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Land tax by state: thresholds and surcharges

Land tax is a state government tax on the total unimproved land value of investment property holdings. It differs dramatically by state, both in threshold and in rate. A portfolio that makes economic sense in NSW can be unaffordable in Victoria because of land tax alone.

The tax-free thresholds (2026 rates)

  • NSW: $1,075,000 (no tax below this; surcharge 2% for absentee/foreign owners above $1,075k)
  • VIC: $50,000 (very low threshold; rate starts at 0.2% and climbs)
  • QLD: $600,000 (no tax below; taxed from 1.0% to 2.75%)
  • WA: $300,000 (no tax below)
  • SA: $732,000 (threshold for general rate)
  • TAS: $100,000
  • ACT: Land tax on residential investment is the harshest - applied to all investment property from dollar zero at rates up to 2.14% fixed plus variable

Principal place of residence is exempt in all states.

The surcharge layers

Most states apply surcharges on top of the base rate:

  • Foreign ownership surcharge: NSW +2%, VIC +4%, QLD +2%, WA +4%, SA +0.5%
  • Absentee owner surcharge: VIC applies 4% to any owner not ordinarily resident in Australia
  • Residential investment surcharge: VIC’s “vacant residential land tax” applies 1% to properties left vacant more than 6 months in a calendar year (as of 2024 reform)

These surcharges can turn a marginal investment into an uneconomic one.

The total portfolio effect

Consider an investor with 3 properties in Melbourne:

  • Property 1 land value: $450,000
  • Property 2 land value: $380,000
  • Property 3 land value: $500,000

Combined land value: $1,330,000. Minus $50,000 threshold = $1,280,000 taxable.

Land tax payable (2026 Victorian rates, approximate):

  • First $100k above threshold: ~0.2%
  • Next $300k: 0.5%
  • Next $400k: 0.8%
  • Above $400k additional: 1.55%
  • Approximate total: ~$11,000/year

Same three properties in NSW: combined land value $1,330,000 minus $1,075,000 threshold = $255,000 taxable. At ~1.6%, land tax payable ~$4,080/year.

The portfolio costs $7,000/year more in Victoria than in NSW, forever.

How NSW aggregates vs other states

NSW applies aggregation differently. Properties held via different structures (sole, joint, trust, company) are generally aggregated for the same beneficial owner. Beneficiaries need to understand this before structuring through trusts.

VIC and QLD have specific trust-based land tax rules that can be significantly higher than individual ownership - sometimes called the “trust surcharge”. In VIC, a trust pays land tax without a threshold unless it elects to be treated as a “fixed trust” and meets specific requirements.

The practical investor takeaways

  1. Budget land tax into cash flow. On three Victorian investment properties with combined land value of $1.5m, expect $15k-$25k/year of land tax. This is after-tax money that comes out of rental surplus.

  2. Understand the threshold cliff. Crossing the NSW $1.075m threshold with a new purchase means the entire portfolio’s land value above threshold is taxable. A fourth property that pushes you $200k over might incur $3k-$4k of land tax on the portfolio.

  3. Consider diversification across states. If your portfolio is heavily VIC-weighted, the land tax drag is substantial. Some investors deliberately hold properties in NSW, QLD, and SA to keep each portfolio’s land value below each state’s threshold.

  4. Revisit valuations annually. State revenue offices issue valuations each June-July. If you believe your valuation is overstated, you can object within 60 days. In rising markets, valuations lag; in falling markets, objections are often successful.