Land tax is, at its most basic, a tax on land. This simple comment fundamentally surprises many families in business – because land tax is not a tax on the buildings they own. Only the value of vacant land held on 30 June is assessed.
Land tax is often ignored by many tax advisors simply because land tax is often not significant. The family home is generally exempt from land tax, agricultural land is exempt and the business premises are often rented.
However, for families with significant real estate holdings, the cost of land tax can become very substantial very quickly. In fact, many of our families we assist – the business of purchasing, holding, selling, managing, administration and developing the property portfolio is the family business.
If you are a diverse property development family it is important to note that land tax is a marginal tax. The rates are below.
|Aggregated taxable value of land||Rate of land tax|
|$0 – $300,000||Nil|
|$300,001 – $420,000||Flat rate of $300|
|$420,000 – $1,000,000||$300 + 0.25 cent for each $1 in excess of $420,000|
|$1,000,000 – $1,800,000||$1,750 + 0.90 cent for each $1 in excess of $1,000,000|
|$1,800,000 – $5,000,000||$8,950 + 1.80 cents for each $1 in excess of $1,800,000|
|$5,000,000 – $11,000,000||$66,550 + 2.00 cents for each $1 in excess of $5,000,000|
|$11,000,000 +||$186,550 + 2.67 cents for each $1 in excess of $11,000,000|
Run the taxable value of your land through a land tax calculator. You can quickly see how, for larger families with a diverse property portfolio, land tax can become a significant cost burden and (in some instances) the most considerable tax cost incurred by the family.
Even if the land held is commercial real estate, so that the cost of land tax is passed onto the tenant, the higher variable outgoings incurred by the tenant will ultimately lead to lower rents to the family (so the family does eventually incur this cost). A tenant will actively look at the total rent cost when making a decision (so rent plus vo recovery).
Of course, land tax is not payable in every instance – agricultural land, the family home, subdivided residential land, and newly constructed homes can be instances where you will enjoy a land tax reduction. And because land tax is marginal many families have separate holding structures to facilitate family succession, asset protection and also enjoy (sometimes) a reduction in land tax.
If you are a family with significant property holdings, you should engage with Westcourt because: