A summary of the key tax measures introduced by the Palaszczuk Government in the 2023-24 Queensland State Budget, namely payroll tax amendments and build-to-rent announcement.
Treasurer Cameron Dick has handed down a budget focussed on mitigating the rising cost of living. The Budget provides $1.6 billion in new and expanded cost-of-living measures in 2023–24, supported by a big infrastructure spend and the ‘Big Build’, a four-year $89 billion capital program intended to fund approximately 58,000 jobs across Queensland. One key measure are the build-to-rent tax concessions the government will provide to support developments that provide at least 10 per cent of dwellings as affordable housing at discounted rents. The initiative is proposed to commence from 1 July 2023.
While individuals and families are the primary beneficiaries of relief measures, businesses received some concessions with the introduction of a $650 rebate on electricity bills for around 205,000 eligible small businesses, and the extension of the payroll tax discount for regional employers to June 2030.
The implementation of these and other cost of living support measures has been made possible through the government’s $12 billion surplus, generated from royalty revenue off the back of exceptionally high coal and oil prices.
Stimulating Growth in Affordable Housing – Land Tax and Duty Concessions for the Build-to-Rent Sector
As a means of addressing Queensland’s housing affordability crisis while also stimulating real estate investment, the Government announced on 13 June 2023 in the 2023-24 State Budget a number of land tax and duty-related concessions available in the Build-to-Rent (BTR) sector. These measures will be implemented by legislative amendment with the introduction of Revenue Legislation Amendment Bill 2023 today. It appears the intention is to rush this Bill through this week while parliament is sitting.
In line with concessions similarly provided in other States, from 1 July 2023 onwards, an entity that owns an “eligible BTR development” will receive the following incentives on the relevant parcel of land:
- A 50 per cent discount on the land’s taxable value for the earlier for up to 20 years
- Exemption from the two per cent foreign investor land tax surcharge for up to 20 years
- Exemption from being subject to Additional Foreign Acquirer Duty (AFAD).
The exemption from AFAD changes come into effect for all land transfers (or agreements to transfer) from 1 July 2023. However, the land tax concessions will only commence for eligible BTR developments from the 2024-25 land tax year that is, land held as at midnight 30 June 2024 onwards. These concessions will be available for BTR developments which became ‘operational’ between 1 July 2023 and 30 June 2030, and will apply from the earlier of 20 years from the date the concessions first apply or until 30 June 2050.
To be eligible for the land tax concessions in a particular land tax year, the following must be satisfied during the previous financial year:
- All dwellings must be located on the same parcel
- The BTR development must have been constructed (or substantially renovated) for the purpose of providing multiple dwellings to be occupied under residential tenancy agreements
- The BTR development comprised of at least 50 self-contained dwellings
- All dwellings must be occupied, or available for occupation under residential tenancy agreements
- The terms of the residential tenancy agreements must not restrict who may occupy the dwellings (other than in cases of protecting public health or safety or where the restriction is related to providing housing of an eligible tenant under a discounted housing agreement
- At least 10 per cent of the dwellings must have been occupied by an eligible tenant under a ‘discounted rent housing agreement’ (i.e. fixed term agreements with a 3 year term option and the rent payable is at least 25 per cent less than market rent)
- The BTR development was used solely for primarily for residential purposes. This suggests a limitation on mixed use retail
- In the case where the BTR development is owned by more than one owner, none of the owners are entitled to a specific part of the land that any of the other owners were not entitled to
- All the dwellings were managed by a single entity. The exemption may still apply where the other entity is a registered community housing provider.
In the case of foreign owners, the exemption from AFAD will only apply where the acquirer can demonstrate the land tax concession eligibility requirements will be satisfied for at least five years continuously.
Entities that are eligible for these concessions will be required to apply in writing to the Queensland Revenue Office (QRO). A ruling can be made prior to acquisition to confirm eligibility of the concessions. However, the land tax concessional measures are not available until the BTR development is operational.
BDO considers that the introduction of these measures is a promising start for the build-to-rent product within the Queensland property industry. However, there are multiple strict requirements that must be met to obtain relief.
While these measures are intended to reduce barriers to the BTR industry and are more accessible than the counterpart provisions in New South Wales, the concessional measures still invite confusion and an uneven playing field for property developers in Queensland for following reasons:
- BTR operations that commenced operating before 1 July 2023 will not be eligible for this concessional tax treatment
- Parcels of land which were acquired prior to 1 July 2023 will not be eligible for the AFAD concession, even where development and operations commence after this time.
- Foreign entities that seek an exemption from AFAD will need to satisfy the BTR development eligibility requirements for at least five years before transferring ownership. This includes transfers between related entities.
In the case of current BTR developments which are in the construction stages, it remains a viable option for foreign owners to apply for ex-gratia relief under the existing AFAD and the foreign land tax provisions. However, land tax will continue to be levied on these local businesses and foreign owners alike with no concessional relief until these BTR dwellings reach the final stages of development and receive occupancy permits.
Payroll tax discount for regional employers extended
The Government has announced an extension of the payroll tax discount for regional employers for an additional seven years, now extended until 30 June 2030. The measure was first introduced in the 2019-20 Queensland Budget and provides a one per cent discount on the payroll tax rate for employers with an ABN registered business address in regional Queensland, as well as at least 85 per cent of their taxable wages paid to employees located outside South East Queensland.
The extension of this measure results in a reduced payroll tax rate of 3.75 per cent for employers paying $6.5 million or less in Australian taxable wages, or 3.95 per cent for employers paying more than $6.5 million in Australian taxable wages, continuing to apply for eligible businesses. The Government estimates that 3,400 regional Queensland businesses will benefit from this extension.
BDO welcomes the extension of this measure given the significant impact of payroll tax on regional businesses which are often subject to greater difficulties in the hiring and retention of staff.
12-month extension to apprentice and trainee payroll tax rebate
As part of a broad range of measures to support apprentices and trainees, the Government has announced an extension of the payroll tax rebate for wages paid to apprentices and trainees for 12 months, ending 30 June 2024. The measure is aimed at assisting with current skill shortages across trades and hospitality.
The extension of this measure means that if an organisation pays exempt wages to trainees and apprentices, it can also claim a 50 per cent rebate (based on the amount of exempt apprentice and trainee wages) to reduce its payroll tax liability for the financial year ending 30 June 2024.
BDO considers this extension will have a positive impact on organisations and will provide incentives to hire additional apprentices and trainees.
Other payroll tax and revenue measures
Further measures of interest announced by the State Government include the general practitioner payroll tax amnesty and funding for the Queensland Revenue Office.
As discussed in our previous insight article, qualifying medical practices liable to payroll tax on payments made to contracted general practitioners will be provided with a payroll tax amnesty until 30 June 2025 and for the previous five years (2018-2025). The Queensland Government estimates that the foregone payroll tax revenue would be up to $100 million per annum during the amnesty period.
The Queensland Revenue Office will be granted additional funding of $24.4 million over four years to increase its capacity in undertaking taxation compliance work. The government will also provide the Queensland Revenue Office with increased funding of $49.4 million over three years and $16.9 million per annum ongoing, to assist with debt recovery and compliance measures. These measures are expected to increase revenue by $610 million over four years.
In 2023-24, the State Government will provide $1 million in funding to automate arrangements for applying land tax home exemptions for landowners. Where landholders are eligible for a land tax home exemption for the property in which they live and data matching verifies eligibility, the system will automatically update to ensure this exemption is applied.
If you’d like to discuss the changes outlined in this article and what they might mean for you, please contact BDO’s team of specialists in Queensland.