Victoria and Queensland’s foreign company land tax concessions
5 mins reading time
In the absence of a land tax concession, both the Queensland and Victorian land tax regimes include a foreign owner (absentee) surcharge which results in an additional 2% in Queensland and 4% in Victoria, over and above existing land tax rates.
While this has been the case for some years, it is perhaps less known that relief from the surcharge may be available if it can be demonstrated that the relevant taxpayer is making a significant contribution to their local economy. However, in circumstances where the absentee is merely a property investor or landlord, neither state will grant a concession.
Although there are also build-to-rent concessions available for absentees in each jurisdiction, they are not the subject of this article.
What is a foreign corporation?
In both Queensland and Victoria, a company is foreign (or it is an ‘absentee corporation’) if:
- it is incorporated outside Australia
- foreign persons or related persons of foreign persons (‘absentee persons’) have a controlling interest in the corporation.
While there are nuances between each state, broadly, a controlling interest requires a foreign party to:
- control at least 50% of the voting power in the corporation
- control the composition of the board
- have an interest in at least 50% of the issued shares in the corporation.
What are the thresholds?
As a foreign company in Queensland, you are liable for land tax if the total taxable value of your freehold land at 30 June is $350,000 or more.
In Victoria, you are liable for land tax if the total taxable value of your freehold land at 31 December is $50,000 or more.
In both states, the taxable value of your land is based on your annual land valuation issued by the state Valuer-General.
I am paying the surcharge; can I apply for the concession?
Queensland
You can apply to the Queensland Revenue Office (QRO) for ex gratia relief from the surcharge. If granted, an ongoing annual declaration is required to confirm you meet the conditions for each subsequent land tax year.
There are two ways to approach the QRO:
- before a liability for land tax has arisen to apply for an indication of whether ex gratia relief will be granted. For example, you may apply for in principle pre-approval before entering into a transaction to acquire land.
- after a liability for land tax has arisen, you can apply for ex gratia approval. You do not need to have applied for in principle pre-approval first.
Even if you have pre-approval, you are still required to obtain formal approval once the liability arises.
Victoria
In Victoria, taxpayers are required to disclose to the State Revenue Office (SRO) that they are an absentee owner. A failure to disclose can result in the imposition of penalties.
If the absentee surcharge is applied to your land tax assessments, you may apply to SRO for the exemption.
The exemption will continue to apply subject to there being no material changes to the circumstances that gave rise to the exercise of the discretion.
What are the relevant criteria?
While both states apply their concession a little bit differently, broadly speaking, they will consider similar criteria for the purposes of assessing an application.
Items of relevance include:
- Whether the corporation is incorporated here or overseas
- Whether it can demonstrate good corporate behaviour (for example, compliance with FIRB, Corporations Act and ASIC requirements)
- The nature and degree of ownership and control exerted by foreign parties over local day to day control, extent of foreign practical influence on financial and operational decisions
- Monetary contributions to the local economy including through the extent of commercial operations here, local employment, engagement of local suppliers
- The size of the local commercial activities as compared with the size of the landholdings
This list is not exhaustive and of course each case will turn on its particular facts and circumstances.
Further guidance for Queensland based taxpayers can be found here and Victoria here.
Macpherson Kelley can assist
If you or a client of yours has not considered whether the surcharge relief is available before now, it may be worth reaching out to our foreign owned subsidiary team to consider further.
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Victoria and Queensland’s foreign company land tax concessions
In the absence of a land tax concession, both the Queensland and Victorian land tax regimes include a foreign owner (absentee) surcharge which results in an additional 2% in Queensland and 4% in Victoria, over and above existing land tax rates.
While this has been the case for some years, it is perhaps less known that relief from the surcharge may be available if it can be demonstrated that the relevant taxpayer is making a significant contribution to their local economy. However, in circumstances where the absentee is merely a property investor or landlord, neither state will grant a concession.
Although there are also build-to-rent concessions available for absentees in each jurisdiction, they are not the subject of this article.
What is a foreign corporation?
In both Queensland and Victoria, a company is foreign (or it is an ‘absentee corporation’) if:
- it is incorporated outside Australia
- foreign persons or related persons of foreign persons (‘absentee persons’) have a controlling interest in the corporation.
While there are nuances between each state, broadly, a controlling interest requires a foreign party to:
- control at least 50% of the voting power in the corporation
- control the composition of the board
- have an interest in at least 50% of the issued shares in the corporation.
What are the thresholds?
As a foreign company in Queensland, you are liable for land tax if the total taxable value of your freehold land at 30 June is $350,000 or more.
In Victoria, you are liable for land tax if the total taxable value of your freehold land at 31 December is $50,000 or more.
In both states, the taxable value of your land is based on your annual land valuation issued by the state Valuer-General.
I am paying the surcharge; can I apply for the concession?
Queensland
You can apply to the Queensland Revenue Office (QRO) for ex gratia relief from the surcharge. If granted, an ongoing annual declaration is required to confirm you meet the conditions for each subsequent land tax year.
There are two ways to approach the QRO:
- before a liability for land tax has arisen to apply for an indication of whether ex gratia relief will be granted. For example, you may apply for in principle pre-approval before entering into a transaction to acquire land.
- after a liability for land tax has arisen, you can apply for ex gratia approval. You do not need to have applied for in principle pre-approval first.
Even if you have pre-approval, you are still required to obtain formal approval once the liability arises.
Victoria
In Victoria, taxpayers are required to disclose to the State Revenue Office (SRO) that they are an absentee owner. A failure to disclose can result in the imposition of penalties.
If the absentee surcharge is applied to your land tax assessments, you may apply to SRO for the exemption.
The exemption will continue to apply subject to there being no material changes to the circumstances that gave rise to the exercise of the discretion.
What are the relevant criteria?
While both states apply their concession a little bit differently, broadly speaking, they will consider similar criteria for the purposes of assessing an application.
Items of relevance include:
- Whether the corporation is incorporated here or overseas
- Whether it can demonstrate good corporate behaviour (for example, compliance with FIRB, Corporations Act and ASIC requirements)
- The nature and degree of ownership and control exerted by foreign parties over local day to day control, extent of foreign practical influence on financial and operational decisions
- Monetary contributions to the local economy including through the extent of commercial operations here, local employment, engagement of local suppliers
- The size of the local commercial activities as compared with the size of the landholdings
This list is not exhaustive and of course each case will turn on its particular facts and circumstances.
Further guidance for Queensland based taxpayers can be found here and Victoria here.
Macpherson Kelley can assist
If you or a client of yours has not considered whether the surcharge relief is available before now, it may be worth reaching out to our foreign owned subsidiary team to consider further.