Land Tax for Australian Property Developers Explained

Land tax is an annual state or territory tax on the unimproved value of land you own above a threshold, and for a developer it is a holding cost that runs every year you hold a site. It is charged on what the land is worth, not on what you build, so it accrues while a site sits through planning, pre-sales and construction, earning nothing. On a multi-year hold it quietly compounds into one of the larger lines in your land holding costs, and it scales with two things you care about most: site value and time.

The headline rate is rarely where the money is for a developer. The money is in the rules around it: the land holding costs that a longer program adds, the aggregation that taxes your second and third sites at your top marginal rate, the foreign owner surcharges that can add up to 5% on residential land, and the exemptions that most developers either overlook or misuse. This guide covers how land tax works for a developer in every Australian state and territory, the current rates and thresholds, the exemptions and surcharges that actually change your feasibility, and where the tax lands in your model. New Zealand gets a short section at the end, because the answer there is different. None of this is tax or legal advice; the treatment turns on your circumstances and structure, and rates and thresholds change, so use it to frame the questions you take to your adviser and confirm against a current primary source.

What is land tax, and why does it matter to a developer?

Land tax is an annual tax levied by each state and territory on the value of the land you own, assessed at a single date each year, and charged on your combined holdings rather than property by property. It is calculated on the unimproved or site value of the land, meaning the value of the dirt without the buildings, as set by the state Valuer-General. Your home is generally exempt, but a development site is not your home, so for a developer land tax is a cost of ownership that applies for as long as you hold the land.

That single-date, per-owner design is what makes it a developer problem rather than a homeowner one. Because it is assessed on ownership at one moment each year (midnight on 31 December in New South Wales and Victoria, 30 June in Queensland, South Australia and Western Australia), a site you settle just before that date can attract a full year of land tax you did not budget for. Because it is charged on your combined landholdings in a state, a second site does not get a fresh tax-free threshold; it generally stacks on top of the first and is taxed at a higher marginal rate. And because it grows with the length of the hold, every month of planning delay or slow pre-sales adds real dollars of land tax to a feasibility, in the same way the interest carry does.

The practical read is that land tax behaves like a meter on the land. It is not a one-off you price once and manage, like a construction cost. It is a recurring charge that keeps running whether the project moves or not, which is why it belongs in your feasibility from the day of settlement, modelled across the real timeline rather than an optimistic one.

How much land tax will you pay? Rates and thresholds by state

Land tax depends on the combined unimproved value of everything you own in a given state, the bracket that total falls into, the type of owner (individual, company, trustee or foreign person), and the date the state assesses ownership. There is no national land tax and no national rate, so a site in Melbourne and an identical site in Perth can carry very different annual charges. The table below sets out the current position for the 2025-26 assessments. Figures are in Australian dollars and change with most state budgets, so treat them as the current starting point and confirm against the relevant revenue office before you rely on a number in a feasibility.

How does land tax work in New South Wales?

In New South Wales, land tax applies when the combined unimproved value of your taxable land is above the general threshold of $1,075,000, and you pay $100 plus 1.6% of the value above that threshold, up to a premium threshold of $6,571,000, above which the rate steps up to $88,036 plus 2% of the excess. Both thresholds were frozen from the 2024 land tax year, so they no longer rise with land values, which means bracket creep will pull more sites into land tax and more value into the premium rate over time. These figures come directly from Revenue NSW’s land tax thresholds and rates.

Two mechanics matter for a developer. First, New South Wales assesses your liability against a three-year average of the land value, not the single latest valuation, which smooths a sharp valuation jump but also means a spike stays in your assessment for three years. Second, ownership is tested at midnight on 31 December, and the tax is for the following year, so the settlement date of an acquisition around the new year can decide whether you wear a full year of land tax on that site.

How does land tax work in Victoria?

In Victoria, land tax starts at a much lower tax-free threshold of $50,000 (or $25,000 for land held on most trusts), so almost any development site is caught, and the general rates then rise in steps to 2.65% for holdings of $3,000,000 or more. The current Victorian land tax rates include a temporary COVID debt levy, legislated to run until the 2033 land tax year, which adds fixed amounts and a small percentage loading across the brackets: for example, land between $300,000 and $600,000 pays $1,350 plus 0.3% of the excess, and land between $1,000,000 and $1,800,000 pays $4,650 plus 0.9%. Victoria assesses on the site value at midnight on 31 December.

