Property tax in Queensland turns on a few decisions made before contracts are signed: whether you are a developer or an investor, which entity buys the land, whether the margin scheme is in the contract, and who the beneficiaries of your trust are. Get those right and the rest is administration. We work with small-scale developers, builder-developers, investors and SMSF trustees across Brisbane, Logan and the growth corridors.
The first thing we ask anyone who buys land in Brisbane is what they intend to do with it, because the answer sets the tax treatment for the whole project.
02A development should almost never run through the entity that holds your other assets.
03GST is the tax most small developers get wrong, and the margin scheme is the main reason.
04Queensland land tax is assessed each 30 June on the total taxable value of land held in the state, with separate thresholds and rates for individuals, companies, trusts and absentees.
The first thing we ask anyone who buys land in Brisbane is what they intend to do with it, because the answer sets the tax treatment for the whole project. Someone who buys to hold and rent is an investor. Their rent is income, their eventual sale is a capital gain with a possible discount, and their interest and depreciation are deductible against rent. Someone who buys to subdivide, build and sell is carrying on a business or a profit-making scheme. Their sale is ordinary income with no discount, and GST applies.
The ATO decides this on the facts: the intention at purchase, the finance, the scale, the documents and what actually happened. An investor who changes their mind halfway and develops can find the property shifts from capital to revenue account at that point. A small-scale developer who claims the capital gains discount on a dual occupancy they always planned to sell is an audit waiting to happen.
We document the intention at the start, set the structure and the books to match, and make sure the GST, income tax and land tax treatments all tell the same story. Changing the story later is possible, but it costs more.
A development should almost never run through the entity that holds your other assets. The standard approach is a special purpose vehicle for each project, usually a company or a unit trust with a corporate trustee, so that a dispute, a defect claim or a lender's default on one site cannot reach the others. Lenders expect it, and joint venture partners insist on it.
Where two or more parties bring land, money and skill together, the choice between a unit trust, a company with a shareholders agreement, or an unincorporated joint venture affects who pays tax on what, how losses are used, how GST is accounted for and how a partner exits. We model each before the contract is drafted, and we work alongside the solicitor so the tax and legal documents agree.
Builders who also develop face an extra layer. The building company is a licensed QBCC entity with minimum financial requirements, and tying up its capital in a land deal can breach those requirements. Keeping the construction business and the development vehicle separate protects the licence as well as the assets.
GST is the tax most small developers get wrong, and the margin scheme is the main reason. On a normal sale, GST is one eleventh of the price. Under the margin scheme, GST is one eleventh of the margin between what you paid for the land and what you sell it for. On a site bought from a private owner who did not charge GST, that difference can be worth a large part of the profit.
The scheme has conditions. The purchase has to have been eligible, the parties have to agree in writing before settlement, and the valuation rules for land held before GST began are specific. If the contract does not include the margin scheme agreement, it generally cannot be applied later. Since GST withholding at settlement was introduced for new residential premises, the purchaser's conveyancer pays the GST to the ATO directly, and the developer needs the notification right or the cash flow is a surprise.
On the cost side, GST on construction, consultants and land can be claimed as input tax credits through the build, which often puts the developer in a refund position on the BAS for a year or more. We lodge monthly where it helps the cash flow and keep the apportionment right when a project includes residential rental, which is input taxed.
Queensland land tax is assessed each 30 June on the total taxable value of land held in the state, with separate thresholds and rates for individuals, companies, trusts and absentees. The thresholds and rates change, so we check the current position each year rather than quote one. A single property might fall under the threshold while a second one pushes the total over it, and holding properties in different entities can change the outcome, though the Queensland Revenue Office looks closely at arrangements set up only for that purpose.
Transfer duty is payable on acquisition and is a real cost in the feasibility. Foreign persons, which can include a trust with a foreign beneficiary or a company with foreign shareholders, face additional foreign acquirer duty, a land tax surcharge and Foreign Investment Review Board approval requirements for residential land. A discretionary trust whose deed does not exclude foreign beneficiaries can be caught by accident, and we review deeds for exactly that.
