Quick answer
Land tax is a yearly state tax on the value of land you own, with owners' holdings added together and a threshold that varies by state. Business premises are usually taxable, and companies and trusts often face lower thresholds than individuals. Unpaid land tax is a first charge on the land, so it can rank ahead of a mortgage and follow the property to a buyer.
Key points
- Land tax is charged on land value, not on the building, and holdings are added together before the threshold applies
- NSW's general threshold for the 2026 land tax year is $1,075,000, frozen, and is tested against a three-year average of land value
- Trusts and companies often get a lower or no tax-free threshold, which changes the maths of holding premises in a trust
- Unpaid land tax is a first charge on the land in NSW and Victoria, ranking ahead of a mortgage and surviving a sale
- Lenders price land tax into the property's outgoings, and tenants may or may not be able to be charged for it
Buy a warehouse, a clinic or a shopfront and you’ll budget for the deposit, the legal costs, the stamp duty and the repayments. Land tax tends to arrive afterwards, in the first year, in an envelope that looks like any other.
For an owner using the property to run the business, land tax is a holding cost like rates and insurance. For an owner borrowing against it, it also has a quieter role: it can outrank the lender. This guide explains how it’s assessed, how business structures change the bill, and why lenders and conveyancers look at it before settlement.
How is land tax assessed?
Land tax is a state tax, set and collected by each state and territory revenue office. The common features are:
- It’s on land value. Valuers assess the land, not the building on it, using site or unimproved value.
- Holdings are added together. The revenue office totals the taxable land you own in that state, then applies the threshold and rates to the total. A second or third property can therefore cost more than the first.
- There’s a tax-free threshold, which varies by state and by type of owner.
- Exemptions exist. The principal place of residence and primary production land are commonly exempt, and other exemptions are state-specific.
- A particular date fixes the position. States use a set date, such as the start or end of a year, to decide who owned what.
For NSW, Revenue NSW’s page for the 2026 land tax year lists a general threshold of $1,075,000 and a premium threshold of $6,571,000, both frozen from the 2024-25 State Budget. It compares the three-year average of your land values against the thresholds, and the Treasurer is due to assess the thresholds by 1 June 2027, so check before relying on a freeze.
Other states have set their own figures, and the lower end is far lower. According to industry summaries, Victoria’s general threshold is $50,000, with $25,000 for trusts, and Queensland’s is $600,000 for individuals with lower thresholds and a surcharge for companies and trusts. We haven’t verified those on the revenue offices’ own current pages, so use them as a rough guide to how different the states are, then check yours.
Why does the owner’s structure change the bill?
This is where business property differs most from a house.
| Owner | Typical treatment | Why it matters |
|---|---|---|
| Individual | Full tax-free threshold in most states | The most favourable |
| Company | Often the threshold applies, but some states reduce it or add a surcharge | Holding property in a trading company may cost more |
| Trust | Frequently a reduced or no threshold, or special rules for undisclosed beneficiaries | Many family businesses hold property in trusts, so check |
| SMSF | Treated as a trust in most states, often with a lower threshold | See SMSF and business property |
The sums can be large. A trust with one commercial property of moderate land value may have no tax-free threshold in some states, so the whole land value is taxed from the first dollar, while the same land in an individual’s name might fall under the threshold. Whether the asset sits in a personal name, a company, a trust or an SMSF should be an early question when you’re buying, not an after-thought. A good starting point for how those structures affect lenders is how trusts affect business borrowing.
Why does unpaid land tax outrank a mortgage?
This is the insight most owners don’t expect. In both New South Wales and Victoria, the revenue office describes unpaid land tax as a first charge on the land.
- Revenue NSW says a first charge takes priority over all other liabilities attached to the property, and a new owner can become responsible for the previous owner’s unpaid land tax, including interest and penalties, if it isn’t dealt with at or before settlement.
- The State Revenue Office Victoria says the charge has priority over any other encumbrances on the land, such as a mortgage, and continues after the ownership changes. A buyer is protected from paying more than a certificate shows only if the buyer obtains their own property clearance certificate; relying on the vendor’s gives no protection.
Two practical results follow:
- If you buy, get your own certificate and check settlement figures. Ask your conveyancer to confirm the amount owing and how it will be paid at settlement. Our guide on stamp duty on business property purchases covers the other big state charge.
- If you borrow, expect the lender to ask. The lender’s mortgage ranks behind a land tax charge, so a lender wants the position confirmed. A clearance certificate or a statement of account is a common request, and a surprise arrears figure can hold up a settlement.
