When purchasing property in Queensland, buyers are often surprised by how many legal and financial disclosures appear in the contract. One of the most misunderstood sections is the Land Tax section of the REIQ Contract, specifically the boxes asking whether the buyer agrees that land tax will be adjusted at settlement.
This may look like a simple checkbox, but ticking Box 2 or Box 3 without proper legal advice can expose a buyer to significant unexpected costs and, in some cases, thousands of dollars in land tax liability.
Here’s why you should pause before ticking anything other than Box 1.
Understanding Land Tax in Queensland
Land tax is a state-based tax charged annually on landowners who hold property above certain thresholds. While many owner-occupiers never deal with land tax, investors and purchasers of higher-value property often do.
Most importantly, land tax is assessed on the seller, for their ownership period up to 30 June each year.
Under the standard REIQ contract, buyers are not required to contribute to the seller’s land tax unless the contract expressly provides otherwise. That is where these checkboxes come in.
What Do the Boxes Actually Mean?
✔ Box 1 – Buyer Does Not Agree to Pay Land Tax (Safe Option)
If Box 1 is selected:
- The seller remains responsible for all land tax up to settlement.
- The buyer does not contribute to any land tax liabilities.
- This is the position most favourable to buyers.
⚠ Box 2 – Buyer Agrees to Pay Land Tax Adjustment (High Risk)
Box 2 means the buyer agrees to contribute to land tax calculated as if the property being purchased were the seller’s ONLY land in Queensland.
This amount is usually lower than the seller’s real assessment — but it is still money the buyer is not legally required to pay.
Why Box 2 is risky:
- Buyer subsidises the seller’s tax obligation.
- Buyer pays land tax even if they personally would NOT be liable after settlement.
- Buyer contributes despite having no visibility into how the adjustment is calculated.
- It may create financing complications because lenders do not like unverified settlement adjustments.
⚠ Box 3 – Land Tax Adjustment Applies Regardless of Assessment (Very High Risk)
Box 3 is the most dangerous option.
If Box 3 is ticked, the buyer agrees to contribute to the seller’s ACTUAL land tax assessment — which is based on:
- all property the seller owns in Queensland
- aggregated taxable value
- whether the seller owns property personally, through trusts, or companies
- whether the seller owns multiple investment properties
- any premium or absentee surcharges
Why Box 3 is the most financially dangerous:
- The seller’s land tax bill may be tens of thousands of dollars.
- The buyer must contribute even though the tax relates to other properties the seller owns.
- The buyer may be forced to contribute to land tax even if they will personally pay no land tax after settlement.
- Buyers do not have access to the seller’s private landholding information.
- Settlement disputes are common because the amount is unknown until the seller provides their assessment.
Why Ticking Box 2 or 3 Can Be Dangerous
1. You may be paying tax the seller should have paid
Land tax is the seller’s statutory obligation. By agreeing to an adjustment, the buyer can end up effectively subsidising the seller.
2. Adjustments can be thousands of dollars
It is not uncommon for Queensland land tax bills to exceed:
- $5,000 for mid-range investment properties
- $15,000–$40,000 for higher-value or multi-lot holdings
Buyers often have no idea of the seller’s wider holdings, which influence the assessment.
3. These boxes override the default legal position
Under Queensland property law, buyers do not pay land tax unless the contract expressly requires it.
Ticking Box 2 or 3 alters this legal default.
4. Land tax has no connection to your future liability
Even if the buyer plans to use the property as their principal place of residence (and therefore qualify for an exemption), this does not change their liability under the contract once Box 2 or 3 is selected.
5. It can complicate financing
Banks may refuse to include estimated land tax liability in settlement financials. This can cause avoidable delays and even put the buyer in breach.
When Might a Buyer Ever Tick Box 2 or 3?
There are rare situations where a buyer might agree to a land tax adjustment, including:
- Negotiated commercial transactions
- Situations where the buyer is receiving another financial benefit
- Certain off-market or developer deals
Even in these limited circumstances, proper legal advice is essential.
Key Takeaway
Never tick Box 2 or Box 3 without legal advice.
Land tax adjustments are not standard, not unavoidable, and not a mere formality. For most Queensland buyers, they represent an unnecessary and sometimes significant financial risk.
Need Contract Advice Before You Sign?
ALF Lawyers specialises in Queensland property law and provides comprehensive contract reviews to ensure your rights and finances are protected from the very beginning.
If you want peace of mind before signing, contact our team for expert advice.
