Land tax is the largest recurring state-level holding cost on commercial property in Australia, and the only one that can move the net yield of an otherwise stable asset by 50 to 100 basis points depending on ownership structure. For private investors building portfolios across multiple states, the rules differ enough that what is a $40,000 a year cost on one structure can be $120,000 on another, for exactly the same land.
This article covers how land tax applies to commercial property buyers in NSW, Victoria, Queensland, Western Australia, South Australia, and the ACT. It also covers the trust surcharge that catches many investors who hold through discretionary trusts, the absentee surcharge that applies to foreign-domiciled buyers, and the interaction with the Victorian Commercial and Industrial Property Tax that replaced stamp duty in 2024.
Land tax is aggregated by owner, not by property. Two assets each below the threshold can attract land tax once held by the same legal entity. The structure of the buying entity matters as much as the land itself.
How Land Tax Works
Each state and territory levies land tax on the unimproved value of taxable land held by an owner as at midnight 31 December (or 30 June in some states). The unimproved value is set by the relevant Valuer-General and updated annually. Rates are progressive in most states, with a tax-free threshold below which no land tax is payable.
Three common surcharges layer on top of the base rate:
- Trust surcharge. Higher rates and lower thresholds for land held in some discretionary trusts.
- Absentee or foreign owner surcharge. Higher rates for non-residents or foreign-domiciled owners.
- Vacant land surcharge. Higher rates for residential or commercial land left undeveloped or unoccupied for an extended period in some jurisdictions.
1 New South Wales
NSW land tax is administered by Revenue NSW. The tax-free threshold for the 2026 land tax year is published each November based on indexed land values, with a premium threshold above which a higher rate applies.
Rates
Below the threshold, no land tax. From the threshold to the premium threshold, $100 plus 1.6% of the unimproved value above the threshold. Above the premium threshold, the rate steps to 2%.
Trust surcharge
Special trust assessments apply to discretionary trusts that do not have an explicit exclusion of foreign beneficiaries. Trust-held land is assessed without the tax-free threshold and at a surcharge rate (currently 1.5% above the standard rate on dutiable values exceeding the threshold). A fixed unit trust with a defined beneficial interest can be assessed similarly to direct ownership; the trust deed controls the outcome.
Surcharge land tax
Foreign-domiciled owners pay a surcharge land tax on residential property only, at a rate that has increased materially in recent state budgets. The surcharge does not apply to commercial property held by foreign owners.
2 Victoria
Victoria land tax is administered by the State Revenue Office (SRO). The threshold and rates are revised periodically and applied on aggregated taxable land value.
Rates
Progressive marginal rates with a tax-free threshold. Above the top bracket the rate is materially higher than NSW or QLD; Victoria's top bracket sits among the highest in the country for general taxpayers.
Trust surcharge
Victoria applies a trust surcharge on discretionary trusts that do not nominate a fixed beneficial interest. The surcharge land tax rate is lower than the general top rate but applies from a low threshold. Nominating a fixed beneficiary can switch the trust to general assessment.
Absentee owner surcharge
The absentee owner surcharge applies to foreign-domiciled owners and to corporations with absentee control. It applies to all taxable land held by an absentee owner, including commercial property.
Commercial and Industrial Property Tax (CIPT)
Victoria's CIPT, introduced in July 2024, replaces stamp duty on commercial and industrial property with an annual property tax of 1% of the unimproved land value, payable 10 years after the first eligible transaction. CIPT runs alongside land tax during the transitional period; long-term holders of post-2024 acquisitions will pay CIPT instead of stamp duty on subsequent transactions, but land tax continues to apply.
3 Queensland
Queensland land tax is administered by Queensland Revenue Office (QRO). It is assessed annually based on the unimproved value of taxable land as at 30 June.
Rates
Progressive marginal rates with a tax-free threshold of $600,000 for individuals and $350,000 for companies, trustees, and absentees. Above the threshold, rates step from 1.0% to 2.75% across the brackets.
Trust assessment
Land held by a trustee is assessed at the trust rate, generally with a lower threshold than the individual rate. The deed structure controls whether the trust is taxed as a discretionary trust, a unit trust, or otherwise.
Absentee surcharge
The absentee surcharge applies to individuals who are not Australian residents and to companies with absentee shareholders or controllers. It is layered on top of the standard rate.
4 Western Australia
WA land tax is administered by Revenue WA. Rates are progressive and the tax-free threshold sits below the NSW threshold.
Metropolitan Region Improvement Tax
The MRIT is a separate levy on metropolitan Perth land above a threshold, on top of standard land tax. It funds public works in the metropolitan area. For investors with metro Perth commercial portfolios, MRIT can add a meaningful holding cost layer.
Trust assessment
Trust-held land in WA is generally assessed at the same rates as individual-held land, with the trustee assessed as the taxpayer. Fixed unit trusts can pass through the threshold to the beneficial owners under specific conditions.
5 South Australia
SA land tax is administered by RevenueSA. Progressive marginal rates apply with a tax-free threshold and a top bracket above which rates increase.
Aggregation rules
SA aggregation rules have specific provisions for partnerships, joint owners, and trusts. Each ownership permutation can produce a different total tax liability for the same underlying land. The buyer's structure should be set before settlement, not after.
Trust surcharge
A surcharge applies to land held in trust where the beneficial owners are not disclosed under the relevant land tax legislation. Notification by the trustee under the SA disclosure regime can reduce or eliminate the surcharge.
6 ACT and Tasmania
The ACT levies land tax on residential property held as an investment or rented; it does not apply to commercial property in the same form. ACT commercial property is subject to General Rates and Fire and Emergency Services Levy instead, which together act as the holding-cost equivalent.
Tasmania land tax applies to taxable land above the general threshold and uses a progressive rate. Commercial and investment property are within scope. The rates and thresholds are revised periodically.
7 Practical Buyer-Side Considerations
Structure before settlement
The choice between individual ownership, company, fixed unit trust, discretionary trust, and SMSF materially changes the land tax bill. Discretionary trusts often produce the worst result on land tax because the threshold is reduced or eliminated. Fixed unit trusts and individual ownership generally produce the best outcomes, subject to other considerations (asset protection, succession, GST flexibility).
Outgoings recovery
In commercial leases, land tax is commonly recoverable from the tenant under the outgoings provisions. The recovery is usually on a single-holding basis (the land tax that would be payable if the property were the only taxable land held by the landlord), not on the aggregated basis the landlord actually pays.
For investors with portfolios, the gap between recoverable single-holding land tax and actual aggregated land tax is a real cost. The brief should model both.
Lease drafting
Commercial leases drafted before 2010 often contain land tax recovery provisions that no longer comply with current retail leasing legislation in some states. Buyer-side DD should review the lease and the disclosure statement against current statute. A non-compliant clause may not be enforceable at renewal.
Frequently Asked Questions
Can land tax be passed on to the tenant?
In commercial leases, yes, usually on a single-holding basis. In retail leases governed by state-level Retail Leases Acts, the position is more constrained; specific recovery rules apply by state. The lease and disclosure statement set the parameters.
Does the principal place of residence exemption apply to commercial property?
No. PPR exemptions apply to residential property used as the owner's main residence. Commercial property is fully assessable from the threshold.
How is land tax handled at settlement?
Land tax is typically adjusted at settlement on a pro-rata basis from 1 January (or 1 July, depending on state). The vendor pays the share covering their period of ownership; the buyer pays the share covering theirs. The contract specifies the apportionment.
Does the Victorian CIPT replace land tax?
No. CIPT replaces stamp duty on commercial and industrial property under specific transitional rules. Land tax continues to apply to commercial property in Victoria.