On Friday 28 January 2011, the Queensland Treasurer announced that Queensland will abolish the land rich duty regime and adopt a landholder duty system, effective from 1 July 2011.
It is estimated that the implementation of a landholder duty regime will generate an additional $30 million annually in duties from corporate transactions. NSW, WA, ACT and NT all currently have landholder regimes.
Based on the Government's announcement, it seems Queensland's proposed new regime will be most similar to that in NSW.
How the landholder duty will apply
Landholder duty will apply upon the acquisition of:
- 50% or more of an unlisted company holding land in Queensland worth $2 million or greater, or
- 90% or more of a listed unit trust or listed company holding land in Queensland with a value of $2 million or greater.
Both direct and indirect landholdings will be taken into account when determining the value of land held.
Landholder duty will be charged to listed entities and unit trusts at only 10% of the duty that would otherwise apply if the entity or Unit Trust was not listed (note the current maximum rate of land rich duty is 5.25%). No detail has yet been released about the extent of proposed carve-outs, if any, from dutiable value (that is, the value upon which duty is calculated).
There will be no changes to the duty arrangements in place for unlisted trusts.
Consequences of implementing a landholder duty system
Broadly, land rich duty is currently only a significant issue for property investors and developers, aged care providers and the energy and resources industry. However the implementation of a landholder duty regime will significantly expand the duty base as many transactions where landholdings are below the current 60% threshold will be caught.
Progress of legislation
The Bill to enact these proposed changes has not yet been introduced to Parliament. We will keep you informed of the progress of the anticipated Bill.