Avoiding land tax is one of the top reasons to diversify your property portfolio. This article explores land tax thresholds across Australia, strategies to minimise taxes, and the importance of diversifying your property investments to maximise profits. With examples and expert insights, you’ll learn how to structure your investments wisely and secure higher returns.
One of the biggest reasons for you to diversify your property portfolio is to avoid paying land tax.
Now, this could be a tax that you haven’t encountered yet, or maybe you’re someone who owns property in the same state and is now having to pay extra tax—which no one really likes.
In this article, I'm going to share exactly what the land tax thresholds are for each state in Australia and how you can avoid paying unnecessary tax so you can maximise your profits.
If you're interested, then definitely keep reading…
The truth is, when you buy real estate, there are a lot of costs involved—some are upfront, and others are ongoing.
What we’re focusing on in this article is land tax and how it varies state by state. This is important to know because, while you may think you can continue buying property in the same state, eventually, you’ll start racking up a large tax bill.
What may seem small early on can actually add up significantly over time, which is why having the right strategy is so important when purchasing property.
To use my example: I have a property portfolio valued at around $15 million to $16 million, with properties spread across four or five different states.
If I had all those properties in just one state, I could be paying anywhere in excess of $50,000 to $60,000 in extra, unnecessary tax.
I say “unnecessary” because, similar to stamp duty, there’s a more efficient way to approach how tax is charged here in Australia, though that’s a separate debate and not something we’ll cover in this article.
Now, of course, tax is something you have to consider as a byproduct of buying property or investing. So, your focus should be on securing high-growth properties that fit into your overall strategy. After that, you’ll want to consider things like depreciation, how much tax you’ll pay, and other costs like land tax.
Let’s go over what land tax is, how it’s calculated, and how it varies from state to state.
You’re charged land tax once you exceed a particular tax-free threshold. This is a bit of a tongue twister, but I’ll do my best to make it clear in this article.
The land tax threshold means that, once you exceed a certain property value, every dollar above that amount is subject to land tax. I'll use an example to make this as clear as possible.
Now, as I mentioned, land tax varies state by state, so I’m going to cover all the major states.
Let’s start with New South Wales. I’m here on revenue.nsw.gov.au, so you can access this information for yourself as well.
What we need to understand first is who is required to pay land tax. You may need to pay land tax if you own or jointly own:
Additionally, you may also have to pay land tax if:
This tax applies regardless of your income, which is important to note.
For instance, if you buy property today and then lose your job, you’ll still be required to pay land tax. This isn’t like your pay-as-you-go income tax, which depends on how much income you make. If you own property with land value exceeding the set threshold, you’ll need to pay land tax.
So, how exactly is land tax calculated, and what are the thresholds in New South Wales?
These thresholds can change yearly. From 2024 onwards, the land tax thresholds in New South Wales are as follows:
Under the general threshold, you can have up to $1.75 million in land value outside of your principal place of residence, which is crucial to note.
I know a lot of you have your own principal place of residence, hold a large portion of value in their land, and are wondering: Am I going to have to pay tax on my own property?
No, you don’t. You pay land tax only on investment properties, so your owner-occupied property is exempt from this calculation. But let’s say you own two properties, and the land value equates to $1.1 million. You would then have to start paying land tax, which is an additional cost that will start affecting your actual cash flow.
For the premium threshold, which is over $6.571 million, very few people reading this will likely fall into that category, but it’s just important to note there are two thresholds.
Now, why is it important that we're making this article?
A lot of people have avoided buying in Victoria specifically because their land tax rules have changed.
I want to go over what’s happening in Victoria, what the changes are, and my thoughts on whether it’s something you should consider in your decision-making process.
For land holdings under $50,000, you pay nothing.
Now, some people might say: If I don’t have to pay land tax up to $1.035 million in New South Wales, why would I purchase in Victoria where I pretty much start paying land tax as soon as I hit $50,000?
If you're purchasing real estate in Victoria and it’s a house, you’re likely to hit that first tier very quickly. I own property in Victoria myself, so I pay land tax, but I’m okay with that.
This is where an advanced strategy comes in. Many people see the higher land tax threshold and lower stamp duty in New South Wales and think Victoria doesn’t make sense because it has the highest stamp duty across the country.
