For all owners of property in Australia, a Land Tax is imposed by the State Government in which the property is located.
Each state has different rates and rules as to how much and when the Land Tax is payable, they all have very good information on their respective State Government websites.
Land Tax is not part of your income tax, which is a Federal Government responsibility, and is an expense of property ownership rather than a levy against the rental. Unlike income tax, which we can plan to eliminate, Land Tax can not be extinguished as it is based on the property value and is a annual levy.
Because it is an expense, you should always be mindful of the cost as it will soak up some of your rental and potentially add to your holding costs.
Each state offers an exemption for the house you live in, so many expats have not experienced a land tax bill previously, but if you have begun renting your home out during your time overseas then land tax will be payable.
Most states levy the Land Tax based upon the “Unimproved Value” of the property, the same method that is applied for your Council Rates, and a threshold is offered so that in many cases if you only have one or two properties, you may well find that you are under the taxable level and no amount is payable.
Because houses have a greater land component, they will attract a higher tax value than apartments.
In all states, the more property you own, the higher the land tax rate, so as you start to accumulate a property portfolio, the cost of land tax can escalate. This may encourage you to look to have a property portfolio spread across Australia where you can benefit from the tax free threshold in each State.
If you have not been paying Land Tax, it is essential that you check and see if you should be as it is your responsibility and penalties will apply if you are found out. Most states issue their Land Tax Notices Between November and March.
In all states, when you sell the property you are required to gain clearance for land tax before the final sale can be transacted.