Queensland's Land Tax Changes Shelved - For Now

September 30, 2022 Edward Dever

In a backflip worthy of a competitor at the 2032 Olympic Games in Brisbane, Qld Premier Annastacia Palaszczuk has now ditched the 2023 land tax changes which sought to assess land tax based on land holdings throughout Australia.

Shelved at least for now but perhaps not forgotten.

Earlier this week, the Qld Treasurer Cameron Dick was adamant the changes would proceed.

"It is understood Ms Palaszczuk made the decision on Thursday night to shelve the scheme after speaking to her interstate counterparts."

NSW, NT and Tasmania were not particularly keen to co-operate.

The Qld Treasurer claimed the tax was to close a loophole used by people in Sydney to flip properties in Qld. However, this side stepped the fact that it applied equally to people in Qld who owned an interstate property. The Government's own example of "Lena" on its website related to a person who owned a property in Qld who then buys a property in Victoria.

The Qld Treasurer also claimed that investors use the tax-free thresholds in each State to avoid paying land tax. While this may be the case, he offered no details on how widespread this practice is.

He also stated that rents in Qld would not be affected by the land tax changes. It seems reasonable that any landlord impacted by the land tax changes would have tried to pass at least some of that cost onto their tenants. The timing of the land tax changes, in the midst of a rental crisis, was unfortunate.

The now scrapped changes would have resulted in a person already paying land tax in another State being assessed on that property again by the Qld government. No credit was to be given for the land tax already paid in that other State.

It would be interesting to see the Qld government's evidence that investors use the tax-free thresholds in each State to avoid paying land tax. I would be surprised if land tax avoidance is the primary broad-based reason for interstate investment property decisions. But, if that is the case, perhaps something can be (better) tailored to deal with it.

Qld shelves controversial land tax plan

September 2022

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.

Qld's 2023 Land Tax Changes - Industry Response

September 9, 2022 Edward Dever

In the past week, much has been said and written about the Qld Government's 2023 land tax changes which will calculate land tax based on the total value of all Australian land (not just Qld land) held by a land owner.

Here is a sample:

Antonia Mercorella, CEO, REIQ - “It is irreconcilable that the Treasury expects to legitimately raise tax on the basis of value of property held outside of Queensland for the purpose of funding infrastructure within Queensland,”

Leisa Rafter, Chair of the Tax Institute’s Queensland committee - “The changes to land tax are likely to increase the compliance costs for taxpayers as well as the administration costs for the Queensland revenue office – there is a potential for the combined compliance and administrative costs to outweigh the revenue collected.”

Hayden Groves, President, Real Estate Institute of Australia - “It’s a dangerous move and if other states see Queensland pulling in revenue from around the country they could follow it. It has never been done before and for good reason.”

"The REIQ has called for repeal of the ‘illogical’ new land tax regime, while the Tax Institute has also warned that the ‘increase in compliance costs may disproportionately impact individual and smaller taxpayers, especially those who reside in other states and now find themselves liable to land tax in Queensland’.”

Qld Parliament resumes next week with the State Opposition calling on the Government to release its modelling on the new tax. The Government is under further pressure from the State Opposition and the Murdoch media to hold an emergency housing crisis summit.

Queensland’s property levy scheme could backfire

September 2022

Will Qld's 2023 Land Tax Changes Drive Away Interstate Investors?

September 7, 2022 Edward Dever

Only time will tell. However, it seems reasonable that a residential property investor with multiple interstate properties and only one or two Queensland-based properties will sell them to avoid the reach of the Qld Revenue Office. (Equally, an investor with predominantly Qld-based properties may sell off an interstate property to avoid a land tax hike.)

If Qld properties are retained, investors are likely to want to increase rents to try to recover some or all of the additional Qld land tax.

Either way, it is likely to exacerbate the already difficult rental climate in Qld. (Not forgetting the Greens plans for nationwide residential rent controls.)

Under the 2023 Qld land tax changes, Qld land tax will be calculated based on:

1. the total of your taxable land located in Queensland. and 2. the statutory value of your interstate land.

Qld land tax is calculated based on the taxable value of Australian land which is then applied to the Qld portion of the land holdings.

The Qld Revenue Office's example has the fictional Lena's Qld land tax bill increasing from $1,950.00 to $8,422.37.

There is no credit given for land tax payable in another State.

It is surprising that it has taken this long for the issue to be picked up by the media and many investors will be unaware of these changes. However, for the moment, the Qld Government is holding firm. Also, once implemented in Qld, how long until other States follow suit?

Fears over land tax changes to include interstate investors’ holdings outside of Queensland

September 2022

Will Landlords Need To Provide References To Tenants?

March 23, 2022 Edward Dever

There is a motion before the ACT Legislative Assembly on 23 March 2022 which "calls on the ACT Government to consider whether prospective tenants should be given the right to receive references from landlords’ previous tenants."

The motion is broadly framed and does not outline what might be required.