However, in the bigger scheme of things, paying an extra $1,000 or $2,000 for a property that you could buy under market value, plus if it’s in the right point of the growth cycle, means it may still outperform net-net when you look at your entire portfolio.
When I say "net-net," I mean after deducting all costs, deductions, and accounting for cash flow position and growth. If you review your net worth growth, you may find some areas in Victoria outperform some areas in New South Wales.
An example for this would be if you purchase something for $500,000 in New South Wales or Victoria, and you find that the one in Victoria is growing by 2% higher annually than the one in New South Wales. You'll see it's growing by $10,000 tax-free every single year, and it’s going to compound more, which means you'll offset any extra land taxes you have to pay anyway.
Now, yes, it should be part of your consideration if you plan on purchasing one, two, or three properties all in Victoria. In that case, you'll find yourself paying quite a bit, but it’s not solely about the land tax.
The real reason I avoid concentrating too much in one area is diversification.
When you focus completely on real estate and do it well, you’re likely to make a lot of money. But you also want to diversify within real estate. So when you're building a portfolio, you should consider one or two property purchases in the same state or area, and then hop over into another state. This way, when rules change in a particular state, you're not completely affected or pushed out of the market.
Consider this: if you were in Victoria and owned property there, paying little to no land tax before the recent changes, you’d probably have felt fine.
However, with the new changes, your bill could jump from, say, $11,000 per year all the way up to $156,000, depending on your holdings. That’s a huge shift, and it highlights the importance of diversifying.
When those changes took effect in Victoria, I only saw a small bump in my land tax because I also had property in Western Australia, New South Wales, Queensland, and South Australia. But many investors focus only on their home state, which can cause issues when scaling a larger portfolio.
Moving to Queensland, individuals have a threshold up to $600,000. It starts at $500 plus 1% for each dollar above $600,000 and increases on a tiered basis for land valued above $1 million.
It’s different for properties held in companies and trusts, which are a hot topic now.
For properties purchased under trusts, the threshold in Queensland is typically lower.
In most other states, if you purchase under a company or trust, you often start paying land tax immediately—no threshold applies.
These are important considerations if you’re planning to purchase property under a different structure.
Again, I’m not an expert or licensed to provide specific advice here, so if you need assistance, reach out by booking a FREE discovery call with my Search Property team and we can point you to accountants who specialise in structuring finances to build a larger portfolio.
In South Australia, the threshold is $732,000.
In Western Australia, it's $300,000.
For Tasmania, it’s around $125,000.
In the ACT, it’s structured differently with a fixed charge. There’s no tier; it’s a flat $1,612, paid regardless of the land's average unimproved value.
These numbers may seem small at first, but if you hold a property for over 20 years, you’ll see the value increase, and with it, your land tax bill.
I always urge people to treat it like a business: put all your income on one side, expenses on the other, look at the growth, assess the cash flow, and then see what your net-net number actually is.
What you see is that if you can get into high-growth markets, it doesn’t matter what these other costs look like.
You need to focus on the bigger picture and enter markets when the growth cycle aligns with your property cycle strategy.
A classic example is that we were buying property in Perth for around $250,000 to $300,000 in 2020 and 2021.
Now, everyone wants to buy because the market has moved up so quickly. But what you want to do is get into these markets at the right time.
I know there's a saying: "Time in the market beats timing the market," but if you can both time the market and stay in it as long as possible, you'll set yourself up from the start. This minimises your downside risk and maximises how long you can hold that property.
If you got in at a lower price, your cash flow looks significantly better by year two or three, and you avoid this whole concept of blue-chip areas, which are often defined by supply and demand.
That’s the sort of stuff we dive deep into—we have a full-blown research team dedicated to this. I don't share as much here in terms of metrics because, honestly, there are people in the company who do it far better than I do, and I think you might find it tedious.
However, if you need help with data-driven research for property purchases, and you'd like it done for you so you can enter the market with speed, definitely contact Search Property by booking a FREE discovery call. That's the buyer’s agency I run. We have over 40 full-time staff, and we’re absolutely loving life helping so many of you.
If you enjoyed this article. I’ll catch you in the next one.
Thanks, guys!
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
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