Understanding NSW Land Taxes in 2025

NSW land tax is a vital aspect of property ownership in New South Wales, particularly for investors and non-residential property owners. Much misunderstood, NSW land tax is an ongoing charge based on the unimproved value of land at December 31 each year. It does not affect all landowners, but for those it does, its effect on long-term investment yield can be profound.

NSW property is liable to this yearly tax if its value tops the government’s established threshold values. Revenue NSW manages the tax, evaluating land values and establishing how much each landowner has to pay. As property values increase throughout the state, ever more owners are discovering they need to know how NSW land taxes work.

The Concept Behind Land Tax Calculation in NSW

The core mechanism behind the land tax calculation in NSW is based on the total taxable value of all landholdings owned by an individual or entity, excluding exempt properties such as the principal place of residence. Each year, the Valuer General determines the land value, using the average of the past three years to help smooth fluctuations in the market.

Once the land’s value is confirmed, Revenue NSW calculates tax using applicable thresholds and rates. The value above the set general threshold is taxed at a standard percentage, and higher values may attract increased rates. This progressive approach is designed to tax wealthier landowners more heavily while exempting those with smaller landholdings.

The Role of NSW Land Tax Thresholds

One of the crucial factors in ascertaining whether a property is tax liable is the NSW land tax threshold. These thresholds are indexed annually and are the minimum value a landholding must be above before taxation becomes payable. If the aggregate value of a person’s or entity’s land in NSW is under the threshold, they are exempt for that year.

For example, if the overall threshold is slightly more than one million dollars, an individual who has a piece of land worth $950,000 would not pay land tax. But when the land is worth more than the threshold, tax is levied on the excess above the threshold. Thus, small landholders or individuals with small portfolios of holdings may pay no tax at all, while high-value portfolio investors will certainly do so.

Knowing these thresholds is particularly valuable for planning reasons because future purchases of land may push the total value into taxable levels. Also, thresholds vary for various types of ownership, like trusts or foreign owners, who are not eligible for normal limits.

Year	General Threshold	Premium Threshold
2023	$969,000	$5,925,000
2024	$1,075,000	$6,571,000
2025 (est.)	$1,150,000*	$6,950,000*

How the NSW Land Tax Rates Apply

When a landholder’s overall land value is above the threshold, NSW land tax rates will dictate how much they will pay. The rates are designed to be proportionally higher as the land value increases. There is usually a base rate for land between the general and premium thresholds and a more significant rate for land above the premium level.

This progressive tax model ensures that more affluent landowners pay more. It can, however, leave investors and developers with large amounts of liabilities, especially those owning big tracts of land or several properties.

The rates themselves are set on an annual basis and released by Revenue NSW at the beginning of each calendar year. For most investors, inclusion of this tax within the overall return on investment is crucial.

The Impact of the NSW Land Tax Surcharge

Besides the normal tax, an additional land tax surcharge in NSW is also imposed on foreign individuals who hold residential land in the state. This surcharge is paid in addition to regular land tax liabilities and is computed at a fixed rate, irrespective of the general limits.

The NSW land tax surcharge was implemented to assist in moderating foreign investor demand for housing and in boosting local housing supply. In contrast to the standard land tax, this surcharge is levied from the first dollar of land value, making it extremely expensive for foreign owners. Nevertheless, residents of countries with international tax treaties with Australia can enjoy concessions or exclusions.

The surcharge provides a strong incentive for overseas property buyers to be aware of their obligations in advance and to pursue any available exemptions. There are foreign owners who would remodel tenure or secure permanent residence to avoid incurring it.

Do You Pay Land Tax on Apartments in NSW?

Apartment owners will inquire if they have to pay land tax, and this will depend on various factors. Although apartments do not take up the majority of the land a building is situated on, each apartment has part of the total value of the land included in its strata title. Where there are many apartments, the aggregate land value may exceed the threshold, and land tax will be incurred.

So do you pay land tax on NSW apartments? If the share of land allocated to your unit, together with other property you hold, brings your overall land value above the cutoff, then yes, you might be caught. Multiple investment unit owners are especially vulnerable to crossing into the tax zone, even if the individual land value of each unit is small.

The means of valuing land under the law of strata results in even small apartments being added to the owner’s general land tax profile. With apartment ownership being an increasingly common type of investment, this subtlety of tax law is proving more and more pertinent.

Family Trust Land Tax Thresholds in NSW

Trusts are important in property ownership and estate planning, but they add an extra layer of complexity when dealing with land tax. One of the main areas of confusion is what happens to family trust land tax thresholds in NSW. Whilst individuals enjoy a tax-free threshold, trusts do not necessarily enjoy the same concession.

Special trusts, including most discretionary family trusts, are usually taxed from the first dollar of land value unless they appoint a beneficiary who can be treated in the same way as an individual for tax purposes. Nominating this correctly and on time enables the trust to take advantage of the general threshold, which can save the trust thousands of dollars.

Not nominating, however, gives rise to immediate tax charge, however trivial the holding of land. Hence, trustees must weigh carefully this dimension of land ownership and take steps to comply while securing concessions to the maximum extent possible.

How NSW Land Tax Affects Long-Term Investment

Investors in property have to carefully consider land tax when considering a prospective purchase. In the long run, the effect of NSW land taxes is able to dissolve profit margins, especially when added to other costs of holding like council rates, maintenance, and insurance.

Knowing how NSW land tax is calculated helps investors understand their risk and whether they should consider alternative ownership structures or geographic diversification to reduce risk. For instance, acquiring property in various Australian states might assist in remaining under each state’s land tax threshold.

In addition, as the value of land goes up, so does the prospect of it being taxed. This indicates that an investment one year exempt could be taxable the following year. Long-term cash flow projection should always include land tax.

Regulatory and Policy Changes to Watch

As with all aspects of taxation, NSW land taxes are liable to be altered in response to economic forces and government thinking. In recent times, there have been increases in thresholds to provide for inflation in property values, but there is always the potential for additional surcharges or different rates being implemented.

As making homes more affordable remains a priority for the NSW Government, investment property taxes could rise as a measure to shape market conditions. Similarly, changes in legislation can affect concessions or redefine who is eligible for a concession.

Property owners, especially those with bigger portfolios or trust-held properties, must remain aware of Revenue NSW releases and seek timely professional guidance. Such notifications can have a material impact on investment choices and financial planning.

Final Thoughts on NSW Land Taxes

In a developing property market like NSW, property tax is a consideration that most property owners cannot avoid. Whether you are an investor, trustee, or foreign buyer, understanding NSW property tax laws is essential to preventing large fines and complying with state laws.

From determining if your property value exceeds the NSW property tax threshold to determining your eligibility for an exemption or additional NSW property tax, there are many pieces to the puzzle that need to be addressed. Understanding how and why it affects estates, trusts, and foreign entities can set you up for more informed decisions.

As always, working with a qualified property accountant or advisor will ensure that you are taking advantage of every benefit while staying up to date with current laws.

FAQ’s

Who has to pay land tax in NSW?

Land tax in NSW applies to individuals or entities that own land valued above the annual threshold, excluding exempt properties like the primary residence.

Do I have to pay land tax if I own an apartment in NSW?

Yes, if the land value associated with your apartment and other properties exceeds the threshold, land tax may apply even for strata title units.

What is the land tax surcharge for foreign owners in NSW?

The NSW land tax surcharge is an additional fixed-rate tax applied to foreign owners of residential land, starting from the first dollar of land value.

Can family trusts claim the land tax threshold in NSW?

Most family trusts cannot claim the general threshold unless a beneficiary is nominated correctly, allowing the trust to access standard exemptions.