Property Investing 101: What is Land Tax?

If you’re just beginning your property investment journey, land tax is definitely something you’ll need to be familiar with.

Property Investing 101: What is Land Tax?

As with any major investment, anyone who is interested in developing their property portfolio should first gain an in-depth understanding of the costs associated with doing so. To help you get started here’s all you need to know about land tax in Victoria!

What is it?

Unlike stamp duty, which is a one-off amount paid when buying a property, land tax is an annual or quarterly tax owners pay to state and territory governments, based on the value of the land they own.

Land tax is charged on any land owned or co-owned above a certain value threshold. That threshold is different in different states. It includes vacant land bought to build on or the land a house or unit is built on.

Generally speaking, a principal place of residence is exempt, meaning land tax is predominantly the concern of property investors, rather than owner-occupiers.

How much is land lax?

The value threshold and percentage charged differs from state to state, so the amount of land tax payable varies. There are often tiers as well, like general and premium thresholds, which also impact how much is charged.

in Victoria, land tax doesn’t apply to a principal place of residence, primary production land for farming or for land owned below the threshold.

Land tax is calculated at the end of the calendar year, on the total value of all taxable land above the threshold, which hasn’t changed since 2009.

The threshold for land in Victoria operates on a sliding scale for land above $250,000 or $25,000 for trusts. They include the following.

  • $250,000 to less than $600,000; $275, plus 0.2 per cent of land value above $250,000
  • $600,000 to less than $1m; $926, plus 0.575 per cent of land value above $600,000
  • $1m to less than $1.8m; $2938, plus 0.875 per cent of land value above $1m
  • $1.8m to less than $3m; $15,838, plus 0.7614 per cent of land value above $1.8m
  • $3m-plus; $24,975, plus 2.25 per cent of land value above $3m.

Additional premiums are payable for land held by a trust, on a similar sliding scale. There are also surcharges for other types of landholders, including absentee owners.

Is land tax deductible?

Short answer: yes, land tax is tax deductible. As an investor, once you have completed a land tax registration form, you will be sent an assessment notice showing the land tax payable on the land you own.

If the property is a rental property, you can only claim a deduction for land tax expenses only if you incur them and they are not paid by the tenant. Since July 1, 2019, it is no longer possible to claim a tax deduction for vacant land.

What property types do you need to pay land tax?

Land tax is usually applicable to rental and investment properties, commercial properties, factories, holiday homes, vacant land and other non-exempt land.

Keen to know how you can grow your property portfolio with land at Harlow? Explore lots now selling or get in touch with our expert Sales Team today on 0419 174 696 to learn more about our masterplanned community in the heart of Tarneit!