Land Tax in Australia 2025: Everything Property Owners Need to Know
Land tax in Australia is a state-level annual charge on the unimproved value of land,
excluding primary residences. It applies to investment properties, commercial
holdings, and vacant land, with varying thresholds and rates.
Understanding where to invest money to get good returns is crucial, as strategic decisions regarding property locations can impact land tax obligations. Each state and territory has its own land tax rules, including exemptions, rates, and aggregation rules.
Foreign owners may face additional surcharges, and structuring ownership effectively can help minimise liabilities across multiple properties. For those considering the best places to buy investment property in Australia 2025, understanding land tax implications in different regions is essential.
Knowing the local regulations and tax burden can guide informed decisions for property owners to avoid penalties, manage investments, and ensure compliance. We’ll explore how to calculate liability, available exemptions, and recent regulatory changes affecting property owners.
What is Land Tax in Australia?
Land tax is an annual charge imposed by state and territory governments on the unimproved value of land owned as of a specific date—typically 31 December. It excludes buildings or dwellings on the land and generally applies to investment properties, commercial holdings, and vacant land, rather than a person’s main residence.
This tax serves two primary purposes:
Generating revenue for essential public services, such as infrastructure, health, and education
Discouraging land banking by incentivising landowners to use land productively
In 2025, land tax remains a vital revenue tool for states and territories, especially as they reduce reliance on once-dominant stamp duty. It also supports broader housing policy goals by encouraging more efficient land use and easing supply constraints.
Jurisdictional Variation
Each Australian state and territory sets its own rules for land tax, meaning thresholds, rates, exemptions, and concessions vary significantly. This decentralised system allows states to tailor their land tax regimes to local economic and housing conditions but can be confusing for property owners—especially those with holdings across multiple jurisdictions.
Why Understanding Land Tax Matters
Understanding how land tax works is important for:
Ensuring compliance and avoiding unexpected penalties
Making informed decisions when buying, selling, or holding property
Forecasting net investment returns, since land tax can materially reduce rental yields and capital gains
With property values rising and various legislative reforms unfolding, land tax is an increasingly important consideration for property investors, developers, and even small-scale landlords.
In 2025, staying across these rules isn’t just good practice—it’s essential to managing risk and maximising returns in Australia’s evolving real estate landscape.
Who Pays Land Tax?
Individuals and entities: Land tax is payable by individuals, companies, trusts, and self-managed super funds owning land above a state’s threshold.
Foreign owners: Non-resident individuals or entities often face a surcharge land tax, which adds to the base tax.
Primary residence exemption: In most states, land used as a primary residence is exempt from land tax.
Investment properties: Owners of residential investment properties, commercial land, or undeveloped blocks are commonly liable.
Trust structures: Land held in trusts (especially discretionary and unit trusts) may attract different thresholds or reporting requirements.
Ownership date: Liability is assessed based on landholdings on 31 December of the prior year.
Multiple properties: Aggregated land values across multiple properties under the same ownership are combined for tax purposes.
Land use matters: Exemptions may apply for primary production, charitable uses, or retirement villages.
Joint owners: Each party is assessed proportionally, unless treated as a single taxpayer in some jurisdictions.
Notifications required: In many states, landowners must inform revenue authorities of changes in property use to maintain exemptions.
When is Land Tax Assessed?
Land tax is assessed based on property ownership and land values as of 31 December each year. The state or territory’s revenue office then issues assessment notices in the first quarter of the new year, usually between January and March.
This process applies the land value—determined by the Valuer-General or similar authority—to the applicable threshold and tax rate to calculate the liability. It’s important to understand that the unimproved land value, not the market value or the value including buildings, is used for this purpose.
Each state has its own method for determining this valuation and applying progressive rates or flat charges depending on the total land value. If land is acquired or sold during the year, the liability typically remains with whoever owns the land as of 31 December.
For new buyers, unpaid land tax may appear in the settlement adjustment, so it’s vital to conduct due diligence and obtain a land tax clearance certificate. In some states, payment can be made in instalments, and early payment may attract small discounts.
Property owners should also be aware of aggregation rules, which can significantly impact tax bills if multiple properties are held in the same ownership name across a jurisdiction. Misunderstanding these rules can result in unexpectedly high assessments.
