What is land tax and how is it calculated

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Taxation
Principal & Head of Tax
December 17, 2021
10
minute read

We take a deep dive into how land tax is calculated across Australia, and what this means for your investments

There’s a lot to consider when buying property in Australia, particularly when you’re looking at an investment property. There's a range of hoops to jump through, red tape to manage—and tax to navigate.

In this article, we take a look at land tax and help you answer the question of how land tax is calculated in your specific state or territory.

Liston Newton Advisory are experts at building an investment strategy that’s customised to your goals—land tax included. Contact us today to book a strategy session with one of our experts and see how we can help you reach your financial goals.

So, what is land tax?

Land tax is an annual tax that’s charged based on the value of any land or property you own, excluding your primary place of residence. So, thankfully, you’re not expected to pay land tax on your family home.

But you do get charged land tax on things like beach houses, investment properties, offices, or shopfronts.

Land tax is charged once the value of your land exceeds a certain threshold. Specific thresholds are managed individually by each state and territory—so they can vary considerably.

The only exception is the Northern Territory, where the government doesn’t charge land tax at all.

The date of charge differs from state to state, too. In some states it can be assessed by financial year, in others it’s every calendar year.

So let’s have a look at how land tax is calculated.

How is land tax calculated?

Land is valued by local or state governments and is based on the ‘unimproved value’ of the property that you own. The ‘unimproved value’ is the value of the land only.

It’s defined as the market value of the land under standard sales conditions, without any structural improvements, properties, or similar, being made upon it.

Similar to stamp duty, it’s typically charged on a sliding scale, with each state and territory having different scales. Much like income tax rates, you get charged a base sum, then a dollar or percentage amount for each dollar over the threshold value.

Generally, though, there’s a base threshold land value for each state and territory. If your land value falls under this, then you won’t be charged land tax. Once it exceeds this value, land tax kicks in.

Land tax calculations state by state

Understanding your land tax obligations can be difficult, as what’s relevant for one state might put you in breach in another. So, how much is land tax? Here’s a summary of the land tax regulations for each state and territory.

How is land tax calculated in Victoria?

In Victoria, there are two types of land tax, General and Surcharge, which are assessed on 31 December each year. Surcharge land is that which is held within a trust.

Land tax type

Threshold

Calculation

General

$250,000.00—$599,999.99

$275 + 0.2% of the amount above the minimum threshold


$600,000.00—$999,999.99

$975 + 0.5% of the amount above the minimum threshold


$1,000,000.00—$1,799,999.99

$2975 + 0.8% of the amount above the minimum threshold

Surcharge

$25,000.00—$249,999.99

$82 + 0.375% of the amount above the minimum threshold


$250,000.00—$599,999.99

$926 + 0.575% of the amount above the minimum threshold


$600,000.00—$999,999.99

$2938 + 0.875% of the amount above the minimum threshold

How is land tax calculated in NSW?

There are two types of land tax in New South Wales, General and Premium, which are charged on 31 December each year.

Land tax type

Threshold

Calculation

General

$822,000.00

$100 + 1.6% of the amount above the minimum threshold

Premium

$5,026,000.00

$61,876 + 2% of the amount above the minimum threshold

How is land tax calculated in QLD?

In Queensland land tax is charged either at an individual rate or at a company & trust rate. It’s assessed at midnight on 30 June every year.

Land tax type

Threshold

Calculation

Individual

$600,000.00—$999,999.99

$500 + 1 cent for each $1 above the minimum threshold


$1,000,000.00—$2,999,999.99

$4,500 + 1.65 cents for each $1 above the minimum threshold


$3,000,000.00—$4,999,999.99

$37,500 + 1.25 cents for each $1 above the minimum threshold

Companies and Trusts

$350,000.00—$2,249,999.99

$1,450 + 1.7 cents for each $1 above the minimum threshold


$2,250,000.00—$4,999,999.99

$33,750 + 1.5 cents for each $1 above the minimum threshold


$5,000,000.00—$9,999,999.99

$75,000 + 2.25 cents for each $1 above the minimum threshold

How is land tax calculated in South Australia?

