Understanding land tax - what you need to know before you invest

If you own or co-own an investment property, a holiday house, or vacant land, and it’s not where you generally live, you may be required to pay land tax each year. The amount of tax may vary based on where the property is located, how you own it and how you use it. There are also exemptions and exceptions that may apply.  

Factors that may impact land tax

Where the land is located

Australian state and territory governments administer land tax. Land tax is calculated using the taxable value of the land you own within a state or territory in accordance with the relevant legislation. The different states and territories have different value thresholds, for example, lower value properties may not attract land tax. It’s important to research the specific rules for your state or territory to better understand potential implications of land tax and consider seeking independent financial advice.

Where you are

If you’re a foreign person who owns land in Australia, you will generally still be liable to pay land tax. In some states and territories, being a foreign person who owns land in Australia could attract a land tax surcharge, which may increase the overall costs of owning the property. 

If you’re in the fortunate position of being a foreign person who owns land in Australia with the ability to make a significant contribution to the local economy, you may be able to apply for an exemption in some states.

How you use the land

Land tax generally impacts property investors rather than owner-occupiers. This is because the following are generally exempt from land tax:

• your home, as your primary place of residence.
• your farm, as your primary production land.
• land you own with taxable value below the relevant land tax threshold.

However, land tax is generally payable on unused land, including vacant land, and land on which there is an existing investment property, or non-primary residence.

In assessing land tax, a state or territory may consider the ‘unimproved’ land value, which means the market value of the land under normal sales conditions excluding capital improvements. Talk to your tax accountant to explore any property depreciation deductions that you might be able to claim, even if you’ve only owned the land for part of the year. 

How you own the land

For land tax purposes, an owner or co-owner could include:

• a legal owner: The person on the title, or the trustee.
• an equitable owner: The beneficiaries of a fixed trust.
• a deemed owner: Grantees of life estates or Crown land lessees.

Some organisation types could be exempt from land tax. Make sure you understand land tax implications before entering into any arrangements concerning property.

Before you buy

Check land tax clearance

To protect yourself from becoming liable for a seller’s unpaid land tax, your conveyancer or solicitor may suggest you apply for a clearance certificate before buying a property. This will check whether any outstanding land tax is owed.

Researching and calculating land tax in your region

Find out more at:

ACT

Revenue ACT

New South Wales

Revenue NSW

Victoria

State Revenue Office Victoria

QLD

Queensland Revenue Office

South Australia

Revenue SA

Tasmania

State Revenue Office of Tasmania

Western Australia

WA Office of State Revenue

The Northern Territory does not impose land tax.

Get advice from someone in the know

Making a land tax assessment involves having an up-to-date knowledge of land tax legislation and the taxable value of your properties.  Because thresholds and conditions may vary between states and territories, you may wish to talk to your accountant or advisor to get an accurate picture of what land tax may be applicable.

To sum up

• Land tax is a form of property tax and is generally payable on land or property owned in Australia that isn’t your principal place of residence.
• It is levied by the state or territory that the land is in and can vary accordingly.
• It’s important to do your research and understand what land tax you may be liable for, and any exemptions or exceptions that might apply.