Land Tax: Uncovered

Like most homeowners, you may need to know that you will be liable for a land tax when purchasing an investment property. Unlike stamp duty which is the one-off amount paid when you buy a home that will be your principal place of residence (PPOR), land tax is an annual or quarterly charge that investors pay to state governments (and in the ACT) based on the value of the land they own.

Land tax is calculated on land owned or co-owned above a certain value threshold that varies across the nation. The land tax includes vacant land on which you intend to build a property.

As the threshold and rates vary state-to-state, how much you pay for land tax in Queensland will differ from South Australia.

 

What does land tax cost across Australia?

The value threshold and rates differ nationally and several other factors need to be considered, including tiers, such as general and premium thresholds, which directly impact how much land tax is charged.

 

New South Wales

Land tax doesn't apply to your PPOR, primary production land for farming or land owned below the threshold. The current threshold (general) in NSW is $969,000, calculated on the total value of all taxable land above the threshold as of 31 December each year.

If you are above this threshold, you will pay $100 plus 1.6% of the land value above the threshold.

In 2023, the premium threshold is set at $5,925,000 and is charged at $79,326 plus 2% of the land value above the threshold.

Thresholds for land values change annually.

Victoria

As in NSW, the land tax doesn't apply to your PPOR, primary production land for farming or land below the threshold.

Land tax is calculated annually on 31 December in Victoria on the total value of all taxable land above the threshold.

For example, the threshold for land tax in Victoria is a sliding scale for land valued above $300,000 or $25,000 for trusts:

●      $300,000 to < $600,000, the tax is $375 plus 0.2% for the amount above $300,000;

●      $600,000 to < $1,0000,000, the tax is; $975, plus 0.5% for the amount above $1,000,000;

●      $1,000,000 to < $1,800,000, the tax is $2,975, plus 0.8% for the amount above $1,800,000.

 
You will be liable for additional premiums for land held by a trust. You should also know surcharges apply to other landholders, including absentee owners.

Queensland

Land tax doesn't apply to your PPOR, primary production land for farming or land owned below the threshold. Unlike in Victoria and NSW, calculating land tax occurs at the end of the financial year on 30 June annually.

 Queensland's land tax operates on a sliding scale for land valued > $600,000:

●      $600,000 to < $1,000,000; $500, plus 1 cent for each $1 more than $600,000;

●      $1,000,000 to < $3,000,000; $4,500 plus 1.65 cents for each $1 more than $1,000,000.

The sliding scale applies to the aggregated land value of less than $10,000,000.

Rates vary for land held by non-individual owners, including trusts, companies, superannuation funds and foreign owners.

South Australia

As with Queensland, the land tax doesn't apply to your PPOR, primary production land for farming or land below the threshold. Land tax in SA is calculated on the financial year ending 30 June.

South Australia calculates land tax according to each parcel of land's ownership, and that land is grouped. SA's revenue office values all taxable land in ownership and assesses the land tax on the total taxable value. The land tax is allocated for each taxable parcel of land in the ownership.

The current general threshold is $534,000.

For example, if your taxable site value exceeds $534,000 but is less than $858,000, the amount of land tax is 0.50 cents for every $100 (or part of $100) above $534,000.

Western Australia

Like other mainland states, Western Australia doesn't apply land tax to a PPOR, primary production land for farming or land owned below the threshold. The land tax is calculated on the financial year ending 30 June annually.

WA has a sliding scale for land valued above $300,000, reviewed annually. For land valued above $300,000 but less than $420,000, there is a $300 flat rate.

For land valued above $420,000 but less than $1,000,000, the tax is $1,750 plus 0.90 cents for every $1 over $420,000. The sliding scale applies to the aggregated land value of less than $11,000,000.

You should note a metropolitan region improvement tax (MRIT) for all taxable land within Perth's metro area. The WA government introduced the MRIT to finance the cost of local services such as roads, parks and public facilities across Perth. This tax is charged at 0.14 per cent for every dollar over $300,000.

Tasmania

Like all other states, Tasmania doesn't charge land tax on PPOR, primary production land for farming or land owned below the land tax threshold.

Tasmania land tax is calculated on the financial year ending 30 June annually.

The current land tax threshold is $100,000.

For amounts greater than $100,000 but less than $500,000, land tax is $50 plus 0.45% of the land valued above $100,000.

For aggregated land value above $500,000, tax is $1,850 plus 1.5% of the value above $500,000.

Australian Capital Territory

Whilst the ACT doesn't apply land tax to PPOR, primary production land for farming or land owned below the threshold, it assesses it differently.

Land tax is assessed quarterly in the ACT on 1 January, 1 April, 1 July and 1 October each year.

It comprises a fixed charge of $1,462 from 1 October 2022 and a total valuation charge, calculated by applying a rating factor to the average unimproved value (AUV).

The ACT deems the AUV as the average of the property's unimproved value over the last five years.

For example, the marginal rates that apply to the property AUV:

●      Less than $150,000; 0.54% of AUV;

●      $150,000 to less than $275,000; $810, plus 0.64% of the part of the AUV above $150,000;

●      $275,000 to less than $2,000,000; $1,610, plus 1.12% of the part of the AUV above $275,000.

●      $2,000,000 and above; $20,930 plus 1.14% of the part of the AUV above $2,000,000.

Rates payable vary on land by property and usage type, including foreign ownership status.

Northern Territory

There are no land tax charges in the NT.

Can I claim a deduction for land tax?

Land tax may be deductible but depends on when the land tax liability arises under that state's legislation. Land tax is typically applied to investment and commercial properties, factories, holiday homes, and vacant and non-exempt lands.

In most states, the year the property is used determines when you are liable. If the property is rented, you can claim a tax deduction for the land tax you incurred, which the tenant did not cover.

Since 1 July 2019, you can't claim a tax deduction for vacant land.

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