It must have seemed like a brilliant idea and a great little earner when the Queensland Treasury boffins floated it — a few tweaks to property taxes that would raise more than half a billion dollars over four years.
The beauty of it? Only foreigners would pay. Voters wouldn’t feel a thing.
Treasurer Jackie Trad announced the changes in her budget for 2019-2020 — released in June last year.
Queensland, she said, would be increasing its land tax surcharge for absentee foreign owners from 1.5% to 2% and widening the definition of who paid the surcharge to include foreign companies and trusts.
Really nothing more than bringing us in line with New South Wales and Victoria, but still, a move expected to deliver $540 million over four years.
Barely six months later, Trad was backtracking big time. The government’s Mid-Year Fiscal and Economic Review (MYFER), released in December, revised its projected four-year land-tax revenue down by $291 million.
Why the sudden reversal? The result of “consultation with industry regarding implementation of the foreign surcharge” was the wonderfully bland explanation in the MYFER papers — which suggests Treasury didn’t do much consulting with industry before announcing the tax changes.
If they had, they might have spotted some of the presumably unintended consequences of the new rules — among them that many local investors could in fact be liable to pay the new foreign surcharge, thereby defeating the no-pain-for-voters element of the proposal.
This would come about, the Property Council of Australia said in a post-budget submission, because of the broadening of the definition of foreign ownership to include publicly listed companies and property trusts that had majority foreign ownership.
“If this application takes effect as proposed, some groups will be treated as ‘foreign’ notwithstanding that they are Australian-managed, controlled, Queensland-based and publicly listed on the ASX,” the Property Council said.
It said that real estate services firm JLL estimated that two-thirds of Brisbane’s CBD office stock was owned by entities that would be considered foreign under the new Queensland definitions. The same would apply in many non-CBD centres.
“A remarkable number of Queensland businesses would rent space within these buildings and face a major increase in their leasing costs if these properties are impacted by the surcharge,” the council said.
Again, probably not what the government had in mind.
And did the government really want such big contributors to the Queensland economy as international brewer Lion, the owner of Castlemaine Perkins, to face a near doubling in its land tax just because it owns the land at Milton where it has invested about $120 million in the past decade?
The property council says Lion’s land tax bill would rise from about $1.2 million to around $2.14 million under the new scheme.
The proposed increase would also see the land tax for overseas-owned student accommodation provider Student One with three Brisbane CBD buildings, double to $3 million and “likely prevent the company from investing in a new facility in regional Queensland”.
Again, was that what the government had in mind?
According to the Property Council, the new tax surcharge proposals, if left to stand, “would be the broadest and most economically damaging in Australia”.
And so, the government has taken a step back while it thrashes out the details with the property industry.
Or to use the wonderfully wordy and non-specific language of the MYEFR:
The Queensland Government is committed to maintaining competitive taxation settings, and will establish guidelines, in consultation with stakeholders, that provide relief for commercial activities that make a significant contribution to the state economy. This will ensure Queensland continues to be an attractive destination for investment.
You wonder why they didn’t think of that before they announced these new tax arrangements in last year’s budget.
Perhaps they were hoping no one would notice.
Robert MacDonald writes for Queensland’s new independent news site InQueensland, where this article originally appeared.