Do You Pay Land Tax on Commercial Property?

In the landscape of investment property, there is a set of responsibilities every property owner needs to know that go beyond the structure or potential of the building. One of the responsibilities that is often overlooked is land tax, which, unlike taxes tied to income or sales, is in direct correlation to the property ownership structure.

Much like most other taxes, navigating the intricacies of land tax can be pretty tricky. So, to make things as easy as possible, we’ve put together a guide with the aim of simplifying land tax and making everything surrounding it much clearer.

What is Land Tax?

The simplest way of explaining what land tax is is to say that it is a state-based tax that is imposed on the unimproved value of the land a property sits on. The main purpose of land tax is to generate revenue for state governments and to encourage the efficient use of land.

Land tax is calculated differently between states and territories, and each has its own legislation governing land tax. Likewise, the rates and thresholds may vary between states.

How Do I Know Whether I Need to Pay Land Tax?

For any investment property, knowing whether or not you need to pay land tax is crucial, and there are a few factors that will determine whether or not you are liable for land tax, including:

Property Type

Residential property where you live or that acts as your principal place of residence is generally exempt from land tax, and will receive a residence exemption. However, investment properties, including holiday homes, vacant land, and any commercial properties owned, may be subject to land tax.

Property Value

Land tax is typically based on the unimproved value of the land, which excludes the value of any buildings or improvements. So, if the unimproved value of your land is below the threshold set out by the state the property is in, you may not have to pay land tax.

State-Specific Regulations

This is where things start to get a little confusing. As land tax is governed by state legislation, rules vary between each state and territory. As such, you’ll need to check the specific land tax laws within the state where your property is located.

Each state’s revenue office will be able to provide information on land tax within that territory, including rates, thresholds, and exemptions.

Foreign Ownership

Some states may impose additional charges on land tax if you are a foreign visitor to Australia or an ‘absentee owner’. Again, it’s best to check the specific legislation in the territory in which the property is located.

Remember – we’re here to help you at every stage of your commercial property investment journey. Contact our expert team of commercial buying agents, and over a no-obligation 15-minute call, we’ll answer all of your questions and look at your next potential steps.

Land Tax Calculations: State-by-State Guide

As we’ve mentioned above, each state in Australia has its own land tax regulations. Let’s look at these in a little more detail below:

New South Wales

In New South Wales, land tax is applied in the following circumstances:

• Urban and rural vacant land
• Land with property attached
• Holiday homes
• Investment property
• Units under company titles
• Land rented from the government

In all of these instances, land tax is payable whether the land earns income or not. There are, however, a couple of exemptions in New South Wales. The first of these is if your property is a principal place of residence (PPOR), in which case you won’t have to pay land tax. Farmland is also exempt from land tax, as this is considered primary production land with a value below the tax threshold.

Victoria

In Victoria, any property used to generate income will be subject to land tax. This includes any properties that were previously your principal place of residence (PPOR) but are now being leased to tenants.

Land tax in Victoria is calculated based on the total value of the taxable land owned as of midnight on 31st December in the previous year of the assessment period.

Queensland

In Queensland, land tax is calculated based on the value of freehold land at midnight on 30th June each year. This includes lots in building unit plans, timeshare schemes, group title plans, and properties owned by unit companies.

There are certain variables in Queensland as well, and even if you didn’t own the land for the entire financial year, you will still be liable for land tax payments if you take possession before the 30th June calculation deadline.

Western Australia

Land tax is also calculated as of midnight on 30th June each year in Western Australia and is based on taxable land value, and calculations include the unimproved value of land without any structural improvements.

It’s important to note that land held in trust in Western Australia is not considered exempt land unless it is being held by the executor or administrator of a deceased estate and is being used as a principal place of residence (PPOR).

South Australia

As with QLD and WA, land tax in South Australia is calculated as of midnight on 30th June each year. However, when a property is sold after this date, the conveyancer will often negotiate between the seller and buyer for a land tax adjustment.

Land tax exemptions in SA include primary production land and off-the-plan apartments.

Australian Capital Territory

In ACT, any properties that are not your principal place of residence (PPOR) are subject to land tax, including property held in trust and subdivided properties on the same land as your PPOR that are being leased out.

Land tax assessments are done quarterly in ACT and are applied on the first day of July, October, January, and April.

Tasmania

Land tax in Tasmania is calculated based on property ownership as of 1st July each year, and the rate applied is usually $50 + 0.55% of land valued above $25,000.

Exemptions in Tasmania are quite different from other exemptions set out in other states, though. For instance, any land used for Aboriginal cultural activities, religious activity, or charitable work will be exempt from paying land tax.

Other exempt land includes retirement villages, medical properties (excluding GP surgeries), and land that is protected by a conservation covenant.

Tips for Paying Land Tax

When it comes to paying land tax, there are a few things you can do to make the whole process a lot easier. These include:

Check Your Land Tax Assessment Notice

In some states, property owners receive an annual land tax assessment notice from the revenue office. This outlines the assessed value of the land, applicable rates, and the amount payable.

While this will have been carefully calculated by the revenue office, mistakes can happen, so it’s a good idea to review this annual tax assessment carefully to ensure you understand what you’re paying and to make sure it’s the correct amount.

Use Online Tools

Some state revenue offices offer online tools or calculators that help property owners estimate their land tax liability. These are incredibly helpful for planning your finances, and after you’ve input all of the required details about your property, you’ll have a better idea of how much land tax you’ll need to pay.

Consult a Professional

Even with land tax assessments and online tools at your disposal, figuring out how much you need to pay can be confusing. So, to make things as easy as possible, we recommend consulting a professional who will be able to look at your specific circumstances and offer more advice on both land tax obligations and any exemptions you may have.

Need Help With Your Commercial Property? Book a Free Call with an Experienced Commercial Buyer Agent

Whether you need help with land tax or you have any other questions about commercial properties, contact Revolve Commercial today to speak with an experienced commercial buyer agent, and we’ll set you on the right path in your investment property journey.