Land Tax

Definition

Land tax is an annual state/territory tax assessed on the total unimproved value of all taxable land you own in that state as at midnight on 31 December (or 30 June in some states). Your principal place of residence is generally exempt, but investment properties, vacant land, and holiday homes are captured. Rates are progressive and vary by state. Land tax thresholds also vary — some states exempt the first $250,000–$300,000.

Land tax is an ongoing holding cost that increases as property values rise. It can significantly impact the cash flow of a portfolio — especially if you own multiple properties in one state, since land values are aggregated. Land tax is a deductible expense for investment properties.

You own two investment properties in NSW with combined land value of $900,000. Land tax is assessed at roughly $6,000/year. This is fully deductible against your rental income.

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