September 23, 2018

About Land Tax and Land Value

If you are new to property investment, land tax is something that you need to familiarise yourself with because the more property that you accumulate, the more tax you are going to have to pay.

What is land tax?

Land tax in Australia is a tax paid based on the value of land on any given state. It is worked out as a percentage of the value of the land that you own and it must be paid yearly. The only state that is exempt is Northern Territory. Each state in Australia calculates the tax amount according to the value of the land owned within that state.

Land tax thresholds

The first thing that you should be aware of is that there is a threshold that you must reach in any state before you become eligible to pay land tax. Every state has a different method for assessing and charging land tax. The threshold varies in each state. This is information that you will need to find out from your accountant. You will not pay land tax until the value of the land reaches that threshold.

How is land tax calculated in Australia?

It is essential to know that land tax isn’t the value of your entire property; it is the value of the land that you own. The land is assessed by the government or the job is outsourced to an evaluation company. It is also important to know when you are purchasing a property the value of the land is not determined by the real estate agent. The only people who are eligible to provide you with this information are the government or the company that they hire to perform the evaluation.

Can I avoid paying land tax in Australia?

You can’t avoid paying land tax in Australia all together but you can avoid paying significant amounts. Since each state has their own assessment criteria for land tax, the properties that you own in other states are not added to the land tax that you pay in a different state. Smart investors spread their investments throughout different states, which means that they are not accumulating all of their land value in one state.

Another strategy is to invest in units, because you own a smaller percentage of the land the value is not as high therefore the tax is lower. These strategies allow investors to enhance their investment portfolios and avoid paying exorbitant amounts of land tax.

Final thought

It is essential that your land tax is paid on time every year or you will face a heavy fine.

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