What is land tax?

What it actually is

Land tax is an annual state tax, not a federal one. Every state sets its own rules, thresholds and rates, there's no single national land tax. It's calculated on the unimproved, or site, value of the land only, not the building sitting on it. A $1.5 million house on a block with a site value of $600,000 is taxed on that $600,000 figure, not the full property value.

It's assessed annually against a snapshot date, 31 December in NSW and Victoria, 30 June in Queensland, and applies to the total taxable value of all land you own in that state above the threshold, not each property individually.

Land tax vs stamp duty vs council rates

Three costs that get mixed up constantly, all different. Stamp duty is a one-off tax paid at settlement when you buy. Land tax is an ongoing annual tax on land you continue to hold, both can apply to the same property, stamp duty once at purchase and land tax every year afterwards, and it adds up over a long hold. Council rates are a separate local government charge for local services like rubbish collection, roads, parks and libraries. Land tax is a state tax on land ownership value. Different levels of government, different purposes, both can apply to the same property at the same time, and neither cancels the other out.

Who pays

Generally investors, not owner-occupiers. You're liable if you own investment properties, holiday homes or vacant land. Your principal place of residence, the home you own and live in, is exempt in every state and territory that levies land tax, this is the big exemption most homeowners never think about because it never applies to them.

Trusts and companies often face different, sometimes lower or nonexistent, thresholds. In NSW, special and discretionary trusts don't get the general threshold and pay land tax from the first dollar. Victoria applies a separate trust surcharge rate on top of the standard scale. Foreign owners face additional surcharges in most states too, NSW charges a 5% surcharge on top of regular land tax for foreign persons from 2025, and Victoria and Queensland run their own absentee or foreign owner surcharge regimes.

How it's calculated

Each state's valuer-general determines the unimproved or site value of your land every year. Your taxable value is the combined total of all your taxable land in that state, excluding your home. If that total exceeds the tax-free threshold, tax applies on the amount above it using a tiered rate scale, similar in structure to income tax brackets. NSW uses a three-year rolling average of land values when assessing, which smooths out sudden spikes, though past increases can keep pushing your bill up even after a single bad valuation year has passed.

A worked example (illustrative only)

Figures below are illustrative only and change regularly, always check Revenue NSW for the current rates before relying on a number. Say you own an investment property in NSW with a land value of $1,400,000, above the general threshold of $1,075,000. The taxable amount above the threshold is $1,400,000 − $1,075,000 = $325,000. At a rate of $100 plus 1.6% of the excess, that works out to $100 + (1.6% × $325,000) = $100 + $5,200 = $5,300 for the year. This is annual, every year, and a second investment property's land value stacks on top of the first.

State-by-state overview

These figures change annually, always verify current numbers with the relevant state revenue office before making a decision.

Your home is exempt in all three states above. Worth noting: NSW froze its thresholds from 1 January 2025, so they won't automatically rise with property values the way they used to. South Australia, Western Australia, Tasmania and the ACT also levy land tax with their own rules, check the relevant state revenue office for those.

The principal place of residence exemption

Your primary home is generally exempt in every state that levies land tax, but you typically need to both own and occupy it as your main residence. Investment properties, holiday homes, vacant land and properties held in certain trust structures are not exempt. A catch many investors miss: if you move out of your home and start renting it out, you may lose the exemption from that point onward. Timing and notification rules differ by state, check with your state revenue office before changing how a property is used.

Three misconceptions worth clearing up

• It's not based on market value. Land tax is calculated on unimproved or site value only, excluding the building and any improvements, often significantly lower than the property's full market value.
• Your home isn't included, in most states. Only investment properties, holiday homes and vacant land count toward your taxable total.
• It's not a one-off cost like stamp duty. It's an annual, recurring tax. On a $1.5 million investment property held for 15 years, even a modest $5,000 to $8,000 annual bill adds up to $75,000 to $120,000 over the hold, it needs to be in your cash flow modelling from day one, alongside costs like interest and other deductible holding costs.