QLD State Budget

Queensland Budget 2024-25 | Record debt fuelled by health, housing and cost of living initiatives

Queensland Budget 2024-25 | Record debt fuelled by health, housing and cost of living initiatives

Queensland Treasurer Cameron Dick has handed down the 2024-25 Queensland State Budget. The budget included record health expenditure and a raft of cost-of-living relief measures, including freezing government fees and charges, which will, in part, be funded by mining company taxes and coal royalties. These initiatives build on the $8 billion in cost-of-living concessions included in the 2023-2024 budget, and are predicted to push the Government into a $2.63 billion deficit.

Support for first home buyers

The Queensland Government has announced changes to support first home buyers by increasing the First Home Buyer duty concession. This adds to the previously announced doubling of the First Home Owner Grant.

The First Home Buyer duty concession will be increased for eligible contracts for first homes and first home vacant land. The current full duty concession applies to first homes valued at up to $500,000 and vacant land valued at up to $250,000. These thresholds have been in place since 2012, despite significant housing price increases during this time. Under the new measures:

  • No duty will apply to first homes valued at up to $700,000, with a partial concession available for homes valued at up to $800,000.
  • For vacant land, no duty will apply to land valued at up to $350,000, with a partial concession for land valued up to $500,000.

This measure is expected to cost Queensland $360 million across the next four years and support around 10,000 first home buyers per year. The changes apply to contracts signed on or after 9 June 2024.

The First Home Owner Grant has been temporarily doubled for transactions entered into between 20 November 2023 and 30 June 2025, increasing from $15,000 to $30,000. The Grant is available for buying or building a new home valued at less than $750,000 (including land). It is not available for existing homes that have been previously used as a residence.

The increased grant is expected to cost the Government $210 million across the next five years, and benefit around 12,000 first home buyers.

BDO comment

Transfer duty can be a major barrier for first home buyers, making a difficult market even less accessible. The First Home Buyer duty concession was in desperate need of an update, with many first home buyers having no prospects of obtaining a home under the existing thresholds, especially in Brisbane and other major Queensland cities.

While the changes are welcome, we would have liked to see the threshold raised further. According to the ABS, the mean dwelling price in Queensland rose to above $850,000 at the end of the March 2024 quarter. No doubt, the increased threshold will help, but for many first home buyers it still won’t be enough.

Likewise, the doubling of the First Home Owner Grant is good news, but the eligibility cap for new homes valued at up to $750,000 means that many first home buyers will not be able to access the grant anyway. 

Changes impacting foreign owners and buyers

AFAD increase

The Queensland Government announced that it will increase the additional foreign acquirer duty (AFAD) rate from seven per cent to eight per cent from 1 July 2024 onwards.

Under the current law, foreign persons, including foreign trusts and foreign companies, acquiring a direct or indirect interest in ‘AFAD residential land’ are subject to an extra seven per cent of duty. AFAD is payable in addition to the duty otherwise payable in relation to the transaction. The increase in AFAD brings the maximum duty rate to 13.75 per cent.

Land is generally considered ‘AFAD residential land’ if it is land in Queensland that is, or will be, solely or primarily used for residential purposes or future residential purposes. The increase of the AFAD rate will bring Queensland’s rate in line with equivalent foreign purchaser surcharge duty rates in other jurisdictions (e.g. New South Wales and Victoria).

BDO comment

The increase in AFAD in Queensland may further disincentivise foreign investment, particularly in the build-to-rent sector at a time where Queensland is looking at viable options to increase housing supply. Whilst ex gratia relief from AFAD remains available to certain Australian-based foreign entities, BDO considers that the eligibility criteria and underlying policy for AFAD relief in Queensland are among the most stringent in Australia.

Land tax surcharge increase

The Queensland Government announced that it will also increase the land tax surcharge rate imposed on:

  • Absentees (e.g. a person who does not ordinarily reside in Australia);
  • Foreign companies; and
  • Trustees for foreign trusts,

collectively termed ‘Absentee Owners’.

The current land tax surcharge rate imposed on the above Absentee Owners is two per cent, payable in addition to the land tax ordinarily payable each year. 

From 30 June 2024 onwards, the land tax surcharge rate for Absentee Owners will increase from two per cent to three per cent. This rate is a flat rate imposed on the taxable value of all taxable land in Queensland owned by the Absentee Owner each year.

BDO comment

The increase of the surcharge rate to three per cent from 30 June 2024 onwards does not give foreign taxpayers sufficient time to consider or budget the additional land tax payable in Queensland. As land tax is determined on all taxable land owned by a taxpayer as at midnight on 30 June of the preceding financial year, BDO expects the Queensland Government’s late announcement will be an unwelcome surprise for foreign landowners in Queensland.