Victoria is the most active state on property taxes, and two changes hit developers specifically. The absentee owner surcharge is 4% for the 2024 land tax year onwards, up from 2%, and applies from the first dollar of land value with no threshold where any owner in the structure is an absentee. Separately, the vacant residential land tax has expanded and now reaches undeveloped land, which is covered in its own section below because it is a genuine trap for land banking in Melbourne. The state’s new Commercial and Industrial Property Tax, a separate 1% annual charge on unimproved land value that progressively replaces stamp duty on commercial and industrial land, adds another holding-cost consideration on those sites once a property has entered the regime.

How does land tax work in Queensland?

In Queensland, the threshold and the rate both depend on who owns the land: individuals get a $600,000 tax-free threshold, while companies, trustees and absentees get only $350,000 and climb the brackets faster. Queensland assesses ownership at midnight on 30 June, and the Queensland land tax rates run to a top marginal rate of 2.25% for individuals and 2.75% for companies and trustees on holdings above $10,000,000. Because most developers hold in a company or a trust, the lower $350,000 threshold and the steeper company scale are the relevant numbers, not the individual figures that dominate the homeowner-focused pages.

Queensland also lifted its surcharge. An absentee and foreign surcharge of 3% applies to the taxable value above $350,000 for absentees, foreign companies and trustees, up from 2% from 1 July 2024, as set out by the Queensland Revenue Office on rates for absentees. Worth remembering: Queensland floated taxing your interstate landholdings when working out the Queensland rate, but that measure was shelved in 2022, so for now only Queensland land counts towards the Queensland assessment.

How does land tax work in the other states and territories?

Outside the three biggest markets the position varies, but the pattern holds: a threshold, a rising scale, and in some places a foreign surcharge. Here is the current shape of it.

South Australia assesses on 30 June and has the second-highest threshold in the country at $833,000 for 2025-26, indexed annually, with rates rising to a top of 2.4%, per RevenueSA’s rates and thresholds. South Australia is notable for aggressive aggregation and a separate, lower trust threshold of $25,000 with its own trust surcharge rates, so structuring across trusts saves less there than developers expect. There is no foreign owner surcharge on South Australian land tax.

Western Australia assesses on 30 June with a $300,000 threshold and rates rising to a top of around 2.67%, and adds a Metropolitan Region Improvement Tax of 0.14% on the value above $300,000 for land inside the Perth metropolitan region, which funds regional parks and infrastructure and is easy to forget in a metro feasibility. The detail sits with the Western Australian government’s land tax pages. Western Australia does not impose a foreign owner surcharge on land tax, though it does apply a separate 7% foreign buyer surcharge on transfer duty.

Tasmania assesses on 1 July, with the tax-free threshold lifted to $125,000 from 1 July 2025 and a top rate of 1.5%, which is lower than the mainland, per the State Revenue Office Tasmania rates. Tasmania applies a Foreign Investor Land Tax Surcharge of 2% on residential land owned by foreign persons, from the first dollar.

The Australian Capital Territory works differently again: there is no tax-free threshold, and land tax applies only to residential property that is not the owner’s home, such as a rented or vacant dwelling, charged quarterly as a fixed charge (around $1,693 for 2025-26) plus a marginal percentage of the average unimproved value. A foreign ownership surcharge of 0.75% of the average unimproved value applies as well, as the ACT Revenue Office sets out. The Northern Territory has no land tax at all, which is a genuine holding-cost advantage on a long Territory hold.

Why do multiple sites cost more land tax than you expect?

Because land tax is assessed on the combined value of everything you own in a state, not property by property, your second and third sites do not each get their own tax-free threshold. They stack on top of the first site and are taxed at your top marginal rate, so the incremental land tax on an extra site is almost always higher than a developer assumes when pricing it in isolation. This is aggregation, and it is the single most common land tax miscalculation in a feasibility.

A quick example in New South Wales shows the size of it. Suppose you hold two development sites in one company, each with an unimproved land value of $1,200,000. Assessed separately, a developer might expect roughly $2,100 of land tax each, because each site is only a little over the $1,075,000 threshold. But the company owns both, so they aggregate to $2,400,000, and the land tax is $100 plus 1.6% of ($2,400,000 minus $1,075,000), which is about $21,300 for the year, not $4,200. The aggregation costs roughly $17,000 a year, and on a three-year hold that is around $51,000 of holding cost that never appeared in the naive version of the model.

