How NSW Land Tax Works in 2025
NSW land tax is an annual state tax on the unimproved land value of property holdings as at midnight on 31 December each year. It is administered by Revenue NSW under the Land Tax Act 1956 and the Land Tax Management Act 1956.
Critically, land tax is calculated on land value only — not the value of any building. The figure used is the Valuer General's site-value assessment, averaged across the current and two prior years.
The 2025 Thresholds
NSW operates a two-tier threshold system:
- General threshold: $1,075,000 — no land tax payable on aggregated taxable land value below this figure
- Premium threshold: $6,571,000 — a higher rate kicks in above this level
The 2025 rate structure on aggregated taxable land:
- $0 – $1,075,000: nil
- $1,075,001 – $6,571,000: $100 + 1.6% of the excess over $1,075,000
- Above $6,571,000: $88,036 + 2.0% of the excess over $6,571,000
The NSW government paused indexation from 2024 onwards, freezing the thresholds at 2024 levels — a structural tax increase as land values continue to rise.
Principal Place of Residence Exemption
Land tax does not apply to your principal place of residence (PPR). The exemption covers the home you actually live in, on land of any value, subject to occupation requirements (generally six months continuous residence in the relevant year). Land tax therefore primarily affects:
- Investment properties
- Holiday homes / second residences
- Commercial property held by individuals or trusts
- Land held in unit trusts and most discretionary trusts (which face a special trust rate with no threshold)
Aggregation
This is the trap that catches investors. NSW aggregates the taxable land value of all non-exempt land you own anywhere in NSW. Owning three investment properties at $500k land value each puts your aggregated holding at $1.5M and into the taxable zone, even though no individual property exceeds the threshold.
Foreign Owner Surcharge Land Tax
Foreign persons pay an additional 5% surcharge land tax on the taxable value of NSW residential land, with no threshold — payable from the first dollar. This rate applies from the 2025 land tax year (increased from 4%).
Worked Example: Investor with $1,500,000 of Taxable Land
- Owner: Australian citizen, individual (not a trust)
- Holdings: two Sydney investment properties with combined Valuer General land values of $900,000 and $600,000
- Aggregated taxable land value: $1,500,000
Calculation:
- Threshold: $1,075,000
- Excess: $1,500,000 − $1,075,000 = $425,000
- Land tax: $100 + 1.6% × $425,000 = $6,900
That bill arrives every year and is deductible against the property's rental income per ATO rental property deductions guidance.
If the same $1.5M of land were held in a discretionary trust without a specific unitholder structure, the special trust rate would apply: 1.6% × $1,500,000 = $24,000 — more than three times the individual bill, with no threshold.
If the owner were a foreign person, surcharge land tax would add 5% × $1,500,000 = $75,000 on top of the standard $6,900, for a total annual bill of $81,900.
Common Mistakes
- Forgetting that thresholds are frozen. Many investors budget assuming annual indexation. The 2024 freeze means rising land values now push more holdings into the net each year without any policy change being announced.
- Treating the building value as relevant. A $2M house on $700k of land falls under the threshold; a $1M townhouse on $1.2M of land does not. Always work from the Valuer General's land value, not the market price.
- Underestimating trust exposure. Standard discretionary trust deeds trigger the special trust rate.
- Missing the registration deadline. Owners must register for land tax themselves once they cross the threshold. Revenue NSW does not always send a prompt; back-assessments with interest are common.
- Assuming PPR exemption transfers automatically when you move. If you move out and rent the former home, the PPR exemption can continue for up to six years under the absence rule, but only if you do not claim PPR on another NSW property and the home is not used to derive income beyond limits set in Revenue NSW Ruling LT 082.
