Land tax is a tax on the ‘value of land’ that is imposed by all States and the Australian Capital Territory, with the exception of the Northern Territory. The methods for determining value vary between jurisdictions. In general terms, the value of land for land tax purposes is the unimproved value determined by the valuing authority.

Land tax can apply to commercial property, investment properties, vacant land and to a holiday home. Land tax varies between jurisdictions and can affect the profitability of commercial property or an investment property.

In all jurisdictions, subject to certain restrictions, land tax does not apply to an owner’s principal place of residence, land used for primary production or land owned by charitable, religious or educational bodies. If a principal place of residence is also used for other purposes, for instance, as a shop, the proportion not used as the owner’s residence is subject to land tax. Further specific exemptions are also imposed by particular jurisdictions.

The liability for land tax falls mainly to the owner of the land. In New South Wales and Victoria, the current year  is based on land holdings as at 31 December the previous year. . Therefore, if the owner sells land during 2016 he/she would still be assessed for land tax because it is based on land holdings as at 31 December 2015. In Queensland, South Australia and Western Australia, land tax for the 2016 year is based on land holdings as of 30 June 2016. In Tasmania, land tax for the 2016 year is based on land holdings as of 1 July 2016.

There is generally a tax free threshold which differs from state to state.  It is useful to know that as this is a state by state tax, a property investor could potentially own many properties in more than one state and pay no land tax, as this tax is not cumulative between states.

 

 

Activity

Mrs Thompson has a commercial property in Brisbane, QLD that she rents out.

  • Assuming the land has a value of $1,000,000 what is the land tax using the current rate
  • How does this compare with other states?