Land Tax on Aussie property
STEVE DOUGLAS outlines the implications of Land Tax on Australian property. 
Q Do I need to pay Land Tax on my Australian property?
A While the Australian Federal Government is entitled to Income Tax and Capital Gains Tax, State Governments are only entitled to raise levies or duties on activities within their state – such as Land Tax. As such, State Revenue Departments tend to be active in chasing non-payers to recoup arrears.
Many people living in Australia are unfamiliar with Land Tax as it’s charged only on vacant land, rental property and commercial property rather than the family home. To be exempt you need to be living in the property on the date of determination. And because this date varies state-to-state, it’s difficult to ascertain, especially if you’re living overseas. Some states offer the family home exemption even when you’re abroad provided you’re not renting out the property. However you are still liable for Land Tax if you’re renting out a property and own more than one rental property in the same state.
Land Tax is calculated on the cumulative value of all the properties you own in each particular state. So the more property you own, the higher the Land Tax rate and annual cost, which can range from a few hundred to several thousand dollars. Each state has a different Land Tax rate, usually based on the unimproved value of the land of the property. But you can be in a tax-free threshold and not be liable for Land Tax if you own just one more property above your family home. This ruling is beneficial if you have properties in a few Australian states, since you get a new threshold for each state. Also, the Land Tax on an apartment is substantially less when compared with that of a house. This is because the unimproved land value is shared between multiple apartment owners, creating a lower individual value.
If you believe you have a potential Land Tax liability, contact your property manager or the State Revenue office to confirm if you’re over the relevant threshold for your state. If you don’t, the penalty can be expensive.
Land Tax isn’t a deterrent to a purchase, it’s just a nuisance. But it can become costly if you’ve built a substantial property portfolio in one state, so always take Land Tax into consideration when calculating your cash flow on a rental property. The expense of Land Tax shouldn’t make you change your investment decision−as the capital growth of any worthwhile property should justify additional costs. But always take Land Tax into consideration when reviewing your investment strategy. To keep your taxable land value at a manageable level, you may want to allow for multi-state property ownership and a sensible mix of houses and apartments.
