Land tax is an annual state tax on land you own above a threshold — and because every state runs its own system, the same investment can attract very different bills depending on where it sits. This guide explains the thresholds, the all-important home exemption, and the traps around trusts and total holdings.
Land tax is an annual state tax on the value of land you own above a threshold, charged on the unimproved land value — the land itself, not the buildings on it. Each state and territory runs its own system, with its own thresholds and rates, which is why the same investment can attract very different land tax depending on where it sits.
Critically, your own home is almost always exempt. Land tax mainly affects investment properties, holiday homes, and vacant land. Estimate your position with our land tax calculator.
In every state, the home you live in — your principal place of residence — is generally exempt from land tax. This is the single most important rule to understand, because it means most owner-occupiers never pay land tax at all. The tax is aimed at land held beyond your own home.
Each state sets a tax-free threshold. Below it, you pay no land tax; above it, you pay on the excess, usually at a rate that steps up as holdings grow. Because the threshold applies to your combined landholdings in that state, the second and subsequent investment properties are where land tax typically starts to bite.
Land values are set by a state valuer, not by what you paid, and they are reassessed periodically. A rising market can push you over a threshold you were previously under, so land tax can appear even if you have not bought anything new.
The systems vary in important ways. Some states have relatively high thresholds that shelter smaller investors; others have lower ones that catch more owners. Several apply surcharges to foreign owners and, in some cases, to land held in trusts or by absentee owners. A few have introduced or debated additional levies on vacant residential land to encourage it into the rental market.
Because the specific thresholds and rates change with each state budget, the reliable approach is to check your own state revenue office for the current figures rather than rely on a number that may be out of date.
For an investment property, land tax is generally a deductible holding cost, like council rates or insurance — it reduces the property's taxable income. It is not deductible on your own home, which is exempt in the first place. This deductibility softens the blow for investors, but it is still a real annual cost that eats into cash flow.
Land tax influences where and how investors buy. Spreading holdings across different states can keep each state's total under its threshold, since the tax is assessed per state. The land-to-value ratio matters too: an apartment sits on a small share of land, so it often attracts less land tax than a house of the same price, which is one reason unit investors sometimes face a smaller land tax bill. As always, structure decisions should be made with a registered tax agent, not on general information alone.
What is land tax?
An annual state tax on the unimproved value of land you own above a threshold — the land, not the buildings. Each state runs its own system with its own thresholds and rates. Your principal place of residence is generally exempt, so it mainly affects investment properties and vacant land.
Is my home subject to land tax?
Almost never. In every state the home you live in — your principal place of residence — is generally exempt. Land tax is aimed at investment properties, holiday homes and vacant land held beyond your own home.
How is land tax calculated?
States add up the value of all taxable land you own in that state, apply a tax-free threshold once, and charge on the excess at rates that step up as holdings grow. Land values are set by a state valuer and reassessed periodically, so a rising market can push you over a threshold.
Is land tax deductible?
For an investment property, land tax is generally a deductible holding cost that reduces the property's taxable income. It is not deductible on your own home, which is exempt in the first place.
Do trusts pay more land tax?
Often, yes. Land held in some trust structures may be taxed from the first dollar with no tax-free threshold. If you are considering a trust to hold property, factor the land tax treatment into the decision with a tax agent.