Land tax: the things you need to consider when investing in Queensland agricultural land

WHO SHOULD READ THIS

• Those who are considering the acquisition of Queensland agricultural land or changing ownership structures of their properties.

THINGS YOU NEED TO KNOW

• In Queensland there are some additional requirements to ensure agricultural land is exempt from land tax. These include the residential status of the individual owners and trust beneficiaries, whether the company is privately owned and the home jurisdiction of its owners.

WHAT YOU NEED TO DO

• Prior to acquiring or making changes to the ownership of Queensland agricultural land it is recommended that you understand your position and seek legal advice to ensure your exposure to land tax is properly managed.

With global food demand booming, investing in Queensland agricultural land is becoming an increasingly attractive option for investors including foreigners. However, investors should be aware of potential land tax ramifications.

In this alert we set out some of the most important land tax considerations that investors in Queensland agricultural land need to be aware of.

Background

As an annual tax, land tax is calculated on a landholder’s total landholdings at midnight 30 June each year. For companies, trustees and absentees there is a tax free threshold of $350,000, with the maximum rate of land tax for landholdings with an unimproved value greater than $5 million, being $75,000 plus 2% for each dollar exceeding $5,000,000.

The Queensland primary production exemption

The majority of land used for primary production in each Australian jurisdiction is generally exempt from land tax on the basis that the land is used solely or mainly for primary production. However in Queensland, there is an additional requirement for land to be exempt. To comply with this requirement the registered owner of the land must be:

• a resident individual,
• a relevant proprietary company, or
• a trustee of a trust where all the beneficiaries satisfy the requirement.

Private companies will generally qualify for the exemption. However, a private company will not qualify for the exemption if shares in the company are held by public or foreign companies, or trusts of which foreign individuals are beneficiaries. Land held directly by public companies or foreign companies will also not qualify for the exemption.

Risks for corporate agribusiness

If a foreign company, or an Australian entity that has ownership interests held by foreign interests, acquires land for farming purposes there is a real risk that land tax will be payable on an annual basis.

Risks for land held by family trusts

The ownership requirements are not limited to foreign investors and could pose potential complexities to Australian farmers. For example, if a family farm is held in trust for family members, one of which moves overseas, then for land tax purposes this family member would be regarded as an ‘absentee’ for land tax purposes and the trustee would no longer be eligible for an exemption from land tax.

Similarly, land held by private corporations that convert to public companies, with a view to listing at a later date, would lose the benefit of any exemption once the entity becomes a public company. This is irrespective of whether the public company is listed or unlisted. Furthermore, if private corporation landholders sell shares to foreign companies then the exemption would no longer technically apply.

Understand your position

Prior to acquiring or making changes to the ownership of Queensland agricultural land it is recommended to seek legal advice to ensure your exposure to land tax is properly managed.

There are certain ways that foreigners (including Australian born expatriates) may be able to hold interests in Queensland primary production land and not be exposed to ongoing land tax liabilities.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.