A prospective purchaser should be aware of their potential land tax liability before they buy a property. Land tax is an annual state government wealth tax on land owners. The amount owed is determined by the unimproved value of property owned by one particular land owner in any one state or territory. The more land a person or entity owns, the more tax they will be required to pay. The unimproved value of a property is the land value as determined by the local municipality. The applicable rate that needs to be paid fluctuates on a sliding scale and increases with the unimproved land value. A tax-free threshold applies in most states and territories and the family home is exempt.
In order to establish the amount of land tax payable on a property, purchasers can obtain a land tax certificate from the relevant state revenue office. This certificate includes an estimate of the unimproved value of the land, the site value and the amount of land tax owed for the current year.
A principal place of residence is exempt from land tax. It applies to property where a landowner resides on a property as their primary place of residence. Jointly owned land which is the principal place of residence of any one of the joint owners is exempt from land tax.
In situations where a substantial business activity is conducted on land, which is also a person’s principal place of residence, land tax is only imposed on the portion of the property used for business purposes. Land used for primary production is also exempt from land tax.
There are exemptions available for land held by particular bodies or used for a specific purpose: