Land tax is levied on anyone who owns property that is not their principal place of residence. It is calculated on the total value of all taxable land above a particular threshold.
In NSW, properties over the first threshold (currently $549,000) incur a tax amount of $100 plus 1.6% of the land value up to the premium threshold (currently $3,357,000).
For example, a property in NSW valued at $700,000 would incur the following land tax:
$100 + (1.6% x 151,000) = $2,516
Any property valued above the premium threshold incurs a further 2% tax.
Land tax thresholds are redetermined each year, meaning there was an increase between the 2016 threshold ($482,000) and the 2017 threshold ($549,000).
However, rising property values have meant that some property owners have been pushed over the tax threshold, some without even realising it.
We ran across an example where an owner, whose property had risen in value and therefore jumped above the threshold, had a land tax in the thousands – where previously they only had to pay a few hundred dollars.
It’s a good idea to be aware of the land tax thresholds each year so you are prepared if your property jumps over the threshold.
Similarly, if you are considering purchasing another investment, be aware that this might also take you over the threshold, meaning you are obliged to pay land tax.
Each state has its own land tax rules, so be sure to check the legislation that applies to your property.