The NSW government announced it will raise the 2024 tax-free threshold for land tax to a combined property value of $1,075,000 as part of Tuesday's state Budget.

That's a rise of $106,000 on the previous year but from then on, the threshold will remain at that level, meaning more property owners will be liable to pay land tax each year as their property values increase.

Land tax is paid by investors on the total value of properties they own in the state, including vacant land.

The tax is generally paid by landlords, holiday homeowners, and businesses with property holdings.

Homeowners' principal places of residence and working farms are exempt from the tax.

New land rates announced

As at 31 December 2024 - the day land tax is calculated in NSW - property owners will be up for $100 plus 1.6% of their combined property value above the threshold.

Those whose holdings come in above the premium threshold of $6,571,000 will have to pay a flat $88,036 plus 2% of their land value above the threshold.

Both thresholds will then be frozen at those levels, rather than being reviewed each year to reflect market conditions as they are currently.

It effectively means more landowners will be hit with the tax as property values rise.

It will likely see the government pull in more annual revenue thanks to so-called 'bracket creep' that also sees state and territory governments reap huge windfalls from unchanged stamp duty parameters that take no account of market price rises.

Government attempt to ease housing crisis

The New South Wales government is unrepentant, with NSW Treasurer Daniel Mookhey saying the adjustments are modest against the backdrop of a generational housing crisis.

"The government has been upfront with the people of NSW," he said.

"We intend to pull every lever we can to confront the housing crisis and build the homes the people of NSW need."

New South Wales becomes the third state government to ramp up land tax, following a significant plunge in the Victorian tax-free threshold in January and an attempted hike in Queensland that was scrapped following industry backlash.

Industry says renters will pay the price

The Real Estate Institute of New South Wales has slammed the move to scrap indexation, saying it amounts to "a tax grab by stealth" that will end up hurting those who can least afford it: renters.

"Adding to the tax burden will only place additional pressure on investment returns, leaving landlords two undesirable options," CEO Tim McKibben said.

"They can either pass the extra cost onto tenants or sell their investment property, taking more homes out of an undersupplied rental market."

Foreign investors also slugged

As well as rate and threshold changes, the foreign investor duty surcharge in New South Wales will jump from 8 to 9% from 1 January 2025.

The surcharge applies to all foreigners who own residential property in New South Wales, even if it's not subject to land tax.

The land tax rate for foreign landholders will also increase from 4% to 5% from the 2025 land tax year.

The New South Wales government said there are currently an estimated 20,000 foreign-owned residential properties in the state.

Mr Mookhey said the increase in the surcharge and taxes for foreign property owners is expected to encourage more properties to be made available to New South Wales residents.

State land tax grabs

In January, the Victorian government dropped the land tax-free threshold to a property value of $50,000 from $300,000, scooping up another 380,000 'mum and dad' investment property owners who'll be hit by the tax for the next five years.

Property industry figures in Victoria claim renters have felt the sting with the tax being pushed on to them in the form of higher rents while prospective investors are turning to other states.

In 2022, the Queensland government made a failed attempt to count properties held across all states and territories in its land tax calculations.

The government shelved the plan with then-Queensland Premier Annastacia Palaszczuk saying the government was unable to rally other states to support the scheme.


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