How Land Tax Works Across Different States
Land tax in Australia is governed at the state and territory level, meaning thresholds, rates, and exemptions differ across jurisdictions. It typically applies to investment properties, commercial land, and vacant land, with owner-occupied residences generally exempt.
In New South Wales (NSW), land tax applies above $969,000, with rates starting at 1.6% plus $100, and a 2% premium rate over $5.9 million. Foreign owners pay a 2% surcharge, and land is assessed as at 31 December.
Victoria (VIC) imposes land tax from $300,000 for individuals and $50,000 for trusts. It uses a progressive rate system and applies surcharges in 2025. Trusts must disclose to avoid default high rates.
Queensland (QLD) starts land tax at $600,000 for individuals and $350,000 for entities. A 2% surcharge applies to foreign owners. Land is assessed as at 30 June, and aggregation rules apply under Landholder provisions.
Western Australia (WA) taxes land above $300,000, with rates up to 2.67%. The principal residence is exempt, and properties are aggregated. Assessments are based on 30 June land values.
In South Australia (SA), the threshold is $482,000, with rates up to 2.4%. It enforces strict aggregation of related landholdings, but relief may apply to small investors.
Tasmania (TAS) imposes land tax above $50,000, with rates from 0.55% to 1.5%. Principal residences are exempt, and some concessions exist for primary producers.
The ACT applies land tax to all investment properties, with no threshold. It uses fixed and marginal rates, mainly targeting rental and leased properties.
The Northern Territory (NT) does not levy land tax as of 2025.
Land Tax Thresholds and Rates
How Thresholds are Determined
Land tax thresholds represent the minimum total land value above which landowners are liable to pay land tax. These thresholds are set by individual states and territories and are reviewed annually based on changes in land values, inflation, and fiscal strategy. Only the unimproved land value is considered when determining whether the threshold is met.
In 2025, the thresholds differ significantly: $969,000 in NSW, $300,000 in Victoria, and $600,000 in Queensland for individual owners. Thresholds are often lower for trusts and foreign owners, increasing their exposure to tax.
Most jurisdictions apply aggregation rules, meaning all taxable land held under a single ownership is combined for assessment. This mechanism ensures that large landholders pay progressively more, while smaller landowners may remain below the threshold.
Progressive Rate Structures
Impact of Aggregate Landholdings
Aggregation rules combine land values across all properties held by the same owner or related entities within a state. This increases the chance of exceeding the threshold and entering higher tax brackets.
Entities like trusts and companies are not automatically separated for assessment. If there’s common control or shared beneficiaries, their land values may be grouped under aggregation provisions.
Different states apply aggregation differently. South Australia and Queensland are known for their strict enforcement, often including land held by family members or controlled structures.
Undisclosed ownership links can lead to reassessments and penalties. It’s essential for property investors to correctly declare ownership structures and update changes with state revenue offices.
Strategic structuring and expert advice can help manage aggregation risks. For investors, understanding how different holdings interact under tax law is critical to maintaining tax efficiency.
Land Tax Exemptions and Concessions
Principal Place of Residence
Owners who live in their property as a principal place of residence (PPR) generally qualify for a full land‑tax exemption. In NSW, the PPR exemption requires at least 25 percent ownership and applies only to one property worldwide Revenue NSW.
Victoria allows exemption while the home is occupied, underpinned by proof such as driver’s licence or utility bills by the State Revenue Office. Queensland exempts the one home you occupy as at 30 June each year; any other property is assessed if the total land value exceeds the threshold Queensland Revenue Office.
WA continues the exemption while you reside there, but you must notify RevenueWA upon any change of use Western Australian Government. In TAS and SA, similar residency tests apply, and the ACT exempts owner‑occupied dwellings automatically under its no‑threshold model.
Primary Production Land
Eligibility: Land used predominantly for agricultural activities—grazing, cropping or horticulture—qualifies if it meets income or land‑use tests.
Valuation basis: Only unimproved value counts; farm buildings are ignored.
Threshold relief: Many states entirely exempt qualifying primary production land, even when overall holdings exceed general thresholds.
Proof requirements: Annual declarations or financial statements demonstrating agricultural use or income may be required.