Structuring across separate entities can spread thresholds, but this is where the grouping rules bite. Most states combine the landholdings of related companies and certain trusts and assess them as one owner, so a group of related development companies generally gets one threshold between them rather than one each. New South Wales applies the premium rate to the combined value of related companies, Victoria groups corporations and assesses them as a single landholding, and South Australia and Queensland both aggregate trust holdings. Splitting land across genuinely unrelated owners can help, but the anti-avoidance and grouping provisions are designed to catch arrangements whose main purpose is to multiply thresholds, so this is a question for your tax adviser rather than a spreadsheet assumption.

Which land tax exemptions can a developer actually use?

The exemptions that matter to a developer are the primary production exemption on land banked for future development, the build-to-rent concessions on rental projects, and, for foreign-owned but Australian-based developers, the surcharge exemptions. The exemption that dominates the search results, the principal place of residence exemption, is largely irrelevant to a development site, because a site you are developing for sale is not your home. It is worth knowing what does and does not apply before you assume a site is exempt.

Can you claim the primary production exemption while land banking?

Sometimes, and it can be the most valuable land tax saving available to a developer holding land for a future rezoning, but it turns on genuine current use, not your development intention. Every state exempts land used dominantly for a primary production business, such as grazing, cropping or horticulture. Land on the urban fringe that is held for a future project but is genuinely farmed in the meantime can qualify, which removes the land tax holding cost across what is often a long rezoning play. This connects directly to how you think about highest and best use: the interim primary production use funds the hold while you pursue the higher-value planning outcome.

The catch is that your future development plans cannot be the qualifying use, and the tests get stricter as land moves towards urban zoning. In New South Wales, the exemption under section 10AA of the Land Tax Management Act 1956 turns on the dominant use of the land, and where the land is not rural-zoned it must also meet commercial tests: the primary production activity has to have a significant and substantial commercial purpose, a real profit-making character, not a few agisted cattle keeping the exemption alive. The New South Wales Court of Appeal confirmed in Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11 that holding land for future development does not, by itself, defeat a present primary production use, which was a genuine win for land bankers, but the use still has to be real and dominant. Victoria takes a broader view of what counts as primary production but applies extra requirements for land wholly or partly within greater Melbourne and in an urban zone, as the State Revenue Office explains. The practical point is that the exemption is real and worth pursuing on a genuinely farmed site, but it is heavily scrutinised, so document the farming business and get advice before you bank on it in a feasibility.

How do the build-to-rent land tax concessions work?

If you are holding a completed project as rental rather than selling it, most states now discount the land value by 50% for land tax, which materially lowers the holding cost on a build-to-rent asset. New South Wales, Victoria, Queensland, South Australia and Western Australia each offer a version of the 50% reduction, generally tied to a minimum project size of around 50 dwellings and a commitment to hold the development as rental under single ownership for at least 15 years. The concession changes the maths on a build-to-rent hold, where land tax would otherwise run every year on the full site value with no sale in sight, and it sits alongside the other settings covered in the build-to-rent Sydney guide and the build-to-rent Melbourne guide.

The detail differs by state and is moving. New South Wales made its build-to-rent land tax concession indefinite from the 2026 land tax year in the 2025-26 budget, and pairs the 50% land value reduction with an exemption from surcharge land tax for eligible developments, as Revenue NSW sets out. Victoria offers a 50% reduction plus relief from the absentee owner surcharge, running to the end of 2053. Queensland pairs its 50% reduction with relief from the foreign surcharge where at least 10% of dwellings are offered as discounted affordable housing. Western Australia offers a 50% exemption for up to 20 years, with a newer 75% exemption for the first 10 years (then 50%) for developments completed from 1 July 2025. Because eligibility and clawback conditions vary, confirm the current rules in the state you are building in before you model the concession.

Is there relief for a foreign-owned Australian developer?

Yes, in New South Wales an Australian-based developer that is technically a foreign person can apply to have the surcharges removed or refunded on land it develops for sale. This is the relief the angle-aware developer is looking for: a locally operating company can still be a foreign person for surcharge purposes if foreign shareholders hold a substantial interest, which would otherwise pile surcharge purchaser duty and 5% surcharge land tax onto an ordinary residential project. The Australian-based developers exemption lets such a corporation apply for an exemption, concession or refund where it builds new homes or subdivides land and sells to unrelated buyers.

It is not automatic and it is not open-ended. You have to apply to Revenue NSW, the homes must be sold to persons who are not associates and not occupied before sale (other than as a display home), and a refund application generally has to be made within 12 months of the sale and no later than 10 years after the land was acquired, under Revenue Ruling G013. For a foreign-owned but Australian-operating developer, this can be the difference between a project that stacks and one that does not, so it is worth confirming eligibility early rather than discovering the surcharge at assessment.

