New tax change could increase your rent

Investors fear land tax changes in Queensland could be copied in other states and drive up rent prices across the country, heaping more pressure on the cost of living.

Under changes to the law, interstate landlords and retirees who own an investment property in Queensland could be slugged with tens of thousands of dollars more in land tax from June next year.

The new land taxes rely on investors voluntary disclosing their interstate holdings.

The current tax-free thresholds are $600,000 for individuals, other than absentees, and $350,000 for companies, trustees and absentees.

When the new tax kicks in, a person who owns land in Queensland with a taxable value of $745,000 and also has land in Victoria valued at $1,565,000 will be slugged $8422.

Sydney-based investor and director of buyers’ agency Right Property Group, Victor Kumar told NCA NewsWire he had been investing in major capital cities since 1998, with 25 per cent of his portfolio weighted in Queensland.

“It’s certainly going to significantly increase my holding cost in Queensland,” he said.

“I will obviously increase my rent at any opportunity I have to mitigate that cost.

“What they’re trying to do in Queensland in terms of creating more opportunities for first time buyers — relaxing the tight rental market — is actually not going to be achieved because you’re actually putting fuel to the fire on something that’s not very well thought out.

“There will be a lot of panic selling, in my opinion, and then that in itself will create some opportunities.”

Mr Kumar said he would personally be slugged an extra $27,000 for his own investments, which was significant.

He said the first thing many people would do was increase rent.

“I think if the market drops significantly in Queensland, and they realise that they haven’t really eased the pressure on the rental market, they may actually … in the next budget they may say no more of the land tax aggregation,” he said.

For now, Mr Kumar is telling his clients take a “wait and see approach”.

More worryingly, would be if other states adopted a similar tax scheme, he added.

“This will go one of two ways. It may go down the way of say the vendor tax in Sydney (which was ultimately scrapped) … or other states may copy this, which would then significantly change the landscape of investing in Australia because it’s only recently that we’ve started doing borderless investing,” he said.

“This this may actually really significantly constrain people into smaller areas or within each state and may actually inflate the pressure on rentals in each state if they are already under-supplied.”