“No one told me about land tax until I got the bill!”

In this episode of the Australian Property Investment Podcast, I sat down with Vishal Sharma, an authority on land tax at Revenue NSW. We unpack what land tax actually is, why so many investors get caught off guard, and how you can plan ahead so it doesn’t keep you up at night.

Land tax is one of those hidden costs that can completely blindside investors. Your bank doesn’t warn you. Your real estate agent doesn’t mention it. Even your accountant might not bring it up until it’s too late.

In this article, I’m sharing the key takeaways from our conversation – plus practical steps you can take right now to protect your cash flow and keep your portfolio growing without unwanted surprises.

What Exactly Is Land Tax?

Land tax is a state government tax on the unimproved value of your land. This means it’s calculated on the value of the land itself – not the house, apartment, or commercial building that sits on it.

Every state and territory (except the Northern Territory) has some form of land tax. The rules, thresholds and rates vary across the country, which means the amount you pay (or whether you pay anything at all) depends on where your properties are located and how you own them.

How It’s Calculated (And Why It Can Be Confusing)

One of the most common misconceptions is that land tax is based on each property individually. In reality, it’s based on your total land holdings in that state. This process is called aggregation.

For example, if you own two investment properties in NSW, the unimproved land values of both properties are added together. If the combined total is above the state threshold – currently $1,075,000 – you’ll start paying land tax at 1.6% on the amount above the threshold, plus a fixed $100. If you cross the premium threshold (around $6.5 million), the rate jumps to 2%.

This is why some investors get caught off guard – they buy one property under the threshold, then buy a second one and suddenly get a tax bill.

Why It Catches So Many Investors Off Guard

On the podcast, Vishal joked that land tax is like “Fight Club… if you know, you know.”

Most investors aren’t told about land tax during the buying process. Your lender doesn’t mention it. Your conveyancer is focused on settlement, not ongoing ownership costs. Even property managers rarely bring it up. So when that letter from The Department of Revenue arrives, it feels like a nasty surprise and can drain the excitement out of growing your portfolio.

Rookie Mistakes That Can Cost You Thousands

There are a few patterns we see over and over again that can make land tax more expensive than it needs to be:

  • Buying under the wrong structure – setting up a discretionary family trust without realising that it doesn’t qualify for a land tax threshold, meaning you pay tax from the first dollar of land value.
  • Not planning ahead – rushing to buy a property without thinking about how it will affect your aggregate land value and cash flow.
  • Failing to register or lodge – waiting until you get a bill instead of proactively registering, which can lead to penalties.
  • Relying on “one-size-fits-all” advice – copying someone else’s structure or strategy that doesn’t match your financial situation or goals.

How Ownership Structure Affects Land Tax

Your ownership structure plays a big role in whether you pay land tax and how much:

Individual or Joint Ownership

If you own property in your own name, you’re entitled to a threshold. If you and your spouse own jointly, you share one threshold – not two – so your combined land value is what counts.

Companies

Companies also get a threshold, but if you have multiple companies that are related (for example, you’re the sole director or shareholder), they’re grouped together so you can’t claim multiple thresholds.

Trusts

This is where things get tricky:

  • Fixed trusts (like unit trusts) can access thresholds.
  • Discretionary trusts (most common family trusts) generally do not get a threshold – meaning you’ll pay land tax on every dollar of land value.

SMSFs and Foreign Owners

Self-Managed Super Funds (SMSFs) generally qualify for thresholds. Foreign owners, on the other hand, often pay surcharges – in NSW it’s an extra 5% of the land value, every year.

Principal Place of Residence (PPR) Exemption

Your home is usually exempt from land tax, but there are rules:

  • You must use the property as your principal place of residence.
  • If you move out, you may still qualify for a six-year exemption if you don’t live elsewhere and don’t rent it out for more than six months in a year.
  • If you own multiple properties, you can only claim one principal residence exemption at a time.

First Home Buyers… Don’t Get Caught Out

For first home buyers using stamp duty concessions or the First Home Buyers Assistance Scheme, there’s a key rule: you must move in within 12 months of settlement and live there for at least 12 months.

Miss that requirement and your concession can be revoked, leaving you with a stamp duty bill you weren’t expecting. For a property worth $800,000 in NSW, that could be over $30,000. Planning ahead is essential.

Why Paying Land Tax Isn’t Always Bad

It might feel painful to get a land tax bill, but as I often say, tax is a success fee. Paying land tax usually means your portfolio is growing and you’re building wealth. The key is to factor it into your cash flow modelling so it doesn’t come as a shock.

How to Avoid Nasty Surprises

Plan Before You Buy

Model your land tax exposure before signing a contract. Know your state thresholds and estimate what your portfolio will look like after purchase.

Get the Right Advice

Work with a property savvy accountant who understands different ownership structures and how they impact land tax. Cheap advice can cost you far more in the long run.

Stay Compliant

Register and lodge returns as required. If you receive a notice from Revenue NSW or your state equivalent, respond promptly.

Keep Learning

Stay up to date with state budget announcements, tax rule changes and market trends. Education is one of the best defenses against surprise costs.

Key Takeaways

  • Land tax is charged on the total land value of all taxable properties you own in a state.
  • Your ownership structure – individual, joint, trust, company – changes how thresholds are applied.
  • Most investors only learn about land tax when they get a bill. Plan ahead to avoid this.
  • Paying land tax is often a sign of portfolio growth, factor it into your strategy.

So… What To Do Next?

🎧 Listen to the Episode: Catch the full conversation with Vishal Sharma on the Australian Property Investment Podcast where we dig deeper into land tax rules and real-life investor stories.

📊 Review Your Portfolio: Speak with your accountant or financial adviser about your current land holdings and whether you need to register for land tax.

🏡 Plan Your Next Move: If you’re buying in 2025, start mapping out your cash flow, including stamp duty, land tax and other holding costs so you can buy with confidence.

👥 Work with Experts: If you don’t have a property savvy accountant, reach out – we can connect you with one who can guide you as your portfolio grows.