Land Tax on Commercial Property: State-by-State Guide
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.
The rules run separately in New South Wales, Victoria, Queensland, Western Australia, South Australia and the ACT, and the traps sit in the surcharges. A trust surcharge catches investors holding through discretionary trusts. An absentee surcharge hits foreign-domiciled buyers. And in Victoria the Commercial and Industrial Property Tax that replaced stamp duty in 2024 now runs on top of land tax rather than instead of it.
How Land Tax Works
Every state and territory levies land tax on the unimproved value of taxable land you hold at midnight on 31 December, or 30 June in some states. The Valuer-General sets that value and updates it each year. Most states run progressive rates above a tax-free threshold, below which nothing is payable.
The point that catches people is aggregation. Land tax is worked out by owner, not by property. Two assets that each sit below the threshold can both attract tax once the same legal entity holds them, so the structure of the buying entity matters as much as the land under it.
Three surcharges can layer on top of the base rate. A trust surcharge lifts the rate and cuts the threshold on land held in some discretionary trusts. An absentee or foreign owner surcharge lifts the rate for non-residents and foreign-domiciled owners. A vacant land surcharge applies in some jurisdictions to residential or commercial land left undeveloped or unoccupied for an extended period.
1 New South Wales
Revenue NSW administers the tax. It publishes the tax-free threshold for the 2026 land tax year each November off indexed land values, and sets a premium threshold above which a higher rate applies.
Rates
Nothing below the threshold. Between the threshold and the premium threshold you pay $100 plus 1.6% of the unimproved value above the threshold. Past the premium threshold the marginal rate steps up to 2%.
Trust surcharge
Special trust assessments hit discretionary trusts that do not explicitly exclude foreign beneficiaries. Trust-held land is assessed with no tax-free threshold and at a surcharge rate, currently 1.5% above the standard rate on dutiable values over the threshold. A fixed unit trust with a defined beneficial interest can be assessed much like direct ownership. The trust deed decides which way it falls.
Surcharge land tax
Foreign-domiciled owners pay surcharge land tax on residential property only, at a rate that has climbed hard in recent state budgets. It does not touch commercial property held by foreign owners.
2 Victoria
The State Revenue Office (SRO) runs land tax in Victoria. It revises the threshold and rates from time to time and applies them to your aggregated taxable land value.
Rates
Progressive marginal rates over a tax-free threshold. The top bracket runs materially higher than NSW or QLD and sits among the highest in the country for general taxpayers.
Trust surcharge
Victoria applies a trust surcharge to discretionary trusts that do not nominate a fixed beneficial interest. The surcharge rate is lower than the general top rate but bites from a low threshold. Nominate a fixed beneficiary and the trust can move onto general assessment.
Absentee owner surcharge
The absentee owner surcharge covers foreign-domiciled owners and corporations under absentee control. It reaches every taxable parcel an absentee owner holds, commercial property included.
Commercial and Industrial Property Tax (CIPT)
Victoria's CIPT, in from July 2024, swaps stamp duty on commercial and industrial property for an annual property tax of 1% of the unimproved land value, payable 10 years after the first eligible transaction. It runs alongside land tax through the transitional period. Long-term holders of post-2024 acquisitions pay CIPT rather than stamp duty on later transactions, but land tax keeps applying.
3 Queensland
Queensland Revenue Office (QRO) assesses land tax each year on the unimproved value of taxable land as at 30 June.
Rates
Progressive marginal rates over a tax-free threshold of $600,000 for individuals and $350,000 for companies, trustees and absentees. Above that, rates step from 1.0% to 2.75% across the brackets.
Trust assessment
A trustee's land is assessed at the trust rate, usually on a lower threshold than the individual rate. The deed decides whether it is taxed as a discretionary trust, a unit trust or something else.
Absentee surcharge
The absentee surcharge applies to individuals who are not Australian residents and to companies with absentee shareholders or controllers, on top of the standard rate.
4 Western Australia
Revenue WA administers land tax on progressive rates, with a tax-free threshold that sits below the NSW one.
Metropolitan Region Improvement Tax
The MRIT is a separate levy on metropolitan Perth land above a threshold, charged on top of standard land tax to fund public works across the metropolitan area. On a metro Perth commercial portfolio it adds a real layer of holding cost.
Trust assessment
WA generally assesses trust-held land at the same rates as individual-held land, with the trustee as the taxpayer. Fixed unit trusts can pass the threshold through to the beneficial owners under specific conditions.
5 South Australia
RevenueSA runs progressive marginal rates over a tax-free threshold, with a top bracket where rates step up again.
Aggregation rules
SA's aggregation rules carry specific provisions for partnerships, joint owners and trusts. The same underlying land can produce a different total bill under each ownership permutation, so set the buyer's structure before settlement, not after.
Trust surcharge
A surcharge applies where land is held in trust and the beneficial owners are not disclosed under the relevant land tax legislation. A trustee notification under the SA disclosure regime can reduce or remove it.
6 ACT and Tasmania
The ACT levies land tax on residential property held as an investment or rented out, not on commercial property in the same form. Commercial property in the ACT carries General Rates and the Fire and Emergency Services Levy instead, and together those do the work of the holding-cost equivalent.
Tasmania applies a progressive land tax to taxable land above the general threshold. Commercial and investment property are in scope, and the rates and thresholds are revised periodically.
7 Practical Buyer-Side Considerations
Structure before settlement
Individual ownership, a company, a fixed unit trust, a discretionary trust or an SMSF each land you a different tax bill. Discretionary trusts usually come off worst because the threshold is reduced or gone. Fixed unit trusts and individual ownership tend to produce the best land tax outcome, though asset protection, succession and GST flexibility pull the other way and have to be weighed.
Outgoings recovery
Commercial leases commonly let the landlord recover land tax from the tenant under the outgoings provisions. Recovery usually runs on a single-holding basis, the land tax that would apply if the property were the landlord's only taxable land, not the aggregated amount the landlord actually pays.
For a portfolio owner, the gap between recoverable single-holding land tax and actual aggregated land tax is a real cost. The brief should model both.
Lease drafting
Leases drafted before 2010 often carry land tax recovery provisions that no longer meet current retail leasing legislation in some states. Buyer-side DD should read the lease and the disclosure statement against the current statute, because a non-compliant clause may not survive renewal.
Frequently Asked Questions
Can land tax be passed on to the tenant?
In a commercial lease, usually yes, on a single-holding basis. Under the state Retail Leases Acts the position is tighter and recovery rules vary by state. The lease and the disclosure statement set the parameters.
Does the principal place of residence exemption apply to commercial property?
No. The PPR exemption covers residential property used as the owner's main residence. Commercial property is fully assessable from the threshold.
How is land tax handled at settlement?
It is adjusted at settlement on a pro-rata basis from 1 January, or 1 July depending on the state. The vendor covers the share for their period of ownership and the buyer covers theirs, with the contract setting 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 carries on applying to commercial property in Victoria.
