Land tax

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:   

  1. We have dedicated property tax specialists in-house.   
  2. We understand that property structure includes land tax, share rates, capital gains tax, GST, income tax, FIRB, principal residence, asset protection, succession, stamp duty and estate planning.    
  3. We are leaders in the tax profession through the Tax Institute, giving us deep networks for transfer duty lawyers and property lawyers who understand the intricacies of transferring property across different land parcels.   
  4. We are part of GGI Global Alliance Network, so we have local on the ground advisors in the Eastern States and overseas for clients buying property offshore – including tax expertise on transfer pricing, thin capitalisation, foreign buyer surcharge and the registered foreign ownership.   

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