Transitional relief: Some jurisdictions grant temporary concessions during land‑use changes (e.g., converting from grazing to cropping).
Charitable Institutions and Non‑Profits
Registered charities, religious bodies, educational institutions and certain non‑profit organisations can obtain land‑tax exemption or significant concessions if the land is used for their charitable purpose.
In Victoria, charities must apply annually and demonstrate ongoing use for eligible activities State Revenue Office. NSW extends exemptions to property used for “benevolent purposes,” including low‑cost rental housing operated by not‑for‑profit providers Revenue NSW.
Queensland and WA similarly exempt land held by charities, but require formal registration and periodic renewal. The ACT and TAS permit exemptions where land supports community services, while SA also offers rebates for non‑profits delivering social housing.
Incorrect claims can trigger back‑tax, interest and penalties, so organisations often engage specialist advisors to maintain compliance.
How to Calculate Your Land Tax Liability
Step-by-Step Calculation Example
Calculating your land tax liability involves a few key steps: determining the unimproved land value, applying the correct threshold for your state, and calculating the rate based on that value.
Obtain the unimproved land value: This value is set by the Valuer-General or relevant authority in each state. It excludes any improvements, such as buildings, and reflects the value of the land alone.
Check the applicable threshold: Each state has a different threshold, and land tax is only applicable if the total land value exceeds that threshold. For instance, in NSW, the threshold is $969,000 for individuals, meaning land tax is only payable if your land value surpasses this amount.
Apply the tax rate: Once your land value exceeds the threshold, a progressive rate applies. For example, in NSW, the rate starts at 1.6% for land over the threshold and increases as the total land value rises.
Consider aggregation: If you own multiple properties, their land values are combined for tax purposes. In NSW, the aggregation rules mean that landholdings under separate titles but owned by the same person will be aggregated, pushing the value into a higher tax bracket.
Calculate the final liability: Multiply the portion of your land value above the threshold by the applicable rate. For example, if your land is valued at $1.5 million in NSW, you subtract the threshold of $969,000 and apply the 1.6% rate to the $531,000 excess.
Online Tools and State Calculators
State revenue offices provide online calculators to estimate land tax liability based on current thresholds and tax rates.
Land value certificates can be obtained for specific properties, helping investors or homeowners clarify their tax obligations.
Some states, such as NSW, allow for online account management to track and pay land tax liabilities.
Tax advisors can assist in calculating more complex land tax scenarios, especially for property portfolios with multiple holdings or trusts.
Ensure to verify the land’s unimproved value through the official state sources, as this will directly influence your tax liability.
Star Investment’s Land Tax Calculator lets you model different ownership structures, thresholds and surcharge scenarios in one place, providing tailored liability estimates for complex portfolios.
Common Mistakes to Avoid
One common mistake when calculating land tax is underestimating the total land value due to inaccurate valuations or failure to aggregate properties correctly.
Property owners sometimes overlook the threshold rules, especially when owning land in multiple states or through trust structures.
Another pitfall is failing to keep track of exemptions and concessions, such as for primary residences or land used for farming, which can reduce taxable land value.
Lastly, neglecting to file on time can result in late fees and penalties, so it’s essential to stay updated on deadlines.
Landowners should regularly review their properties and ensure they’re applying the correct thresholds and tax rates to avoid surprises when assessments arrive.
Land Tax for Investors and Property Owners
Impacts on Investment Returns
Land tax directly reduces net rental yields and overall investment returns. When calculating expected yields, investors must subtract annual land tax from gross rental income. For example, an investment property in Victoria valued at $500,000 with a 1.2% land tax rate would incur $6,000 in tax, reducing a 4% gross yield to approximately 2.8% net yield.
Over time, rising land values push more properties above thresholds, increasing tax bills. This can affect decisions on borrowing, property selection, and hold periods. Savvy investors forecast land tax liabilities when modeling cash flows and factor potential threshold changes and surcharges into long‑term strategies to maintain desired return on investment.
Land Tax Planning Strategies
Ownership structuring: Use separate entities (individuals vs. trusts) to leverage different thresholds and rates, while complying with aggregation rules.
Timing of acquisitions: Acquire property just after the valuation date to delay first land tax assessment by nearly a year.
