What is Land Tax? The Details & State Thresholds

What is Land Tax?

Land tax is an annual state-based tax charged at the end of each calendar year with each State or Territory having their own rules and thresholds. The types of properties that are covered by land tax could include residential or commercial rental properties, vacant land and holiday homes.

In NSW, the Valuer General determines the unimproved value of all land in NSW at 1 July each year.

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Land Tax exemptions - Where do they apply?

Thankfully there are several land tax exemptions that apply to owners of land, generally you do not pay land tax on:

• Your home, also known as your principal place of residence
• Farms (primary production land)
• The total value of land you own that is below the land tax threshold.

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In what ways can you own land?

You can choose to own land in a number of different ways. Revenue NSW applies Land Tax differently depending on the legal owner.

Individually, or Jointly as Tenants in Common

You are assessed on the taxable value of land based on your ownership percentage. For example, if you own 50% of an investment property, you will only be assessed on 50% of the land value of the property. Separate assessment notices will be sent for any jointly owned land.

An advantage of owning land personally is that natural people are entitled to a land tax threshold.

Companies

A companies land tax treatment is the same as an individual, unless it is related to another company.

Trust

All types of trusts will receive a land tax assessment, however not all trusts are entitled to a land tax threshold.

A discretionary trust (family trust) is not entitled to a land tax threshold and will pay tax on the total value of land the trust owns.

In general, a fixed trust (unit trust) is entitled to the land tax threshold if the deed is appropriately drafted. Once land tax is paid at the trust level, Revenue NSW will then issue a further assessment to each unit holder. The unit holders will receive a credit for any land tax already paid by the trust to avoid double taxation.

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NSW Land Tax traps

Foreign persons

If you are a foreign person who owns residential land in NSW, you are required to pay foreign owner surcharge land tax of 4% on the taxable value of all residential land you own as at midnight 31 December each year. This is in addition to any other land tax that you might have to pay.

You may be a foreign person if you are not an Australian Citizen or you have lived in Australia for less than 200 days in the 12 months prior to the taxing date on 31 December. A foreign person can be:

• An individual
• A company
• A trustee of a trust
• A beneficiary of a land tax fixed trust

If land is held in a discretionary trust, Revenue NSW will automatically assume the entity is a foreign person unless the trust deed irrevocably excludes foreign persons to be beneficiaries. This is not a typical clause that is factored in for new trust deeds. If your discretionary trust owns property you should consider having it reviewed.

Revenue NSW earlier this year have advised that citizens of some countries are no longer liable for surcharge purchaser duty or surcharge land tax. This is due to these taxes imposed by Revenue NSW being inconsistent with the international tax treaties the Federal Government has with these countries.

Individuals who are citizens of the following countries will not be charged surcharge purchase duty or surcharge land tax: New Zealand, Finland, Germany, India, Japan, Norway, Switzerland and South Africa.

Citizens of these nations who have paid one of the surcharges incorrectly can apply for a refund through Revenue NSW. Entities such as companies or trusts potentially associated with these nations should also review their circumstances.

Does a Unit Trust meet the definition of Fixed Trust?

As previously discussed, a fixed trust is eligible to receive a land tax threshold. A fixed trust includes some unit trusts and bare trusts. Per Revenue NSW and the Land Tax Management Act, to qualify as a fixed trust the trust deed must satisfy the following:

• The unit holders are presently entitled to all the income of the trust, after payment of the proper expenses incurred by the trustee in authorised administration of the trust
• The unit holders are presently entitled to the capital of the trust and may require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust
• The entitlements can’t be removed, restricted or otherwise affected by the exercising of any discretion, or by a failure to exercise any discretion, conferred on a person by the trust deed
• For unit trusts, only one class of units can be issued, and the proportion of trust capital a unit holder is entitled to on winding up or surrender of units must be fixed, and must be the same as the proportion of income of the trust to which the unit holder is entitled.

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Land Tax thresholds & calculations in each State

Land Tax rules can change year on year, some states tend to update their particular Land Tax thresholds each year so it’s important to keep on top of the changes. Below is a summary of the 2023 Land Tax thresholds for each state as well as some links to each state’s website with some additional information if you wanted to do some extra reading.

New South Wales

For additional information around NSW Land Tax refer to the Revenue NSW website.

Assessment date – Midnight on 31 December each year

Victoria

For additional information around Victorian Land Tax refer to the State Revenue Office website.

Assessment date – Midnight on 31 December each year

Queensland

For additional information around Queensland Land Tax refer to the Queensland Government website.

Assessment date – Midnight on 30 June each year

South Australia

For additional information around South Australian Land Tax refer to the Revenue South Australia website.

Assessment date – Midnight on 30 June each year

Western Australia

For more information around Western Australian Land Tax refer to the Western Australian Government website.

Assessment date – Midnight on 30 June each year.

Tasmania

For more information around Tasmanian Land Tax refer to the State Revenue Office of Tasmania website.

Assessment date – Midnight on 30 June each year

Northern Territory

Currently the Northern Territory Government does not charge land tax for land owners.

ACT

For more information around ACT Land Tax refer to the ACT Revenue Office website.

Assessment dates - Midnight on 1 July, 1 October, 1 January and 1 April each year

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What do I need to do if I own land?

Land Tax in Australia is a self-assessed tax, so if you are a land owner you will need to determine if you need to register based on the properties you own. It’s important to be on top of your obligations, as the State Revenue Offices and the ATO are regularly reviewing land title records to check to see if people are meeting their obligations.

For NSW land owners once you have registered you will receive your Land Tax Assessment in January which will outline what land you own and whether you are liable for land tax on each property. If you are a land owner in NSW and you exceed the land tax threshold for the first time on by 31 December in a given year, you will have until 31 March three months later to register.

Should anything on your land tax assessment notice seem incorrect, you have until the first payment instalment date to notify the State’s Land Tax Office of any changes which is usually at the end of February. Additionally, if you disagree with the land values in your assessment, you can submit an objection within 60 days from the issue date of your assessment.

If you are a business owner who would like some advice around your Land Tax obligations our team at BLG Business Advisers are happy to help you out. We are a Wollongong based firm but we service clients all around Australia so please feel free to talk with us.

Wishing you every success!

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*Please note that the above information is general advice only. We recommend you seek advice from a specialist relevant to your personal situation. This information is relevant at the time of publishing and is subject to change*