Land Tax In Australia- 2024 Updates

Land Tax In Australia – 2024 Updates

By: Nfinity Financials0 comments

If you own property in Australia, you must be updated on the rules and regulations enforced by each state government. As you develop your property portfolio, you may become subject to Land Tax, which varies by state. 

In recent years, we have seen a significant growth in property values. This is causing headaches for many Australian property investors, especially as tax deadlines for some states approach.

In this blog, we will talk about land tax and the details. Let’s start with knowing what is land tax.

What is Land Tax?

A land tax is computed using the total value of all unimproved land owned by a person, excluding his primary residence in any state. In Australia, land tax is estimated and collected yearly or weekly if you live in the Australian Capital Territory. Because land tax is just a tax on land value, many investors choose to purchase units with relatively low land values, therefore reducing payments each tax season.

Your council determines how much you pay for land tax. Tax rates, valuation procedures, and payment schedules may vary per council. Your land tax is then used to fund a variety of community services, including infrastructure (roads, bridges, parks and gardens), health and safety (immunization, pest eradication), and other administrative initiatives such as libraries, community events, tree planting, and so on.

If you own a few properties, paying land taxes isn’t always a hassle. However, if you are a significant property owner, the amount of land taxes you must pay each year may be prohibitively expensive.

Before July 1, 2022, the Property Activation Levy exempted property investors with units in the Northern Territory from paying any land tax. However, land taxes are imposed by all Australian state and territory administrations.

Who Pays Land Tax?

You could have to pay land tax if you own or jointly hold:

  1. Rural land, vacant land,
  2. Land on which a home, residential unit, or flat has been erected,
  3. Holiday Home
  4. A property for Investment,
  5. Company title units,
  6. Commercial or residential units, including car spaces,
  7. Commercial properties,
  8. Land leased from local or state government.

Additionally, you may have to pay land tax if,

  • You are considered a foreign owner for land tax reasons (this includes properties subject to property tax).
  • You are a not-included owner of a property that has opted into property tax, and the total value of your properties exceeds the land tax threshold. Please see the property tax website for further information on the land tax consequences for properties that have chosen to pay property taxes.

The land tax applies regardless of whether revenue is generated by the land.

Typically, you do not pay land tax on:

  • Your principal place of abode
  • Includes your house, farm, and 
  • Any land with a total taxable value below the land tax threshold.

How is Land Tax Calculated?

The ‘Unimproved Value‘ of any responsible property you possess determines how much land tax you will pay. The unimproved value of land is its market worth under normal sales conditions, presuming no structural improvements have been completed.

Like stamp duty, states and territories often impose the tax on a sliding basis. When the value of the land you own exceeds the exemption level, you are charged a basic sum and dollar amount for each dollar beyond the threshold. 

Your state or local government will normally value your land for tax purposes. 

You may have to pay anywhere from a few hundred dollars to several thousand dollars in land tax. For further information, contact Nfinity Financials.

How To Get Exempt From Paying Land Tax?

Each sort of exemption, concession, or refund has its application form.

ExemptionEligibility
Living in your own homeYou can get an exemption if you own and use your property as your principal residence on June 30th.
Moving between homesYou may be eligible for an exemption if you are relocating from one property to another that you purchased in the previous fiscal year.
Building a new homeIf you’re building a new house and don’t live on another property you own while it’s being built, you may be eligible for an exemption.
Moving to a new or renovated homeIf you intend to sell your old house and build a new one on newly purchased land, you may be eligible for an exemption.
Deceased estateFollowing the death of the owner of a private house, you may be eligible for an exemption.
Owner in careIf you enter a full-time care facility, such as a nursing home or hospital, you may be eligible for a principal residence exemption.

Partial Exemption

If just a portion of the land’s owners use it as their primary residence or if it is utilised for both exempt and non-exempt uses, such as residential and business/commercial reasons, then partial exemptions and concessions are available.

Other Exemptions

  • Right to reside under a will
  • Property used by a related disabled person
  • Trust property used by a disabled beneficiary
  • Inner City living rebate
  • Religious Institutions
  • Educational Institutions
  • Aged care facility
  • Caravan Parks
  • Retirement Village
  • Build-to-rent
  • Charitable exemption
  • Subdivided residential land
  • Primary production

In what ways you can own a land?

Owning land may be accomplished in a variety of ways. Depending on who is the legal owner, Revenue NSW applies land tax differently.

Individually or jointly as a common tenant

Depending on your ownership portion, you are assessed depending on the taxable value of the land. You will only be assessed on 50% of the land value of an investment property, for instance, if you own 50% of it. Any land that is jointly owned will receive separate assessment notifications.

An advantage of owning land is that you are entitled to a land tax threshold. 

Companies

Unless it is connected to another business, a company’s land tax status is the same as that of a person.