Utilising exemptions: Convert eligible investment properties to primary residences or farm use to access exemptions.
Threshold management: Sell or transfer marginal land holdings to stay below higher rate bands, especially before threshold changes.
Reviewing valuations: Lodge objections if land valuations appear excessive, potentially reducing taxable value and tax liability.
Ownership Structures and Aggregation
Different ownership structures—such as individual names, companies, discretionary trusts, and self‑managed super funds—face varying thresholds and tax rates. Trusts often have lower thresholds, making them liable sooner, but may access special concessions.
Companies pay at the same rates but can pool land values across shareholders. Self‑managed super funds (SMSFs) generally pay trust rates; however, land held within an SMSF may benefit from additional concessions if used for business real property.
Aggregation rules can combine land values across structures under common control, so splitting ownership must be carefully planned. Professional advice ensures compliance while minimising overall land tax exposure through optimal structuring.
Land Tax and Foreign Owners
Surcharge Land Tax
In Australia, foreign property owners are often subject to a surcharge land tax, which increases their tax liability on top of the standard rates. Several states, including NSW, VIC, and QLD, apply surcharges specifically for foreign individuals or entities.
These surcharges were introduced to curb speculative foreign investment in the residential property market and increase the availability of housing for domestic buyers.
For example, in NSW, foreign owners face a 2% surcharge, which is applied to the base land tax amount, making land tax substantially higher than for domestic landholders.
Victoria applies a similar surcharge on foreign individuals and companies, while Queensland has introduced a 2% foreign landholder surcharge that applies in addition to the standard land tax rates.
In some states, the definition of foreign owners includes individuals or companies that are not Australian citizens or permanent residents, as well as foreign-controlled entities or trusts. These surcharges can make property ownership more costly, especially in high-value markets, and have a substantial impact on the investment return for foreign landowners.
Disclosure Requirements
Foreign owners must declare their status when purchasing property to avoid penalties or back taxes.
Annual declarations are required for foreign-owned properties, confirming foreign ownership status.
Self-managed super funds (SMSFs) with foreign control may face additional scrutiny under these rules.
Foreign individuals and entities must file separate returns, ensuring full compliance with surcharge regulations.
Failure to disclose foreign ownership can lead to heavy penalties, including the imposition of backdated taxes.
Changes in Recent Legislation
In recent years, several states have introduced changes to foreign ownership tax rules, tightening compliance and increasing surcharges to address growing concerns over property affordability.
For instance, Queensland and Victoria have revised their surcharge rates to 2%, up from 1.5% in earlier years, and extended them to more types of property beyond just residential dwellings.
Additionally, some jurisdictions have implemented more stringent monitoring and enforcement mechanisms. NSW has been proactive in enforcing compliance through audits and penalties for incorrect declarations, with the goal of capturing more revenue from foreign owners.
These changes make it increasingly important for foreign property owners to stay informed about local land tax laws and keep up with the ongoing legislative adjustments.
Foreign owners must also be aware that changes in their residency status can trigger land tax liability adjustments. If a foreign owner becomes an Australian resident or vice versa, their land tax surcharge could increase or decrease accordingly, depending on the rules in place at the time.
How to Manage and Minimise Land Tax
Structuring Property Ownership
One of the most effective ways to manage land tax is through careful structuring of property ownership. Holding properties in different ownership vehicles—such as individuals, joint tenants, companies, or trusts—allows you to utilise multiple thresholds and potentially reduce aggregated values in any one entity.
For example, splitting holdings between spouses or adult children (each with their own threshold) can lower total taxable value per owner. However, each state’s aggregation rules must be considered: entities under common control may still be combined.
Professional advice is crucial to ensure that any restructuring complies with state regulations, avoids unintended aggregation, and does not trigger capital gains or stamp duty events that could offset the tax benefits.
Using Trusts and Companies
Discretionary trusts can distribute land value among beneficiaries, each with separate thresholds, reducing tax in the trust itself.
Unit trusts allow multiple investors to share land value; individual unitholders may use personal thresholds.
Company structures face a single corporate threshold, but profits can be retained or distributed tax‑effectively.
Self‑managed super funds (SMSFs) may access special thresholds and concessional treatment if land is used for business real property.
Beware of attribution: aggregation rules can capture related trusts or companies if control or beneficial interest tests are met.
