What Is Land Tax in NSW?
Land tax is an annual state tax levied by Revenue NSW on the total taxable land value of property you own as at 31 December each year (the "taxing date"). It applies to investment properties, commercial properties, and vacant land — but not to your principal place of residence (PPOR).
Unlike stamp duty (which is paid once), land tax is a recurring annual cost. For portfolio investors, it can become a significant expense — particularly as NSW land values have risen sharply over the past decade.
NSW Land Tax 2026: Threshold and Rates
| Component | 2026 Amount |
|---|---|
| General threshold | $1,075,000 |
| Fixed charge (if above threshold) | $100 |
| Standard rate (above threshold) | 1.6% of land value exceeding threshold |
| Premium threshold | $6,571,000 (applies to individual landholdings, not aggregated) |
| Premium rate (above premium threshold) | 2.0% of land value exceeding premium threshold |
| Trust surcharge (discretionary trusts) | +0.8% on top of standard rate = effectively 2.4% |
| Foreign person surcharge | 4.0% (in addition to standard rate) — applies to residential land |
How to calculate your land tax bill
Formula: Land Tax = $100 + 1.6% × (Total taxable land value − $1,075,000)
Land tax = $100 + 1.6% × ($1,270,000 − $1,075,000) = $100 + 1.6% × $195,000 = $100 + $3,120 = $3,220 per year
Land tax = $100 + 1.6% × ($2,500,000 − $1,075,000) = $100 + 1.6% × $1,425,000 = $100 + $22,800 = $22,900 per year
Principal Place of Residence (PPOR) Exemption
Your main home is exempt from land tax — provided:
- You are an individual (not a company or trust)
- The property is your genuine primary residence as at 31 December
- You notify Revenue NSW by lodging a claim (or it is already registered)
- You own the property (not just occupy it as a tenant)
The PPOR exemption applies to only one property per owner. If you move out (e.g. to rent elsewhere), you have a 6-year exemption window if you intend to move back — but if you purchase another home and live in it, the original PPOR exemption ends.
| PPOR Exemption Rule | Detail |
|---|---|
| Who qualifies? | Individual owner only (not company, not trust) |
| How many properties? | One PPOR per owner only |
| Partial use (e.g. granny flat) | May reduce exemption proportionally |
| Renting out while overseas temporarily | Exemption may continue — seek Revenue NSW confirmation |
| After you move out permanently | Exemption ends; property becomes taxable from next assessment |
| Inherited property | 12-month exemption grace period after inheritance in most cases |
Jointly Owned Properties: How Assessment Works
If you own properties jointly (e.g. with a spouse or partner), land tax is assessed on each owner's share separately. Revenue NSW attributes a proportion of the land value to each owner based on their ownership percentage, then adds that to any other taxable land that individual owns.
This is why some investors choose to structure ownership so that both partners each hold properties, spreading land value across two tax accounts and potentially keeping both below the threshold for longer.
Trusts and the Land Tax Surcharge
Holding investment properties in a discretionary (family) trust is common for asset protection and estate planning — but it comes with a significant land tax penalty in NSW.
| Structure | Standard Land Tax Rate | Additional Surcharge | Effective Rate |
|---|---|---|---|
| Individual (own name) | 1.6% | None | 1.6% |
| Company (not trustee) | 1.6% | None | 1.6% |
| Discretionary (family) trust | 1.6% | +0.8% | 2.4% |
| Fixed unit trust — all beneficiaries assessed | 1.6% (individual beneficiaries assessed) | None | 1.6% (if individual beneficiaries) |
| Self-managed super fund (SMSF) | 1.6% | None (no surcharge) | 1.6% |
The 0.8% trust surcharge applies to all discretionary trusts — you cannot nominate a PPOR exemption for a trust-held property. For a property with $500,000 of taxable land above threshold, the extra 0.8% costs $4,000 per year extra versus individual ownership.
Foreign Person Surcharge
Foreign persons (including foreign companies and certain trusts with foreign interests) pay an additional 4% surcharge on the NSW land value of residential properties they own. This is in addition to the standard 1.6% rate.
- Applies to temporary visa holders and foreign citizens
- Some exceptions apply (e.g. Australian citizens living abroad are not "foreign persons")
- On a $1,500,000 land value property, the foreign surcharge adds $60,000 per year — a major cost
- This is separate from the foreign investor FIRB approval process
- Permanent residents are not subject to the surcharge
Land Tax as a Cashflow Cost: Real Impact on Investors
Many investors — particularly those buying in Western Sydney where land values have risen significantly — underestimate land tax as a holding cost. Here's how it impacts a typical portfolio:
| Portfolio Size | Estimated Land Value | Annual Land Tax (Individual) | Monthly Cashflow Impact |
|---|---|---|---|
| 1 investment property | $900,000 | $0 (below threshold) | $0 |
| 1 investment property | $1,300,000 | $100 + 1.6% × $225,000 = $3,700 | −$308/month |
| 2 investment properties | $1,900,000 | $100 + 1.6% × $825,000 = $13,300 | −$1,108/month |
| 3 investment properties | $2,700,000 | $100 + 1.6% × $1,625,000 = $26,100 | −$2,175/month |
| 4 investment properties (trust) | $3,200,000 | $100 + 2.4% × $2,125,000 = $51,100 | −$4,258/month |
Managing Land Tax Across a Portfolio
Experienced investors use several strategies to manage land tax as their portfolio grows:
1. Spread ownership across partners
If you and your spouse or partner each hold properties in your own names, you each get the $1,075,000 threshold. Combined, you effectively have $2,150,000 in exempt land value — rather than one threshold if everything is held in one name or a joint structure.
2. Buy in states with lower land tax
NSW is known for relatively high land tax exposure. Queensland, Victoria, and Western Australia have different threshold structures. Diversifying interstate can manage the NSW exposure — though each state assesses separately.
3. Hold high-land-value assets in SMSF
SMSFs pay land tax at the standard individual rate (1.6%) without the trust surcharge. For larger portfolios, holding some assets through an SMSF avoids the discretionary trust penalty.
4. Consider the timing of property purchases
Land tax is assessed at 31 December. If you settle on a new investment property on 1 January, you've avoided that year's land tax assessment. The saving in year one is the full year's land tax bill on that property.
5. Factor land tax into your yield calculations
When assessing whether an investment property is viable, always include the projected land tax as an annual cost in your yield modelling. Land values typically increase over time, meaning land tax bills grow even without buying new properties.
Related investor guides
Common Land Tax Mistakes NSW Investors Make
- Not registering: Revenue NSW automatically assesses land tax, but if you're unregistered, you may receive a bill (plus interest) years later when they identify your holdings. Register proactively.
- Forgetting to claim PPOR exemption: If you don't actively lodge your PPOR exemption with Revenue NSW, it may not apply automatically. Check your account every year.
- Assuming trust ownership avoids land tax: The opposite is true — trusts typically pay more land tax due to the 0.8% surcharge. Get proper advice before buying in a trust structure.
- Not accounting for land value growth: Even if you're below the threshold today, rising land values can push you over it without you buying any new properties. Budget for this in your long-term cashflow modelling.
- Forgetting it's deductible: Some investors pay their land tax but forget to claim it as a deduction on their tax return. It belongs in your rental property expenses schedule (Item 21 on the ATO tax return).
- Missing the joint ownership nuance: Both individual and joint assessments apply. Get your accountant to model the impact of ownership structure before signing contracts.