Holding costs during a development, including interest, rates, land tax and insurance, are generally capitalised into the cost of the project for a developer rather than deducted as they fall, and vacant land held by an investor has its own deduction restrictions. The feasibility should carry them at full weight.
For investors, the day-to-day accounting is about what is deductible against rent and what adds to the cost base instead. Interest, agent fees, repairs, insurance, rates and body corporate levies are deductible. Improvements, initial repairs and borrowing costs are treated differently. A quantity surveyor's depreciation schedule turns the building and its fittings into an annual deduction that most owners of newer properties underclaim without one.
Negative gearing means the property's deductions exceed its rent, and the loss offsets other income. It is a cash loss first and a tax benefit second, and it only works if the capital growth eventually exceeds the accumulated losses. We run that calculation honestly before a purchase rather than after.
The main residence exemption removes capital gains tax on your home, but it has edges. Renting the home out, running a business from it, owning two homes during a move, or subdividing the backyard all affect it. The six-year absence rule helps some owners and traps others. We work through the facts before contracts are signed, because the choices made then decide the tax years later.
A feasibility is only as good as the numbers underneath it, and most small developers are too optimistic on three lines: construction cost, time, and the selling price at the end. We stress-test feasibilities for an interest rate rise, a six-month delay and a price fall, and we add the tax, GST and duty lines that spreadsheets from the internet leave out.
Lenders want a credible feasibility, a clean structure, pre-sales where required and a sponsor with evidence of capacity. We prepare the financial information for the bank or private lender and keep the project's books in a form that supports progress drawdowns. For investors acquiring several properties, we track the whole portfolio's cash flow, land tax position and loan structure in one place, so the next purchase is a decision rather than a reaction.
A self-managed super fund can hold property, including business premises leased back to your own company at market rent. Residential property can be held too, provided no member or relative lives in it. Where the fund borrows to buy, it must use a limited recourse borrowing arrangement, with the property held in a separate bare trust and the lender's rights limited to that asset. The rules are strict, the set-up order matters, and a fund that gets it wrong can be made non-complying.
Development inside an SMSF is a different matter. Borrowed funds cannot be used to improve an asset, and a fund that develops and sells can be seen to be running a business. We help trustees understand what the fund can and cannot do before a contract is signed, and our SMSF accounting team handles the annual compliance, audit and valuation requirements that come with holding property in super.
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An investor buys to hold and earn rent. Their sale is taxed as a capital gain, often with the fifty per cent discount, and GST usually does not apply. A developer buys to improve and sell. Their profit is ordinary income with no discount, GST applies to the sale and holding costs are capitalised. The ATO decides based on your intention and conduct, so it should be documented from the start.
Most small developments run through a separate entity set up just for that project, usually a company or a unit trust with a corporate trustee. This keeps the risk away from your home, your other investments and any building business you own. Where partners are involved, the choice between a unit trust, a company and a joint venture depends on how profits, losses and exits should be shared, so we model it first.
Yes, through a limited recourse borrowing arrangement. The property is held in a separate bare trust, the lender's rights are limited to that property, and the fund cannot use borrowed money to improve or develop it. Members and relatives cannot live in a residential property the fund owns. The documents must be set up in the correct order before contracts are exchanged, so get advice first.
Under the margin scheme, GST on the sale is one eleventh of the margin between your purchase price and your sale price, rather than one eleventh of the full sale price. It can save a large amount when the land was bought from a seller who did not charge GST. The buyer and seller must agree in writing before settlement, and the original purchase must have been eligible, so the contract wording matters.
Land tax applies when the total taxable value of all the land you own in Queensland at 30 June exceeds the threshold for your type of owner. Individuals, companies, trusts and absentees each have different thresholds and rates, and those change over time. Your home is generally exempt. We check your position each year and consider how the entity holding each property affects the result.
Usually yes on the subdivided lot, because the main residence exemption only covers the land your home sits on and a sale of vacant land is not a sale of your home. If you build and sell with a profit-making intention, the ATO may treat it as income rather than a capital gain, and GST may apply. The treatment depends on your intention and the scale, so talk to us before you lodge the plan.