Penalties, Disputes and Compliance
Late Payment Penalties
Failure to pay land tax on time can result in significant penalties and interest charges. Most states impose a late payment fee if the tax is not settled by the due date, which is typically within 30 to 90 days of the assessment notice.
In addition to the base penalty, interest is often charged on any outstanding amount, compounding daily or monthly depending on the jurisdiction. For instance, NSW applies a 1% per month interest rate on overdue land tax, which can quickly escalate liabilities.
In some cases, failure to pay may lead to legal action, including property liens or forced sales to recover outstanding taxes.To avoid penalties, landowners must stay aware of the specific due dates in their state and set reminders for timely payment.
Many states allow payment in instalments, providing some relief for large liabilities, but missing any scheduled payment can still lead to additional charges.
How to Lodge a Dispute
Dispute process: Most states allow property owners to lodge disputes if they believe their land tax assessment is incorrect.
File a formal objection: Disputes typically require a written objection, outlining why the assessment is wrong, with supporting evidence (e.g., incorrect land value or aggregation errors).
Timeframes: Disputes must be lodged within a set period, usually 60–90 days from the notice date, so timely action is critical.
Review options: Revenue offices review disputes, and in some states, you may be entitled to a second review or independent appeals process.
Keep records: Ensure proper documentation and evidence are maintained, including valuation reports, ownership records, and correspondence.
Audit and Review Process
State revenue offices actively monitor and review land tax returns to ensure compliance. If discrepancies or concerns are detected, they may initiate an audit, requesting additional documentation and clarifications.
Landowners can expect a thorough review of land values, ownership structures, and eligibility for exemptions or concessions. To avoid audits, it’s essential to maintain accurate and up‑to‑date records, file returns on time, and promptly report any changes in land use or ownership.
In the event of an audit, cooperating with revenue authorities and addressing their concerns promptly can often resolve the matter without further penalties.
Landowners who suspect an error in their land tax assessment should take immediate action by contacting the relevant authorities or seeking professional assistance. Early intervention can prevent an audit from escalating into more serious issues or backdated assessments.
Recent Changes and Future Outlook
Recent Legislative Updates
In recent years, several states have implemented significant reforms to land tax legislation to address rising property values, increase tax fairness, and adapt to evolving economic conditions.
Notably, NSW and Victoria introduced surcharge increases for foreign owners in 2025, raising the surcharge to 2% to cool speculative foreign investment.
Additionally, Queensland has increased its landholder surcharge for foreign investors, while other states like South Australia and Western Australia have focused on streamlining aggregation rules and enhancing compliance mechanisms.
Several states have also moved towards digitalisation of land tax processes, providing online calculators, automated assessments, and enhanced reporting features.
This has made it easier for landowners to manage their land tax liabilities, check valuations, and track exemptions.
The ACT has taken the lead by eliminating the threshold for land tax entirely, simplifying the system but increasing the tax burden on property investors.
State Budget Implications
State budgets heavily rely on land tax revenue, leading to periodic threshold adjustments to ensure revenue targets are met.
Tax reforms may be proposed in the upcoming state budgets to address affordability and investment growth.
Changes in tax rates and exemptions are often tied to broader economic goals, such as housing supply, fiscal health, or environmental sustainability.
Increased focus on foreign investment surcharges reflects national and state efforts to make housing more accessible to residents.
Budgetary shortfalls may lead to higher surcharges or revised assessment methods in the future.
Possible Reforms in the Pipeline
Looking ahead, there are growing discussions across Australian states about consolidating land tax systems into a more uniform approach, aiming for interstate consistency in how land tax is assessed and administered. This would simplify compliance for property owners with land across multiple states and address concerns about double taxation.
Additionally, some states are considering land tax reductions or exemptions for environmentally sustainable land use or affordable housing projects. There is also potential for further surcharge increases for foreign investors and speculative property holdings as part of broader efforts to manage the housing crisis.
As property values continue to rise and fiscal pressures increase, land tax is expected to remain a key source of state revenue. Keeping up with potential legislative reforms is crucial for property owners, as changes could affect both liabilities and opportunities.
Originally Published: https://www.starinvestment.com.au/land-tax-guide-australia-2025/
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