Queensland is emerging as a much more attractive place to do business than New South Wales, with the ‘Smart State’ boasting significantly less duties and taxes than its southern counterpart, says a Gold Coast solicitor.

Hickey Lawyers partner Allan Mitnovetsky, who works for clients undertaking transactions in both states, said additional charges in NSW meant it often cost considerably more to do business in NSW than it did over the border on the Gold Coast.

Recent changes to legislation introduced in the NSW Mini Budget, which was released late last year, highlighted the substantial differences in duties between the two states.
 
“Those doing business on the NSW side of the border are often forced to pay considerably more taxes than in Queensland, which is a huge burden especially given the current financial climate,” said Mr Mitnovetsky.

“Some examples of taxes that exist in NSW but not Queensland include share duty, payable on the sale of shares in a company incorporated in NSW; the cost of declaring a trust, $500 in NSW; and nominal duty on documents, up to $50 in NSW.

“While mortgage duty was fully abolished in Queensland in July last year, in NSW it will still apply until July 2012 to mortgages secured by property used for commercial purposes, including property development sites.

“Several taxes are also higher in NSW including the standard rate of transfer duty for a property purchase over $1 million, which, in NSW, is $40,490 plus $5.50 for every $100 compared to $38,175 and $5.25 for every $100 in Queensland.

“Land tax in NSW is $29,920 plus 2 per cent of the amount in excess of $2.25 million, whereas in Queensland it is 1.5 per cent of the total value where the unimproved land value is $2.25 million and above.”

Mr Mitnovetsky said land rich duty in NSW would be replaced by ‘land holder’ duty as of July 1, 2009.

“At present, land rich duty applies to the purchase of a significant interest in a private company or trust that owns land in NSW where the total value of its land is $2 million dollars or more,” he said.

“Currently, for ‘land rich duty’ to apply, the private company or trust must have land representing 60 per cent (‘the land rich threshold’) or more of the value of all its property.

“Under the new regime, the land rich threshold is to be removed so that duty will apply whenever the entity holds, whether directly or indirectly, interests in land in NSW with a value of $2 million or more.  Duty will be calculated on the gross value of land in NSW.

“These changes are expected to capture a much broader group of private companies and trusts, for example the sale of a trading entity which owns its premises may attract duty as the value of its non-land assets, such as stock and trade, will no longer be taken into account when assessing whether or not the duty applies. 

“The NSW Government is still to consult industry regarding this proposed change as its affect may be significant.” 

Mr Mitnovetsky said the vast differences between the taxes charged in the two states made it much more appealing to do business in Queensland than NSW.

“These taxes have a significant impact on industry and business, with many of the taxes relating to the purchase and refinance of sizeable tracts of land or shares in large companies,” he said.

“As such, in the current climate especially with companies looking to minimise costs, businesses are increasingly looking, where possible, to do business in Queensland.”