In practice, allowing prospective tenants to request references from previous tenants may not be particularly helpful if those tenants do not wish to, or cannot, provide references in a timely manner. A better approach may be to provide details of the ACAT (or QCAT in Qld's case) matters involving the landlord in the past three years.

The ABC reports that "If the motion is passed, prospective renters in Canberra would have the right to request a landlord reference from a previous tenant, detailing their treatment by the landlord."

Not exactly. The motion calls on the ACT Government to consider the issue and "report back to the Assembly on this matter during the November 2022 sitting period."

Any change in ACT would seem a long way off.

In any event, landlords who treat their tenants fairly and make necessary repairs in a timely manner should have little to fear.

New ACT Legislative Assembly motion seeks to allow prospective renters to request a landlord reference

Legislative Assembly for the Australian Capital Territory - Notice Paper - No 40 - Wednesday, 23 March 2022

March 2022

Property and Extreme Weather Events

March 15, 2022 Edward Dever

Interesting insurance company research on the likelihood of extreme weather events and the impact on property and insurance.

Plenty for landlords, strata committees and Governments to ponder.

Insurers brace for rising flood damage amid climate change, and they warn you should too

March 2022

Qld's New Rules On Pets In Residential Tenancies Commence 1 October 2022

February 25, 2022 Edward Dever

Queensland’s rental reforms regarding pets in residential rental properties commence on 1 October 2022.

From that date: "If a renter requests to keep a pet, a rental property owner must have reasonable grounds to refuse and respond in writing to this request within 14 days. Reasonable grounds include if the property is unsuitable, and if keeping the pet would breach laws or by-laws.

Rental property owners can also place reasonable conditions on pet ownership, including that the pet is to be kept outside or that carpets are cleaned, and the property is fumigated at the end of a lease. A rent increase or bond are not reasonable conditions. The laws also clarify that fair wear and tear does not include pet damage.

Minimum housing standards for Queensland rental properties will start applying to new leases from 1 September 2023 and to all rental properties from 1 September 2024."

Date set for remaining Stage 1 Rental Reforms to commence

February 2022

A Fool and His Money Are Soon Parted

November 16, 2021 Edward Dever

As the Australian Government's Scams Awareness Week closes, it is worth highlighting perhaps one of the oddest scams of recent times.

In Texas last month, the self-proclaimed ‘Money Doctor’, the 80 year-old William Gallagher was sentenced to three life prison terms in Tarrant County for defrauding investors. This is in addition to a 25 year term for similar offences in Dallas County.

The Money Doctor bought time on a Christian radio station where he gave financial advice with a Christian theme, signing off his broadcasts with ‘see you in Church on Sunday’.

One of the most bizarre investments he promoted through his Ponzi scheme was a plan to use a satellite via a company called Hoverlink to shine holographic advertising down to Earth. Over time, Hoverlink morphed from a hoverboard rink to a cancer-curing pharmaceutical to law enforcement body armour before going galactic with its satellite plans.

It was all a scam. Yet people piled into the schemes, all neatly packaged in religious wrapping.

It reminds me of the time I gently nudged ASIC to force a Qld company to issue a supplementary prospectus to protect investors' interests.

A former sportsman who moved into property development was looking to swap his high levels of bank debt for income securities, issued mainly to retirees.

Investor presentations were organised in regional areas, including in church halls, offering returns around 12% p.a.

In my view, this was an attempt to replace sophisticated Big 4-type lenders with unsophisticated investors. A couple of phone calls to real estate agents quickly uncovered that the sales data in the prospectus was somewhat misleading.

The ex-sportsman was on a generous salary and car package and the company had licensed the use of his name at significant annual cost. Given how the company had performed to that time, it was arguable that killing off all these costs and installing a new CEO may have been a better option.

In the end, ASIC forced the issue of a supplementary prospectus and, given the delay, only a paltry sum was raised.

Unfortunately, the company collapsed a number of years later leaving over 150 small creditors out of pocket to the tune of $17 million. It seems the fund raising hadn't ended with the supplementary prospectus. His company was apparently subsequently offering returns as high as 20% p.a. paid monthly to lure investors.

In the end, slow property sales, poor land purchase decisions and mountains of lender debt (some at 30% p.a.) and investor debt brought the company down. Ex-sports personalities don't necessarily make good business people. Cold comfort to those who lost money.

A Christian talk show host promised to enrich clients. His Ponzi scheme bilked them out of millions.

November 2021

Evergrande - Not So Grand Or Too Big To Fail?

September 21, 2021 Edward Dever

That is the main question troubling markets in Asia and elsewhere at present.

And it is perhaps a question only President Xi Jinping in China can answer.

China Evergrande Group is a Fortune Global 500 China-based property conglomerate which has diversified into eight major industries, including automobile manufacturing, film and TV production, theme parks, healthcare and food production. In the property sector, it owns more than 1,300 projects in over 280 cities in China.

For students of Australia's 1980s corporate excess, think Alan Bond and Bond Corporation, just on steroids.

Evergrande has around USD 300 billion of debt to 171 domestic banks and 121 other financial firms and is facing looming interest payments on its bank loans and bonds and a collapsing share price. Protests have taken place outside its offices in China.