Is land under construction exempt from land tax?

Generally no, not for a development you are building to sell. This is a common and costly assumption. The construction exemptions that exist, such as the Victorian and Western Australian exemptions for land on which you are building your own principal place of residence, are aimed at owner-occupiers, not at a developer building stock for sale. A spec builder or an apartment developer holding a site through demolition, approval and construction is generally liable for land tax across that whole period, on the full site value, every year. That is precisely why the holding period is such a sensitive input: there is usually no exemption switching the meter off while you build.

How do foreign owner surcharges catch developers?

If any owner in your structure is a foreign person, most states add a surcharge on residential land, charged from the first dollar with no threshold, on top of ordinary land tax. The surcharge is the single largest state tax risk for a developer with offshore capital in the ownership chain, because it applies to the full residential land value every year, and it can be triggered by a minority foreign interest that a developer did not think of as controlling. New South Wales charges 5%, Victoria 4% (its absentee owner surcharge), Queensland 3%, Tasmania 2% and the Australian Capital Territory 0.75%, while South Australia and Western Australia do not levy a land tax surcharge at all.

The trap is how easily a person or entity becomes foreign for these rules. A foreign shareholder with a substantial interest in your development company, a foreign unit holder in a unit trust, or a discretionary trust whose potential beneficiaries include a foreign person can each taint the whole holding, so the surcharge attaches to 100% of the residential land value even though the foreign interest is a fraction of the equity. For discretionary trusts in New South Wales and Victoria, the standard fix is a trust deed amendment that irrevocably excludes foreign persons as beneficiaries before the relevant date, which is a common oversight when capital is raised quickly. Where the developer is genuinely Australian-operating but technically foreign, the surcharge exemption for Australian-based developers covered above may recover it, but only on application. If your capital stack includes any offshore investors, price the surcharge into the feasibility until you have confirmed the structure is clean, because finding it at assessment is an expensive way to learn the rule.

The Victorian vacant residential land tax trap for land banking

Victoria now taxes vacant residential land, and from 1 January 2026 the tax reaches undeveloped residential land in metropolitan Melbourne, which turns land banking into an annual charge on top of ordinary land tax. The vacant residential land tax is separate from ordinary land tax and is charged on the capital improved value of the land, not the unimproved value, starting at 1% and escalating to 2% in the second consecutive year and 3% in the third. It began as an inner-Melbourne measure aimed at empty homes, expanded across the whole state from 1 January 2025, and now extends to undeveloped residential land in metropolitan Melbourne that has stayed undeveloped for at least five years, as Pitcher Partners has flagged for developers.

For a developer, the exposure is real. A residential site held long term in Melbourne while you assemble neighbouring lots, wait out a market, or push a planning proposal through can attract the vacant residential land tax on its capital improved value, which is a much larger base than the unimproved value that ordinary land tax uses. There are exemptions, including for land that is genuinely being developed and for certain changes of ownership, but they are conditional and time-limited, so a stalled project is exactly the situation the tax is designed to catch. The State Revenue Office guidance on vacant residential land tax sets out the current exemptions and notification obligations, and the obligation to notify sits with the owner, so a developer holding undeveloped Melbourne land should check its position rather than wait for an assessment. If you are land banking in Victoria, model this alongside ordinary land tax, because together they can make a long Melbourne hold meaningfully more expensive than the same strategy in another state.

Can you deduct land tax against your development profit?

Usually yes, if you are carrying on a development business, land tax is either deductible in the year you incur it or built into the cost of the project, so it reduces your taxable profit rather than sitting as a pure cash cost. How it is treated follows whether your project is on revenue or capital account. Most developments that build to sell are on revenue account, where the profit is taxed as ordinary income, as covered in the income tax on development profit guide, and land tax is generally deductible as a holding cost or absorbed into the cost of the land as trading stock. Where a project is held on capital account, land tax that is not otherwise deducted can form part of the third element of the capital gains tax cost base, reducing the gain on eventual sale.

The exception that catches passive structures is the vacant land rule. From 1 July 2019, section 26-102 of the Income Tax Assessment Act 1997 denies deductions for the costs of holding vacant land, including land tax, council rates, interest and maintenance, but it specifically excludes companies and land that is used in carrying on a business. The Australian Taxation Office (ATO) sets out its view in Taxation Ruling TR 2023/3. A developer genuinely carrying on a business is generally outside the rule, so this is mostly a problem for a landholding entity whose only function is to hold the land: if it cannot show it is carrying on a business, the Australian Taxation Office (ATO) can deny the holding-cost deductions, which then add to the cost base instead of reducing income now. The timing difference is real money, because a deduction today is worth more than a cost base addition years away, so how you hold land bank sites is worth getting right before the costs accrue.

