Land tax is an annual state or territory tax imposed on the unimproved value of land you own.Â
It is calculated based on the value of the land, not including any buildings or improvements on it. Unlike income tax, land tax is a liability that accrues each year as long as you own land above a certain value threshold.
Each state or territory sets its own minimum thresholds and progressive tax rates, which can vary widely and are adjusted often, so it is important to remain aware of the differences and how they may impact your property investment decisions and analysis.
How Land Tax Is Calculated
1.
The Valuer General for each state assesses the unimproved value of all land within a state or territory on an annual basis.
- For units, the land tax is calculated on the apportioned share of the total land, often resulting in a lower tax burden.
2.
Land tax is determined by applying the relevant state’s progressive rates to the unimproved value of your land over the exemption threshold.
- For example, if your state’s threshold is $300,000 and your land is valued at $500,000, you’d be taxed on the excess $200,000 at the specified rate.
3.
Land tax is then apportioned to account to joint ownership, as outlined in Lesson 2.
4.
Any relevant exemptions are applied.
Exemptions
Land tax exemptions differ by state or territory, but typically include:
- Principal Place of Residence: Your main home is usually exempt from land tax.
- Primary Production Land: Farmland used for agricultural activities often qualifies for an exemption.
- Charitable Organisations: Properties owned by certain registered charities may be exempt from land tax.
- Other Specific Exemptions: Some states provide exemptions for properties used for specific purposes, such as retirement villages or aged care facilities.
Official Land Tax Calculators:
- NSW: Land tax calculator
- QLD: Land Tax Estimator
- VIC: Land Tax Calculator
- SA: 2023-24 General Land Tax Rates Calculator | RevenueSA
- ACT: Home
- WA: Online Services Portal
- TAS: Land tax calculator | State Revenue Office Tasmania
- NT: No Land Tax
Example:
Consider someone who owns an investment property in a state where the land tax threshold is $300,000. If the unimproved value of his land is $500,000, only $200,000 is subject to land tax.
- Suppose the state applies a flat tax rate of 1.5% on the excess value.
- Their annual land tax liability would be: $200,000×1.5%=$200,000×1.5%=$3,000
If they co-own the property with a partner on a 50/50 basis, each person would be responsible for half of the $3,000, resulting in $1,500 each per year.
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If they also owned another property in a different state, and the unimproved value of that property is below the land tax threshold in that state, they will not be charged land tax on the 2nd property. Whereas, if the 2nd property were located in the same state, then 100% of the unimproved land value would be subject to land tax as they have already exceeded the minimum threshold.
Planning for Land Tax
Effective strategic planning can help you manage your land tax liabilities. Consider these approaches:
- Structuring Ownership: Organise your investments by holding properties in different entities or trusts to optimise your overall tax position.
- Portfolio Diversification: Spread your investments across various states or property types to mitigate the impact of differing land tax rates.
This content is based on information obtained from sources believed to be reliable and accurate at the time of publication, but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no ongoing obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice, and do not constitute financial product advice.
We do not provide tax agent services. The information provided in this article should not be relied upon to satisfy liabilities or obligations that arise, or could arise, under a taxation law or to claim entitlements that arise, or could arise, under a taxation law. You should seek professional tax advice to understand your tax liabilities, obligations and entitlements.Â