Reduction in Motor Vehicle Registration Duty

The Government is reducing the registration fee and traffic improvement fee components of motor vehicle registration by 20 per cent for a 12-month period from August 2024. The temporary reduction will apply to all light vehicles, including motorcycles and trailers, at an estimated cost to the budget of $435 million.  Light vehicles are generally those less than 4.5t gross vehicle mass.

This cost-of-living measure compliments the freeze to motor vehicle registration costs announced in the 2023–24 Budget Update, to commence in 2024–25 at an estimated cost of $281.8 million over four years. 

The 20 per cent reduction equates to a saving of around $85 for a four-cylinder private-use vehicle for 12 months, reducing the registration fee to approximately $338.75 (excluding CTP). The Government estimates that the reduction will benefit owners of around 5.7 million vehicles across the state. The fee reduction will start appearing on renewal notices sent to customers from 5 August 2024.  This corresponds to the commencement date of the Government’s six-month, 50 cent flat fee public transport trial, estimated to save commuters $150 million.

BDO comment

BDO is generally supportive of cost-of-living relief for Queenslanders in need. However, we note the challenge this and future governments will have in balancing the potential inflationary impacts of broad-based government spending with the desire to relieve cost of living pressures.

Payroll tax changes from 1 July 2024

Regional payroll tax eligibility changes

The Queensland Government has announced its intention to amend the payroll tax regional discount rate currently in force.

Currently, eligible regional employers are entitled to a one per cent discount to the following payroll tax rates imposed on employers in Queensland:

  • 4.75 per cent for employers or groups of employers who pay $6,500,000 or less annually in Australian taxable wages; and
  • 4.95 per cent for employers or groups of employers who pay more than $6,500,000 annually in Australian taxable wages.

This means that certain regional employers in Queensland are currently eligible for a reduced payroll tax rate of 3.75 per cent(or 3.95 per cent depending on the employer’s Australian grouped taxable wages). A regional employer will be eligible for the regional employer discount if:

  • The employer’s principal place of employment is in regional Queensland (i.e. as defined and identified by the ABS); and
  • At least 85 per cent of the employer’s taxable wages are paid to regional employees.

From 1 July 2024, a new threshold will be introduced for a regional employer to qualify for the discount. Specifically, only regional employers who pay $350,000,000 or less in annual taxable wages will be eligible for the regional employer discount.

Where an employer is required to lodge monthly payroll tax returns, this threshold will be tested proportionately, meaning that an employer must pay taxable wages equal to or less than $29,166,166 per month to qualify.

BDO comment

The original objective of the regional employer discount was to encourage businesses to employ workers in regional communities and therefore, stimulate economic growth within these areas. This appears to be a targeted measure aimed at very large employers who are currently making a positive contribution to these regional areas. This may detract from further investment in regional Queensland on new projects and as a result, reduce future employment in these rural labour markets. 

Extension of apprentice/trainee rebate

To encourage the hiring of apprentices and trainees, the Queensland Government announced that the apprentice/trainee rebates for payroll tax will be extended until the year ended 30 June 2025.

Therefore, not only will amounts payable by employers to apprentices and trainees during their period of apprenticeship remain exempt, but a 50 per cent rebate will be available to employers.

BDO comment

BDO welcomes the extension of the apprentice/trainee rebate as this will continue to encourage employers hiring apprentices/trainees and stimulate the labour market without adverse payroll tax consequences.

The Revenue and Other Legislation Amendment Bill 2024 was introduced today which provides amendments to the Duties Act 2001, Payroll Tax Act 1971, Land Tax Act 2010 and First Home Owner Grant and Other Home Owner Grants Act 2000 to implement the above measures. This was declared an urgent Bill to be considered this week.

Additional funding for the Queensland Revenue Office (QRO)

The Government is providing the following additional funding:

  • Revenue and penalty debt administration - additional funding of $117 million over four years and $35.2 million per annum ongoing to assist the QRO in revenue and penalty debt administration. This is expected to support revenue benefits of $970.1 million over four years.
  • Digital and Data Uplift - additional funding of $11.9 million over four years and $2.1 million per annum ongoing to improve and secure QRO’s technology, data and telephony systems.
  • Mental Health Levy and Resourcing - increased funding of $17.2 million over four years and $4.5 million per annum ongoing to assist the QRO in retaining ongoing capacity to administer the Mental Health Levy and to ensure effective collection of revenue for Queensland.

BDO comment

BDO welcomes the additional funding and notes that it is crucial that the QRO is appropriately funded in order to provide the range of services and experience expected from a revenue administration authority. BDO suggests that the funding outlined above for revenue administration could be used to improve the taxpayer experience and increase staff numbers to assist taxpayers with their queries and compliance obligations.

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