What is land tax and who pays it?
If you’ve ever considered buying a property, you’ve probably stumbled across the term land tax.
And although the term seems pretty straightforward, what exactly does land tax mean and who needs to pay it? Find out what land tax is, how it’s calculated, and who has to pay for it.
What is land tax?
To put it quite simply, land tax is an annual tax that is charged on any land you own or co-own above a certain value threshold (varies by state). Whether your business owns property, or you have vacant land that you’re planning to build on, or have investment properties, you may have to pay land tax.
Now to reassure you, your permanent residence (i.e. the property you own and live in) is usually exempt from the land tax charge.
With the exception of the Northern Territory, your state or territory government will levy your land tax at the end of either the financial or calendar year.
When does land tax apply?
Aside from the exemptions listed below, if you own property that has a taxable value above the value threshold, you may have to pay land tax. This can include anything from:
- vacant land, including rural land
- land where a house, residential unit or flat has been built
- investment properties
- residential, commercial or industrial units, including car spaces
- commercial properties
- holiday homes
- company title units
- land leased from state or local government
Who pays land tax and are you exempt?
As already stated, your principle place of residence is generally out of the firing line - no land tax payable.
You’re also exempt from paying land tax if the total value of the land you own is below the value threshold that your state or territory has set. Make sure to check out the thresholds guide below to find out.
But for those who don’t fall into this category, then you're more likely to be affected by land tax.
How is land tax calculated?
The amount of land tax you pay depends on the unimproved value of all the taxable property you own. Unimproved value reflects the value of the land in it’s natural and undisturbed conditions with no improvements. For instance, it does not include fencing, clearing, earthworks, levelling, etc.
In this case, it is its market value under normal sales conditions.
Now, most states and territories charge land tax on a sliding scale. When the owner’s land value passes the specific exemption threshold, they start to pay land tax.
So, who values your land?
For tax purposes, this is assigned to your state or local council.
Typically, the owner is charged a land tax that incorporates:
The base sum plus a dollar or percentage amount for ever dollar that your land’s value is above the threshold.
If you’re eager to find out more information about how much land tax you’ll have to pay, visit your state or territory’s revenue office website.
Land tax thresholds in Australia's states and territories
As we mentioned previously, land tax thresholds vary from state to state so here is a quick go-to guide on each states 2022 threshold.
Queensland
Threshold: $600,000 and above
Calculation: Starts at $500 plus 1 cent for each $1 above $600,000 then increases for land value above $1,000,000
New South Wales
Threshold: $822,000
Calculation: $100 plus 1.6 per cent of land value above general threshold
Victoria
Threshold: $250,000 and above
Calculation: Starts at $275 + 0.2% of amount above $250,000 then increases for land value worth more than $600,000
ACT
Threshold: Nil - applies to all land values
Calculation: $1,326 paid regardless of the land’s unimproved value
South Australia
Threshold: $482,000 and above
Calculation: Starts at $0.50 for every $100 or part of $100 above $482,000 then increases for land value >$774,000
Western Australia
Threshold: $300,000 and above
Calculation: Starts at a flat rate of $300 for unimproved land value above $300,000 then increases for land value more than $420,000
Tasmania
Threshold: $50,000 - $399,999.99
Calculation: $50 + 0.55% of value above $50,000
Threshold: $400,000 and above
Calculation: $1,975.00 + 1.5% of value above $400,000
What is a land tax clearance certificate?
When you’re in the process of purchasing a property, you may be notified by your conveyancer or solicitor to apply for a land tax clearance certificate.
It’s crucial that the certificate is filled out as it can protect you from having to pay the seller’s unpaid land tax. You want to ensure this gets done before you take possession of the property.
This is usually taken care of on your behalf from your conveyancer.
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