Trust

Every kind of trust will be assessed for land taxes; however, not every trust is eligible for a land tax threshold. A discretionary family trust is not subject to a land tax threshold and is responsible for paying taxes on the entire amount of land that it possesses.

If the deed is properly structured, a fixed trust (unit trust) is generally entitled to the land tax threshold. Each unit holder will receive a new assessment from Revenue NSW once the land tax has been paid at the trust level. To prevent double taxation, the unit holders will be credited for any land tax that the trust has previously paid.

What is the Threshold?

If the entire taxable value of your freehold land, which includes both your share of jointly held land and land you own alone, is $600,000 or more as an individual on June 30th, you will be subject to land tax.

The taxable value of your land is based on your annual land valuation. 

You might be able to lower your overall taxable value by applying for exemptions. For instance, if you use all or a portion of the land as your house, you can qualify for a home exemption.

How do we value land for Land Tax?

Every year on July 1st, the valuer assigns valuations to all of the land in New South Wales. It is the unimproved value of your land.

The taxable value of each parcel of land is based on the average value of the current year and the previous two years, if appropriate.

When a parcel of property is established less than three years ago, such as through a subdivision or merger, we only evaluate the years after its creation.

Notice Of Assessment

A yearly notice of assessment detailing all the NSW land you owned as of December 31, 2018, together with the amount of land tax owed, will be sent to you if you are subject to land tax.

To find out if you are required to pay land tax, please Get In Touch With Us if you have not received a notice of assessment.

Land Tax Metrix For Australian States & Territories

See the matrix below for more comprehensive information about land tax:

 

What is the difference between Land Tax & Property Tax?

Knowing the distinction between land tax and property tax is crucial if you’re thinking about purchasing or selling real estate in Australia. This will enable you to choose the kind of home that best suits your needs.

In Australia, there are two distinct kinds of taxes imposed on property: land tax and property tax. Land tax is a tax on the unimproved value of the land, whereas property tax is a tax on the value of the property. This indicates that, in contrast to land tax, property tax considers the value of the structures situated on the land.

Knowing Property Tax

Council rates, another name for property tax, is a charge determined by estimating a property’s worth. This tax is collected by the local government, which uses the proceeds to pay for infrastructure, community facilities, garbage management, and other public services.

In Australia, different states and territories have different property tax rates, so you must know what your particular responsibilities are. These taxes will be a component of your annual costs as a foreign investor or expat, and they may affect your total investment results.

Knowing Land Tax

Conversely, land tax is an annual charge made on the total value of all your taxable land, except your principal house. In Australia, land taxes varied greatly between states and even within individual territories.

The progressive nature of land tax—which increases with property ownership—is one of its most distinctive features. Comprehending the effects of land tax on real estate investments can assist international investors and expatriates in maximising their tax planning opportunities.

Differences

Despite many parallels, the objectives and methods of calculation of land tax and property tax are distinct. While land tax is based on the overall value of all taxable land you possess, property tax is often a set proportion of the assessed value of a property. 

Scope & Definition

The definitions and purview of land tax and property tax are fundamentally different. Land tax solely accounts for the value of the unimproved portion of the land; property tax considers the entire worth of the property, including the land and any improvements.

Tax Application

All kinds of real estate properties, including residential, commercial, and industrial ones, are subject to property tax. However, land tax is unique to land holdings and could not apply to homes that are used as a primary place of dwelling, also referred to as a “principal place of residence.”

Tax Rates & Calculation

Land tax and property tax have separate formulas and rates. Usually, the rate at which property taxes are levied is either fixed or calculated as a proportion of the property’s worth. On the other hand, land tax rates are progressive, which means that they rise when the value of the land exceeds certain levels.

Thresholds & Exemptions

There may be thresholds or exclusions from both land tax and property tax, but the requirements are different. Properties utilised for philanthropic or religious purposes, for example, may be excluded from property taxes. Conversely, state-specific exclusions from property taxes frequently depend on elements such as ownership type and land use.

Ownership Requirement

Since property tax is linked to property ownership, the owner of the property is subject to it. On the other hand, since land tax is associated with property ownership, the owner is still liable for paying it even if the land is leased or rented.

Tax Purpose

Local governments usually use the money from property taxes to pay for infrastructure projects, public safety initiatives, and educational schemes. On the other side, land taxes are frequently employed as a tool to promote effective land use and discourage land banking.

Certain FAQ’s

While going through this information, you might have certain questions in your mind like:

  • What if you own land with others?
  • What happens with a land held by trust?
  • If you own land with your partner, will you pay land tax?
  • If you are currently building a home, do you need to pay land tax?
  • Can you claim an exemption?

For more such information stay tuned. Remember that knowing the distinction between land tax and property tax is essential to your investing endeavors. Please don’t hesitate to Contact Our Team of Knowledgeable Consultants if you want more individualized guidance or assistance Call us at 1300 GET LOAN.

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