The level of Evergrande's debt is around three times the national debt of New Zealand.

Recently, Evergrande has been borrowing money from its employees to stay afloat (apparently telling employees to lend it cash or lose their bonus) and offering properties (including car park spaces) in satisfaction of its debts. Rumours abound that local creditors will be paid in full while foreign creditors will be required to take haircuts.

Any restructuring would be a complex affair. Bondholders are already establishing creditors committees to engage in discussions with Evergrande. Creditors may agree to defer interest payments and rollover loans although this would seem to just delay some form of inevitable restructuring.

Ultimately, despite discouraging government bailouts, the Chinese Government may step in and organise an orderly sell down of assets. This would be driven by a need to ensure market stability and may involve selling off non-core assets - Evergrande has apparently already been completing asset disposals - and hiving off other assets into a workout vehicle. A split between Evergrande and a bad asset vehicle, probably not named "Not So Grande".

With China's current crackdown on wealthy entrepreneurs and its tightening of restrictions on indebted developers, founder Hui Ka Yan will need to rely on his Party connections to determine if he has a role going forward. This assumes President Xi does not decide to use Evergrande as an example of how capitalism goes wrong. If so, the founder's prospects of remaining involved in Evergrande seem slim.

What Is China Evergrande and Why Is It In Trouble?

September 2021

Pets in Apartments - NSW Update

July 27, 2021 Edward Dever

Some interesting comments in the post-Cooper March 2021 decision in McGregor v The Owners – Strata Plan No 74896 [2021] NSWCATCD 1.

This NCAT matter involved the refusal by an owners corporation for a dog to be kept in an apartment block which was part of a larger complex, each block with separate by-laws and all subject to a community management statement.

The applicant dog owners were self represented. And that was probably their downfall.

The by-laws expressly prohibited dogs but not other pets such as cats, with an exception in the townhouse by-laws for small dogs which were permitted in the townhouse section of the complex.

The applicants placed significant reliance on the decision of the NSW Court of Appeal in Cooper. In that case, the effect of the Court’s decision was that a “blanket ban” on the keeping of pets was “harsh, unconscionable or oppressive”.

The applicants' prime application was misconceived as it sought relief under Section 157 of the Strata Schemes Management Act which allows the Tribunal to approve a pet where the by-laws permit a pet with owners corporation approval and that approval has been unreasonably withheld. Neither of these conditions was met.

The applicants also chose the wrong by-law to request the Tribunal to declare as invalid. The applicants should also have included the Community Association as a respondent.

In the circumstances, it was not necessary for the Tribunal to consider the effect of Cooper on the relevant by-law but the Tribunal did note that the by-law did not, in any event, constitute a “blanket ban” of the type considered in that decision.

It will be interesting to see whether other owners corporations seek to distinguish Cooper on the basis that their by-laws, while prohibiting dogs, do not prohibit other animals.

July 2021

Queensland Tenancy Reforms Draw Near

July 8, 2021 Edward Dever

On 18 June 2021, the Qld Government introduced the Housing Legislation Amendment Bill 2021.

The Bill sets forth the long awaited reforms of tenancy legislation which were the subject of a lengthy public consultation process.

Part of the draft reforms relate to tenants' rights regarding pets.

It was expected that Qld would follow the southern States approaches.

The Bill falls short of Victoria's keeping pets as of right approach . (The Qld Greens Private Member's Bill is closer to the Victorian model.) Further, Qld strata schemes would be entitled to use their by-laws to restrict pets which seems contrary to the position in NSW following the Cooper case.

It is not clear at this stage whether a blanket 'no pets are allowed' strata by-law will be acceptable to the Qld Government given that a landlord will be unable to use 'no pets are allowed' as grounds for refusing pets. But it seems unlikely.

Proposed Section 184E(1)(f) is quite broad. However, the days of complete strata pet bans seem over and not destined to make a return.

The Qld Government may take the view that QCAT (or an appeal court) will confirm that the use of blanket no pet by-laws in Qld strata schemes is "oppressive or unreasonable" and therefore adopt a similar approach to the NSW Court of Appeal in Cooper. In the past, strata by-laws that have prohibited pets have been ruled as oppressive and unreasonable by QCAT and, prior to that, by the CCT.

This may be the reason the Qld Government has not moved to amend the Body Corporate and Community Management Act 1997 to exclude no pet by-laws and align this Act with the prohibition on complete pet bans in Section 184D(5) of the Bill.

The Bill has been referred to the Queensland Parliament Community Support and Services Committee with a report due by 6 August 2021.

The closing date for written submissions to the Committee is 12.00pm, Tuesday 13 July 2021.

Participate in the Committee process

Housing Legislation Amendment Bill 2021

Housing Legislation Amendment Bill 2021 - Explanatory Notes

Greens Private Member's Bill - Residential Tenancies and Rooming Accommodation (Tenants’ Rights) and Other Legislation Amendment Bill 2021

Cooper v The Owners – Strata Plan No 58068 [2020] NSWCA 250

July 2021