If you are buying or selling a commercial property in Queensland, it is important to understand how land tax is handled under the new REIQ Contract for the Sale and Purchase of Commercial Real Estate.
This contract, effective from 1 August 2025, brings important changes that can have a very real impact on your bottom line. Land tax may not be the first thing you think about when negotiating a property deal, but the choice you make about it could mean saving or losing thousands of dollars.
A Clearer Approach to Land Tax in the New Contract
One of the most significant updates in the new REIQ Commercial Contract is how it deals with land tax. Buyers and sellers must now make an active decision about how land tax will be treated in the final settlement adjustments. The contract sets out three clear options for the parties to choose from, and if no selection is made, a default rule will apply automatically.
In the past, the standard terms did include a land tax clause, but it was inconsistently applied and often misunderstood. In many transactions, the clause was overlooked or modified in special conditions, leading to confusion, disputes, and unexpected costs at settlement. By making this decision an explicit and unavoidable part of the contract, the new approach brings clarity and consistency, allowing both sides to address land tax early and avoid costly misunderstandings later.
The Default Rule
If the parties do not actively choose one of the three available options in the contract, the default position will apply; the seller will be responsible for paying the entire year’s land tax for the year in which settlement takes place.
For buyers, this can be a significant advantage because they can take ownership partway through the year without having to contribute to that year’s land tax at all. For sellers, however, it can become a major and sometimes unexpected cost, reducing the net proceeds of the sale. If the property attracts a high rate of land tax, the financial impact can run into tens of thousands of dollars.
The Three Options and What They Mean
1. No adjustment for land tax
This option is the same as the default rule. The seller pays the land tax for the entire year and the buyer does not contribute to it. The amount is not shared based on when settlement occurs, which makes this approach simple and easy to apply. It generally benefits the buyer, as they can take ownership partway through the year without having to pay any portion of that year’s land tax.
2. Land tax adjusted on a single holding basis
Under this method, land tax is calculated as if the property being sold is the seller’s only landholding. The calculation is based on the land’s unimproved value. The annual figure is then apportioned between the buyer and seller according to the number of days each owns the property during the land tax year. This approach is often seen as fairer when the seller owns multiple properties because the buyer’s contribution is based only on the tax linked directly to the property being purchased.
3. Land tax adjusted on the seller’s actual liability
This option is based on the seller’s actual land tax assessment from the Queensland Revenue Office, which can include all properties they own. The buyer then pays a portion of that total bill based on the settlement date. Because this method factors in land tax from other properties in the seller’s portfolio, it can sometimes mean the buyer pays more than they would under the single holding method.
Why This Choice Matters
Land tax on commercial property in Queensland can be substantial, sometimes reaching tens of thousands of dollars. Choosing the wrong option, or leaving it blank without understanding the consequences, can have serious financial implications.
Sellers who fail to address it may lose the chance to recover part of the cost from the buyer. Buyers who agree to the actual bill method without understanding the calculation method could be committing to far more than intended.
Practical Guidance for Sellers
Sellers should take the time to plan ahead and decide how they want land tax to be handled before the contract is signed.
- Find out your likely land tax bill for the year of settlement.
- Decide whether you want to share or pass on some of the cost.
- Make sure that choice is made early and clearly written into the contract.
- Brief your agent so they can explain it to buyers confidently.
Practical Guidance for Buyers
Buyers should protect themselves by understanding exactly what land tax arrangement they are agreeing to before committing to the purchase.
- Check which land tax option has been chosen before signing anything.
- Understand what it means in dollar terms.
- If “actual liability” is selected, ask for details of the seller’s assessment.
- Factor the cost into your settlement budget.
The new REIQ Commercial Contract makes land tax a front-and-centre issue rather than an afterthought. It gives buyers and sellers control over how it is handled, but with that control comes the responsibility to choose wisely.
The safest approach is to get advice early, make the decision that works best for your situation, and record it clearly in the contract.
Contact Us
At Ardor Legal, we help you make sense of the fine print, avoid costly surprises, and achieve the best possible outcome for your property transaction. If you are buying or selling a commercial property in Queensland, now is the ideal time to get clear advice on how land tax will be handled. Call our team of experienced solicitors on 1800 BIZLAW or book a complimentary 15 min discovery meeting to see if we are the right fit for you.
FAQs on Land Tax in Commercial Sales
1. Who pays land tax under the new REIQ commercial contract in Queensland?
Under the default position, the seller pays the entire year’s land tax regardless of the settlement date. However, the parties can choose a different arrangement in the contract.
2. What does single property basis mean for land tax?
It means land tax is calculated as if the property being sold is the only property the seller owns, and the amount is then shared between the buyer and seller based on how long each owns it during the year.
3. How is land tax split between the buyer and seller?
The split depends on which option is chosen in the contract. It can be no adjustment, an adjustment on a single property basis, or an adjustment based on the seller’s actual total bill.
4. What happens if no land tax option is chosen in the contract?
If no option is chosen, the default applies. This means the seller is responsible for the whole year’s land tax.
5. Is it better for a buyer to agree to the actual land tax liability?
Not always. If the seller owns multiple properties, their total land tax bill can be much higher, which may mean the buyer ends up paying more. Buyers should review the seller’s assessment before agreeing to this method.
