Land Tax in Australia: What Property Investors Need to Know

Land tax is a state and territory tax that catches many property investors off guard, sometimes significantly increasing the holding costs of their portfolio. Unlike stamp duty, which is a one-off cost at purchase, land tax is an annual obligation. Understanding how it works in each state, what exemptions apply and how to structure your portfolio to manage it is important for anyone holding or planning to accumulate investment property.

What Is Land Tax?

Land tax is an annual tax levied by state and territory governments on the unimproved value of land you own. It is calculated on the value of the land, not the buildings on it, as assessed by the relevant state valuation authority.

Land tax applies to investment properties, commercial properties, holiday homes and vacant land held in your name (or in a trust or company that is subject to land tax). Your principal place of residence is exempt from land tax in every Australian state and territory.

How Land Tax Is Calculated

Each state sets its own:

Tax-free threshold (below which no land tax is payable).

Rate structure (ranging from flat rates to progressive brackets).

Assessment methodology for unimproved land value.

Because each state operates independently, an investor with properties in multiple states is assessed separately in each state. The combined land tax exposure can be significant across a multi-state portfolio.

State-by-State Overview (2025-26 Settings)

New South Wales

NSW has a land tax-free threshold of $1,075,000 in 2025-26 for standard landholders. Above this threshold, a base amount plus a rate per dollar above the threshold applies. The base rate is 1.6 per cent of the value above the threshold, plus a premium rate for very high-value landholdings.

NSW also introduced an optional annual land tax payment scheme for eligible first home buyers as an alternative to upfront stamp duty on purchases up to $1.5 million. This is a separate mechanism from the standard investment land tax.

Victoria

Victoria has a land tax-free threshold of $300,000 for landholders who are not trusts. Trust landholdings have no threshold and pay a higher surcharge rate. Victoria's land tax rates are progressive, with higher rates applying to larger holdings.

Melbourne investors should be aware that Victoria also levies an absentee owner surcharge and a residential land tax for overseas owners.

Queensland

Queensland's land tax threshold is $600,000 for individuals. Above this, rates range from 0.5 per cent to 2.75 per cent depending on the total taxable land value. Queensland aggregates all land you own in the state across different properties to determine your total taxable land value.

From 2023, Queensland introduced a change to include interstate landholdings when determining the rate applied to Queensland land for interstate investors, though this has since faced legal challenge and its current implementation status should be verified.

South Australia

South Australia has a land tax threshold of $668,000 (2025-26). Above this, rates are progressive. SA also applies additional rates for trusts and company ownership structures.

Western Australia

Western Australia has one of the higher land tax-free thresholds at $300,000, but rates are applied to the aggregated value of all taxable land owned in the state.

Australian Capital Territory

The ACT applies an annual rates levy that functions similarly to land tax for residential properties. There is no separate land tax threshold system as in other states.

Tasmania

Tasmania applies land tax above a threshold of $100,000 of total taxable land value, with a progressive rate structure.

The Principal Place of Residence Exemption

Your home, the property you live in as your primary place of residence, is exempt from land tax in every state and territory. This is a universal exemption.

To qualify, the property must genuinely be where you live. You cannot designate an investment property as your PPOR for land tax purposes while renting it to tenants.

How Portfolio Structure Affects Land Tax

For investors with multiple properties, land tax management is an important consideration.

Aggregation rules mean that all investment land you own in a state is combined to determine your total taxable land value. Adding a second or third investment property in the same state can push your total above the threshold or into higher rate brackets.

Holding properties in different states distributes the portfolio across separate land tax regimes, each with its own threshold and rate structure.

Ownership structure matters. Properties held in a trust or company are typically taxed differently, sometimes at higher rates and often without access to the standard tax-free threshold. Always obtain specific advice on the land tax implications of trust or company ownership in the relevant state before structuring a purchase this way.

Land Tax and Rental Income: Deductibility

For investment properties, land tax is a deductible expense against the rental income from that property. The deduction is available in the financial year in which the land tax is paid.

This means the net cost of land tax is reduced by your marginal tax rate, though it remains a real out-of-pocket expense that must be budgeted for.

Practical Steps for Investors

Keep a record of land valuations for your properties in each state and compare them against the applicable thresholds each year.

Notify the relevant state revenue office of any changes to your portfolio, including purchases, sales and changes in how you use a property.

Work with an accountant who has cross-state property experience if you hold or intend to hold property in multiple states.

Factor land tax into your investment property cash flow projections before you buy. A property that is marginally positively geared before land tax can become negatively geared once it is included.

Use the Loan Repayment tools at HomeLoanTools.com.au to model the full holding cost picture of any investment property you are assessing, and make sure your cash flow analysis includes land tax.