Understanding Land Tax in Australia
If you own property in Australia, it’s important to stay updated on the rules and regulations each state government enforces. As your property portfolio grows, you might have to pay Land Tax, which varies by state. Recently, property values have risen significantly, causing headaches for many Australian property investors, especially as tax deadlines approach in some states.
What is Land Tax?
Land tax is a tax calculated on the total value of all the land you own, except for your primary residence. In Australia, land tax is estimated and collected yearly or weekly if you live in the Australian Capital Territory. Since land tax is only on land value, many investors buy units with lower land values to reduce their tax payments.
The amount you pay for land tax is determined by your council. Tax rates, valuation procedures, and payment schedules can vary by council. Your land tax helps fund community services like infrastructure (roads, bridges, parks), health and safety (immunization, pest control), and other initiatives (libraries, community events, tree planting).
If you own a few properties, paying land tax might not be a big deal. But if you own a lot of properties, the land tax can be quite expensive.
Who Pays Land Tax?
You might have to pay land tax if you own or co-own:
- Rural land, vacant land
- Land with a home, residential unit, or flat
- A holiday home
- Investment property
- Company title units
- Commercial or residential units, including car spaces
- Commercial properties
- Land leased from local or state government
You may also have to pay land tax if:
- You are considered a foreign owner for land tax purposes
- You own property that has opted into property tax and the total value exceeds the land tax threshold
You typically do not pay land tax on:
- Your main home
- Farmland
- Land with a taxable value below the land tax threshold
How is Land Tax Calculated?
The ‘Unimproved Value’ of the land determines how much land tax you pay. This is the market value of the land assuming no structural improvements have been made. States and territories usually impose land tax on a sliding scale. When the land value exceeds a certain threshold, you pay a base amount plus a dollar amount for each dollar over the threshold. Your state or local government will typically value your land for tax purposes.
Getting Exempt from Land Tax
Different types of exemptions, concessions, or refunds exist, each with its own application form. Examples include:
- Living in your own home
- Moving between homes
- Building a new home
- Moving to a new or renovated home
- Deceased estate
- Owner in care
Land Ownership and Land Tax
You can own land in different ways, and land tax is applied differently depending on ownership:
- Individually or jointly: You are assessed based on your ownership portion.
- Companies: Treated the same as individual ownership unless linked to another business.
- Trusts: Different types of trusts are assessed differently, and not all are eligible for land tax thresholds.
Threshold for Land Tax
If the total taxable value of your freehold land is $600,000 or more on June 30th, you will be subject to land tax. You might lower your taxable value by applying for exemptions.
Land Tax vs. Property Tax
Land tax is a tax on the unimproved value of the land, while property tax is on the value of the property, including buildings. Property tax helps fund local services like infrastructure and community facilities. Land tax is more about encouraging efficient land use.
Common Questions
- What if you own land with others?
- What happens with land held by a trust?
- If you own land with your partner, will you pay land tax?
- If you are currently building a home, do you need to pay land tax?
- Can you claim an exemption?
Understanding the differences between land tax and property tax is essential for making informed decisions about your property investments. Stay tuned for more information.
