NSW vs Victoria: Land Tax Comparison

NSW generally has lower land tax for an individual owner, because of its much higher threshold ($1,075,000 vs $50,000 in Victoria). Land valued at $500,000 pays nothing in NSW but $1,950 in Victoria. However, NSW property prices are often higher, so actual tax bills can be similar for equivalent properties — and the comparison inverts for a discretionary trust, which loses the NSW threshold entirely.

Victoria reduced its land tax threshold from $300,000 to $50,000 from 1 January 2024 as part of COVID debt recovery measures. This brought approximately 360,000 additional landowners into the land tax system.

Yes, Victoria has a separate (higher) rate scale for land held in trusts, with an even lower threshold of $25,000. NSW distinguishes too, and more sharply: a discretionary or family trust is a "special trust" under Land Tax Management Act 1956 s 3A, and Land Tax Act 1956 sch 13 pt 2 taxes it at 1.6% of the whole taxable value from the first dollar — the $1,075,000 threshold does not apply at all. Only a fixed trust keeps it.

Both states have surcharges. NSW charges foreign owners 5% surcharge land tax on their share of NSW residential land, with no tax-free threshold and payable even where no ordinary land tax is (Land Tax Act 1956 s 5A). Victoria charges absentee owners 4% once the $50,000 threshold is reached, calculated on the whole taxable value rather than only the amount above it. The definitions of "foreign" and "absentee" differ between states.

Land tax is an annual holding cost that reduces your net rental yield. At higher land values, Victorian land tax can be 0.5-2% of land value annually, while NSW investors below the threshold pay nothing. Factor this into your investment analysis.