Land tax in South Australia is charged at either a General rate or a Trust rate and is assessed at midnight on 30 June each year.

Land tax type

Threshold

Calculation

General

$482,000.00—$773,999.99

$0.50 for every $100, or part of $100, above the minimum threshold


$774,000.00—$1,125,999.99

$1,460 + $1.25 for every $100, or part of $100, above the minimum threshold


$1,126,000.00—$1,349,999.99

$5,860 + $2.00 for every $100, or part of $100, above the minimum threshold

Trust

$25,000.00—$481,999.99

$125 + $0.50 for every $100, or part of $100, above the minimum threshold


$482,000.00—$773,999.99

$2,410 + $1.00 for every $100, or part of $100, above the minimum threshold


$774,000.00—$1,125,999.99

$5,330 + $1.75 for every $100, or part of $100, above the minimum threshold

How is land tax calculated in WA?

In Western Australia, land tax is charged at one General rate, and is assessed between October and January each year.

Land tax type

Threshold

Calculation

General

$300,001.00—$420,000.00

A flat $300 rate


$420,000.00—$1,000,000.00

$300 + 0.25 cents for each $1 above the minimum threshold


$1,000,000.00—$1,800,000.00

$1,750 + 0.90 cents for each $1 above the minimum threshold


$1,800,000.00—$5,000,000.00

$8,950 + 1.80 cents for each $1 above the minimum threshold

How is land tax calculated in Tasmania?

In Tasmania, land tax is charged at one General rate, and is assessed at midnight on 1 July every year.

Land tax type

Threshold

Calculation

General

$50,000.00—$399,999.99

$50 + 0.55% of the amount above the minimum threshold


$400,000.00 and above

$1,975 + 1.5% of the amount above the minimum threshold

How is land tax calculated in the ACT?

Land tax in the Australian Capital Territory is one of the most complex in Australia. The land tax itself is made up of two components, a fixed charge and a valuation charge.

  • There is no minimum threshold for the fixed charge.
  • The valuation charge is calculated based on a rating of the average unimproved value (AUV) over the entire year. It’s averaged over 3, 4, or 5 years, depending on the date of purchase of your property.
  • And, rather than being assessed annually, ACT land tax is assessed quarterly on 1 July, 1 October, 1 January, and 1 April each year.

Land tax type

Threshold

Calculation

Fixed Charge

$0

A flat $1,326 fee

Valuation Charge

$0.00—$150,000.00

0.54% of the property’s AUV


$150,000.00—$275,000.00

$810 + 0.64% of the property’s AUV over the minimum threshold


$275,001.00—$2,000,000.00

$1,610 plus 1.12% of the property’s AUV over the minimum threshold


$2,000,000.00 and above

$20,930 plus 1.14% of the property’s AUV over the minimum threshold

Land tax exemptions

It’s comforting to know that you’re not expected to pay land tax on your family home. Otherwise, many of us would be in serious trouble. However, companies or trusts aren’t able to access this exemption—it’s for personal use only.

This exemption also extends to a situation where a group of people own land. If one of the owners uses the land as their primary place of residence, this still means that the property is exempt.

There are several other situations in which you can be exempt from paying land tax:

  • The land is purchased with the intent of using it as your primary place of residence in the future;
  • It’s purchased from a deceased estate, up to two years following the previous owner’s death;
  • You’re unable to continue living independently, and you’re required to move to a hospital, hospice, or nursing home;
  • The land is unfit for occupation, due to damage, construction, or significant renovations;
  • If your home is occupied by a person living there free of rent;
  • It’s considered primary production land;
  • It’s owned by a charity;
  • If it’s vested in or owned by armed services personnel or their dependents;
  • If it’s leased primarily for sporting or recreational activities;
  • The land is used as a childcare facility, residential care facility, retirement facility, or facilities for people with disability;
  • The land is used as a registered caravan park; or
  • The land is used exclusively as a mine site.

The final word

As you can see, land tax can be a complex subject. But if you’re looking to own an investment property, it’s critical that you understand it and get it right.

It’s important to factor in the right calculations, to ensure you’re not falling afoul of your State Government.

Luckily, we’ve got your tax obligations covered.

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