taxes (you lose Capital Gains Tax exemptions and discounts as well as a higher CGT Foreign Resident Rate when selling the property)
The only non-contribution towards taxes that can be thought of would be those normally derived from:
* Electricity usage — residents would of course be paying for usage, however Absentees not wishing to be disconnected may keep an electricity account connected. Or, they may have other family or relations still residing in the property using and paying for electricity. Property investors would have tenants paying for this service regardless.
* Internet usage — residents would of course be paying for usage, however Absentees not wishing to be disconnected may keep an internet account connected. Or, they may have other family or relations still residing in the property using and paying for internet usage. Property investors would have tenants paying for this service regardless — if they chose that service.
* Telecommunication Service Providers (TSP) — Absentees may or may not still have connection to TSPs. Taxes collected would be GST.
* Tolls — taxes collected via motorway tolls — would only apply to those who own motor vehicles and who also use tollways. In many cases it would not be applicable residents anyway.
* Public transport — taxes collected via public transport services would only apply to those who use public transport.
* Shopping/spending locally — taxes collected by local businesses would be GST.
Those additional taxes possibly paid by QLD residents would not supersede the amount of additional taxes borne by an Absentee via the excessive Land Tax & Absentee Surcharges (LT&AS). The LT&AS is completely disproportionate.
Absentees are of course also paying taxes in the countries they are frequenting whilst out of Australia, meaning their personal burden of tax payments is amplified even more.
Shorter term Absentees are even worse off than longer term in respect to QLD taxes.
Taxes are even more disproportionate for those Absentees who are only absent from Australia for a period just over the 6 month time frame. Because the legislation is framed around a 6 month absentee period within a financial year, if one was to return to Queensland (or other State or Territory for that matter)just over the 6 month period, you would be paying additional local taxes as well. Shorter term absentees are hit with even more QLD taxes than anyone.
Absentees represent a small population and therefore overall would not contribute significantly to the QLD economy.
Property owners who reside interstate.
There are Queensland property owners who are not Queensland residents, but live interstate when back in Australia. Therefore, regardless of whether they were in Australia or not, they would not be contributing any further to Queensland tax revenue.
The flip-side of that argument also stands true in that there are Queensland residents who also own property outside Queensland, who do not contribute any further to that State or Territory’s tax revenue. But in that case, if they are Absentees, they do not pay an Absentee Surcharge and the reduced tax-free threshold of Land Tax — because QLD is the only State in Australia to apply this to Australian citizens.
Benefiting from capital appreciation of land holdings due to high standard of services and infrastructure delivered and maintained — argument.
This argument that Labor uses to further justify the LT&AS is also flawed. Absentees, as I have demonstrated, pay much higher taxes overall that are disproportionate to what residents pay.
Services (such as public transport and government offices) and infrastructure are not necessarily provided and built near each land holding either. There are many properties that do not benefit at all and will not appreciate in value.
Appreciated value of land holdings not proportionate to market values.
Based on my personal circumstance and the opinions of two experienced local property agents, it has been demonstrated that the capital appreciation of a property is not proportionate to the ratio of increased land valuations.
Land valuations are made by the Department of Natural Resources and Mines (DNRM) under the Land Valuation Act 2010. The LT&AS is are either based off a three year average or a State average calculation.
When adding the increased amended land value to the purchase price, it becomes apparent that the retail market value of the property does not appreciate at the same ratio. So, although my property has seen significant land valuation increases over the last three years, the market value of my property has barely moved. The increased market value falls well short of the combined overall costs incurred from purchasing the property (including more taxes), renovations,buyer’s agent fees and ongoing costs. The LT&AS adds to the shortfall.
The ‘broad range of taxes’, that are ‘generally borne by resident taxpayers’ are on the whole also borne by Absentees who are Australian residents. Even non-Australian Absentees (foreign residents) are paying usual local QLD taxes to hold their properties. Both resident and Aussie Absentee property owners are holding the ‘tax torch’. But Absentees are taking on a greater burden.
The LT&AS year-on-year increases are so extreme that they cause immediate financial hardship to many Absentees. This unfairly disadvantages them with financial and psychological distress. The repercussions of that are obvious with forced early sales of properties as they become unsustainable to hold and health problems.
One can draw the conclusion that the real reasons behind implementing the LT&AS upon Australian citizen absentees, is because they represent a small population compared to the population of unaffected Queensland citizens and therefore do not pose an election risk.
Many Australian citizen absentees may only be charged the LT&AS once due to an extended stay overseas, so it is an easy cash grab from them and unlikely to cause too much fuss.
Others who remain absentees are mostly disenfranchised due to their location and lack of ability for absentees to become a collective voice to object to the injustice and unfairness of these punitive taxes. Australian citizen absentees are an easy target.
Page 8 of the Explanatory Speech document also answers a question ‘Will Queenslanders working overseas be subject to surcharge?’. Pitt in his explanation focuses on the small minority entitled to the limited exemption, critically failing to highlight the fact that most Queenslanders working overseas will be affected. QLD Labor obviously did not wish to expose the negative impacts.
The spiel used that Pitt and others use to justify the LT&AS is complete rubbish and used to hoodwink the general public into believing their rhetoric. Shame on the Palaszczuk Queensland Labor Government.
