What is land tax and how is it calculated?

Land tax is an annual levy calculated each year on property that you own.

In Australia, land tax is a state tax. Each state has its own rates of land tax, time of year it is calculated, and threshold for when it becomes applicable.

As a property owner and investor, it’s important to know what land tax is, how it is calculated and what you’ll be liable for.

Land tax in a nutshell 

Land tax is levied every year by your state or territory government on property you own. The exception is the Northern Territory, which doesn’t have a land tax.

It’s a tax charged on any land you own or co-own above a certain value threshold (this varies from state to state). It includes vacant land you’ve bought to build as well as the land on which the the house or unit you’ve bought is already built.

Land tax is levied at the end of either the financial or calendar year, depending on your state.

How is land tax calculated? 

The amount of land tax you pay is determined by the unimproved value of all property you own, unless it’s exempt. 'Unimproved value' of land generally means its market value under normal conditions. It also assumes no structural improvements have been made.

Most states charge land tax on a sliding scale. You’ll only start paying land tax once the value of your land passes the exemption threshold. You’re usually charged a base sum plus a dollar or percentage amount for every dollar of your land’s value above the threshold.

Your land’s value is usually determined by your state or local council.

New South Wales land tax

Land tax in NSW is calculated on the total value of all your taxable land above the land tax threshold (which is $755,000 in 2021). Not on each individual property value. If the combined value of your land does not exceed the threshold, no land tax is payable.

Your land tax is calculated on land you own as of 31 December in the year prior. Any changes to the land you own in the current year will affect how much you pay the next year.

Queensland land tax

Land tax is applied based on an assessment of the total taxable value of freehold land you own in Queensland.

Your land value is calculated on 30 June each year. The value of any land you own will be calculated to determine if you’ll be liable for land tax.

Different rates apply depending on this total value and what type of owner you are. You are liable when the total taxable value of your land is:

+ $350,000 or more— for, companies and trustees and superannuation funds

+ $600,000 or more—for individuals.

Victoria land tax

In Victoria you pay land tax if the total taxable value of all the land you own is $250,000 or more. It’s calculated on 31 December each year and includes land you either individually or jointly own. If any of the land you own is exempt, it’s not calculated as part of the taxable land you own. The rate of tax you pay depends on the total taxable value of all your taxable land.

Victoria has another tax called the Vacant Residential Land Tax, which shouldn’t be confused with land tax. It is different, and applies to homes in inner and middle Melbourne that were vacant for more than six months in a calendar year.

Using a land tax calculator specific to Victorian criteria can help give you an idea of what you might need to pay in land tax.

South Australia land tax

South Australia has recently undergone changes to how land tax is assessed. From the 2020-21 financial year the changes affect land owned by multiple people or in trust.

Exemption from land tax may be available depending on the use of the property and/or the owner of the property.

Land tax is calculated 30 June and takes into account ownership, value and how the land is used.

Find out about the rates and thresholds specific to South Australia. Or chat to a professional to help you navigate how it works as well as the recent changes.

Western Australia land tax

Western Australia has both a land tax and a Metropolitan Region Improvement Tax (MRIT)

Both are calculated on the total taxable value of all land held in the same ownership (excluding exempt land) at midnight on 30 June.

If you are liable to pay land tax, you may also be required to pay metropolitan region improvement tax (MRIT). MRIT is paid on property with a land tax liability. 

Find out more about exemptions, rates and how it’s calculated. And if you think you may be subject to land tax contact a property tax professional.

Tasmania land tax

Land tax in Tasmania is payable by the owner of land as at 1 July each year. Properties that are taxable include vacant land, commercial properties, rental properties and shacks. 

​​Land tax is not payable on a property which is the owner's principal place of residence or the land classified as primary production land. But you need to apply to have your property classified as one of these.

​​​​Rates you pay vary once your land value exceeds $25,000. You can find out more about the land tax rates in Tasmania from the State Revenue Office or a property tax professional.

Australian Capital Territory land tax

Land tax is assessed quarterly and based on the status of your property on four key dates: 1 July, 1 October, 1 January and 1 April each year.

In the Australian Capital Territory land tax has two components:

• Fixed charge
• Valuation charge

The fixed charge is currently $1,326.The valuation charge is calculated using the average of the property’s unimproved value over a number of years.

Find out more through the ACT Revenue Office. Or better still get some advice about how your land tax is calculated.

Are there any land tax exemptions? 

Land tax is more likely to affect investors than owner-occupiers. That’s because you usually don’t have to pay land tax on any property that is your principal place of residence.

Generally, you also won’t pay land tax on: 

• your farm, known as primary production land
• any land you own when the total value falls below the land tax threshold.

But you’ll want to check out the specific exemptions that relate to the state where your property is located.

Property tax professionals 

Understanding what expenses you might incur when purchasing property is important. Having someone who can explain things clearly and provide guidance on how to manage it, is even more important.

Kelly+Partners are property tax specialists. Book a discovery session or get in contact with your Client Director today to find out everything you need to know about land tax, how it’s calculated and how it will affect you and your cash flow.