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What is land tax? Land tax is a tax you pay based on the value of your land in a given state.

Land tax is a tax that you pay based on the value of your land in any given state. Hey, I'm Ryan from onproperty.com.au and in this episode, I'm going to be talking about what is land tax and how does it affect you as an investor? Land tax is something that you need to be aware of as you accumulate more and more properties. Because it can become quite expensive if you don't prepare yourself for it properly.

So land tax, as I mentioned before, it's a tax that you pay based on the value of your land in any given state. Land tax is a tax that's generally a percentage of the value of land that you own that you need to pay every single year. It's charged in all states, except Northern Territory, and each state assesses land tax based on the value of land that you own within that state. So we're going to go through and explain land tax in a bit more detail. We're going to talk about some of the exemptions, how it's going to affect you as an investor, some ways that you can avoid it and then future potential changes to the land tax that are out there.

The first thing that you need to be aware of when it comes to land tax is that there's thresholds that you need to hit in any given state before you start getting charged land tax. Now, every state assesses and charges land tax differently. So, for example, in New South Wales, the threshold at the moment as I record this is $482,000. In Queensland, it's $600,000. In South Australia, it's $323,001 is how much the threshold is. So, each state varies in terms of its threshold, so you need to research each state individually or talk to your accountant about this stuff.

So what happens is basically, you don't pay land tax until the value of your land reaches that threshold. And once the value of your land reaches that threshold, you are then charged land tax. It's important to know that land tax isn't the value of your property as a whole. It's the value of the land that you own. So, for example, if you are a part of a unit complex, then you will only own a percentage of that land. So, only a percentage of the land’s value will count and the value of the unit itself won't count. If you own a house, it's only the land they're looking at, it's not the land plus the dwelling that's on the land, so that's very important.

When it comes to assessing land value, it's done by the government or by parties that the government hire to do it. So, for example, in Queensland, the assessment is done by the Department of Natural Resources and Mines. Basically, from what I can gather, the government does the assessments or pay someone to do the assessments for them. They then tell you how much your land is worth and your land tax calculations are done on top of that. There are ways that you can dispute it and try and get it changed if you need to. So, the assessment, it's not based on what you purchase your property for, what the real estate agent says it's worth, but it's what the government says the land is worth – that's a very important thing to note.

Also, there are a lot of different exceptions as well to paying land tax. For example, in most – if not all – cases, your principal place of residence is exempt from the land tax payment and from the threshold, so it doesn't add to the value of the land that accumulates towards paying land taxes. There’s a whole bunch of different other exemptions based on the type of land – whether it's commercial or personal, etcetera, etcetera. So, you need to consult each individual state on what those exemptions are and whether you fit into them. So, for example, there's different thresholds if you're a personal investor versus if it's for commercial use and stuff like that. And there's exemptions for things like caravan parks and all of that sort of stuff.