Land tax is one of several expenses you may have to pay when you buy property. But just what exactly is it, and who must pay it? And why is mine going up?!
What is Land Tax?
Unlike stamp duty, which is a one-off charge, land tax is collected every year you own a property by your state or territory government, except in the Northern Territory.
Broadly speaking, it’s a tax charged on any land you own or co-own above a certain value threshold which differs by the state you reside. For instance, in Queensland this threshold amount is $600,000. This includes all land for investment properties, commercial properties, or any vacant land you’ve bought to build on. Your ‘principal place of residence’, i.e., your home you own and live in), is generally exempt.
If you find yourself with a land tax bill, it is normally paid at either the end of the financial year or calendar year. This will again depend on your particular state or territory.
How is land tax calculated?
The amount of land tax you pay is determined by the 'unimproved value' of all liable property you own. Put simply, this means the total value of land assuming no structural improvements like a house or office building are in place. Government valuers will determine the land value taking into consideration various factors, including:
The property market.
The land’s physical attributes.
How the land is being used and any constraints on its use.
How you own the land – for example, as an individual, corporation, or trustee etc. Land tax rates, thresholds, and exemptions vary accordingly, with companies and super funds generally paying more than individuals.
Like stamp duty, states and territories typically charge the tax on a sliding scale. Once the value of the land you own passes the exemption threshold, you’re charged a base sum plus a dollar or percentage amount for every dollar of your land’s value above the threshold.
Why is land tax going up on the Sunshine Coast?
On the Sunshine Coast, the major reason people are finding their land tax bill increasing is due to the rapidly rising property prices experienced over the past few years. This is highlighted by the table below, with some of the biggest increases found in the Noosa region.
Median House Price
Median House Price
2020 - 2023
As I discussed above, land tax is calculated based on the value of the land assuming no dwellings are in place. As such, these increasing property prices are then almost entirely attributed to the value of the land itself. This in turn has a direct impact on the amount of land tax owing.
This hot property market has also caught many investors off guard. Many who previously owned land valued under $600,000, have now found they’re valued over this threshold. Meaning, they are now liable for land tax for the very first time!
You can check your land valuation by visiting the Queensland government’s website.
How much more do I have to pay?
That depends on factors discussed above and which state or territory the land you own is located. But for example, let’s stay in the Noosa region of Queensland and assume you own properties with a combined land value of $2 million, which has increased in value by 50% so that the total value is now $3 million.
The difference in land tax would be $16,500 ($37,500 vs $21,000 as an individual; or $45,000 vs $29,500 for a company or super fund).
Further Increase Called Off
The Queensland government’s Revenue Legislation Amendment Act 2022 was intended to introduce significant changes to land tax in Queensland from 1 July 2023. This included counting a taxpayer’s total landholding value Australia wide when determining their land tax liability. Thankfully for many however, the government’s plans were abandoned when governments in other jurisdictions refused to comply by sharing property records in their States or Territories. Phew!
Impacts on Property Investors and Owners with Substantial Assets
The increase in land values experienced in South East Queensland, and in most places around the country of late, is likely to have significant effects on many people's budgets.
For instance, individuals who own multiple properties or those whose properties are worth over $4 million could face annual land tax bills exceeding $30,000. Such a scenario could alter their budgets and lead to financial difficulties, particularly for those who rely on rental income.
Alternatively, landlords may raise the rent on their homes or holiday rentals to compensate for the tax increase, leading to further issues concerning housing affordability in our area.
Some families who have held land or homes across several generations may be forced to sell because of the increased costs.
Property owners may also now need to explore alternative investment options to diversify their portfolios.
If you think you may be affected, it is advisable to seek professional advice as soon as possible.
We hope you found this article interesting and useful. Please, feel free to reach out to discuss anything further or enquire about how we might help you with any lending requirements you may have.