How does land tax flow through your feasibility?

Model land tax as an annual line in your land holding costs, recurring for every year you hold the site, because it scales with both site value and time and is one of the more sensitive inputs in the whole model. It is not a settlement cost you pay once. It is an outgoing that lands each year from acquisition until the last lot settles or the asset stabilises, and it rolls into your total development cost and shows up in the development cashflow as a recurring outflow across the hold. A twelve-month program and an eighteen-month program carry very different land tax bills on the same site, so the land tax bill tracks your program length as much as your land price.

In a feasibility model this sits with your other outgoings as a land holding cost. In a tool like Feasly you can carry land tax as an annual holding-cost line across the program and flex the holding period to see what a longer hold does to your margin, alongside the other levers in a sensitivity run. What it will not do, and what no feasibility platform should claim to do, is work out the assessment for you: the figure you enter still has to come from the current state rates, your aggregated position, and your adviser, because the tax depends on your whole landholding and structure rather than the single site. Treat the platform as the place the cost flows through the model, and the state revenue office as the source of the number.

The timing trap is worth pricing separately. Because land tax is assessed on ownership at one date, the settlement date of an acquisition can add or save a full year of land tax. Settling a New South Wales or Victorian site on 30 December makes you the owner at midnight on 31 December and liable for the following year on that land, whereas settling in early January can defer the first assessment by a year; in Queensland, South Australia and Western Australia the pivot date is 30 June. On a commercial contract, land tax is often adjusted between buyer and seller at settlement, so check the adjustment clause, because you may be reimbursing a vendor’s land tax for part of a year you did not own the land. None of this changes the total tax owed to the state, but it changes who pays it and when, which is exactly the kind of detail that decides a marginal line in a feasibility.

What about land tax in New Zealand?

New Zealand has no land tax, so it is not a holding-cost line for a New Zealand development in the way it is across the Tasman. A New Zealand developer’s recurring holding costs are council rates and the interest carry, without an annual state land tax layered on top, which is a genuine structural difference when you compare an Australian and a New Zealand feasibility on otherwise similar sites. It does not mean land is untaxed: council rates still run every year, and the tax bite arrives on sale through income tax and the bright-line test, covered in the New Zealand bright-line test guide. For a developer weighing projects on both sides of the Tasman, the absence of an annual land tax is one reason a long New Zealand hold can carry lower recurring cost than an equivalent Australian one, even before you look at the rest of the tax position.

The underlying principle travels beyond Australia and New Zealand. Wherever a jurisdiction charges an annual tax on land value, it behaves the same way in a development model: a recurring cost that scales with time and with the value of the dirt, punishing delay and rewarding a tight program. The rates and the exemptions are local, but the discipline of modelling the charge across the real holding period, rather than an optimistic one, is the same everywhere.

A land tax checklist for developers

The headline rate is the least important part of land tax for a developer. What moves your feasibility is the combination of how long you hold, how your sites aggregate, whether any owner is foreign, and whether you can reach an exemption. Before you commit to a site, it is worth checking a short list of the things that most often change the number:

• Model land tax from settlement to final sale across the real program, not a single year, and stress-test a longer hold.
• Aggregate all your sites in the same state and the same ownership before you estimate the rate, rather than pricing each site against a fresh threshold.
• Check whether any owner, shareholder or trust beneficiary is a foreign person, and price the surcharge until the structure is confirmed clean.
• On a genuinely farmed land bank, investigate the primary production exemption early, and document the farming business rather than relying on your development intention.
• If you are holding to rent, confirm the current build-to-rent concession in that state; if you are land banking in Melbourne, add the vacant residential land tax to the model.
• Confirm the settlement date against the state’s assessment date, and read the land tax adjustment clause in the contract.

Land tax rewards developers who plan the hold and punishes those who treat it as an afterthought. It is a state tax, so the rules genuinely differ across borders, and the figures in this guide move with most state budgets. Use them as the current starting point, confirm the numbers against the relevant revenue office and your adviser for your own structure, and put the cost where it belongs: in the model, from day one, across the timeline you will actually hold the land.

This guide is general information for property developers, not tax or legal advice. Land tax rates, thresholds and exemptions change regularly and depend on your circumstances and structure. Confirm the current position with the relevant state revenue office and your own adviser before relying on any figure for a feasibility or a transaction.