If you’re also running a title search on a property you plan to buy or borrow against, ask your solicitor to check the land tax position alongside it.
How do lenders treat land tax on commercial property?
A lender assessing a commercial property loan wants to know the net income the property produces and the costs that come off it. Land tax is one of those costs, along with council rates, water, insurance and maintenance.
- Owner-occupied property. The lender looks at your business’s cash flow. Land tax is an outgoing that has to be covered after the loan repayments.
- Investment property. The lender looks at net rent after outgoings. If tenants don’t reimburse land tax, it reduces the net income.
- Multiple properties. Because holdings are added together, the land tax on your whole portfolio may rise with each purchase. Experienced lenders ask for a summary of all holdings.
Our guides on commercial property loans for first-timers and how lenders value commercial property show the numbers a lender builds from this.
Can land tax be passed to a tenant?
Sometimes. Commercial leases commonly allow a landlord to recover outgoings from tenants, including land tax. But retail leases are regulated state by state, and some states restrict or prohibit passing land tax to retail tenants. Before you sign or set rents, check the retail leases legislation in your state, your lease wording and the landlord’s actual practice.
If you’re the tenant, ask for the outgoings estimate and the land tax component before signing, because it changes the true cost of the premises. If you’re weighing a purchase against a lease, buying your business premises vs leasing sets out the full comparison.
A worked example: two ways to hold the same warehouse
An illustrative case. A family business owns a warehouse with a land value of $900k in a state where an individual’s threshold is above $900k, and where a trust has a much lower threshold.
If the owners hold the warehouse in their own names and charge the business rent, the land tax threshold may cover the land value entirely, and the bill may be nil. If a family trust holds the warehouse, the lower trust threshold means a significant part of the land value is taxed each year. The difference could be thousands of dollars annually for the same building and the same business.
Neither answer is automatically right: the trust may offer asset protection or tax advantages that outweigh the land tax, and a personal holding may have drawbacks. The point is that the choice should be made with the land tax figure on the table. Your accountant and solicitor can model it, and your lender will want to see the structure either way.
What should you do before buying or refinancing property?
A short checklist:
- Ask your accountant to model land tax under each ownership structure before you sign.
- Order your own clearance certificate for any purchase.
- Check land values and object if needed. Valuations are set by the state valuer and can usually be challenged in a set window.
- Add land tax to your holding costs in the cash flow forecast, alongside rates and insurance.
- Check the lease for who pays outgoings, if the property is tenanted.
- Allow for it when you refinance. A refinance triggers discharge and settlement, where land tax arrears surface. See when to refinance a business loan.
If you’re not sure whether the property finance you have in mind fits, tell us the property and the purpose and we’ll help you think it through.
If land tax has fallen behind
Pay or arrange to pay before it compounds. Revenue offices charge interest and penalties on overdue amounts, and the charge on the land means the debt doesn’t disappear if you sell. Contact the office early about a payment arrangement. If a lender is holding the property as security, tell your lender before it hears from the revenue office. How to keep a lender on side explains why that conversation goes better when you start it.
A short-term facility can clear arrears at settlement, and in the right circumstances a secured loan can bridge the gap. Our overview of commercial property loans explains the options.
Property finance that accounts for the holding costs
Land tax is one line in a long list of property costs, but it’s a line that can change a deal. The best time to find it is before you commit, when there’s still room to change the structure.
Buying, refinancing or borrowing against business premises? Our short form takes around a minute, and since nothing in it involves a credit check, asking leaves your credit file exactly as it was. Your enquiry goes to one of our team, not out to a pile of lenders; they read it, then ring you. Give the property type, value and who owns it as precisely as you can, because that is what lets the first call land on the right option.
Frequently asked questions
Do I pay land tax on my business premises?
Generally yes, if you own the land and the total value of your taxable land in that state exceeds the threshold. Your home is usually exempt, and primary production land often is too, but commercial premises are normally taxable. If you lease, the landlord pays the tax, and your lease may or may not allow them to recover it from you.
Is land tax charged on the building or the land?
On the land. States assess it on the land (site or unimproved) value, not on what you've built, which is why a modest building on a valuable block can attract more tax than a large building on cheap land. Valuations are set by the state valuer-general or equivalent, and you can usually object.
Why do trusts pay more land tax?
Many states have reduced or no tax-free thresholds for land held in certain trusts, or apply surcharges, to stop owners using many trusts to claim multiple thresholds. Victoria's trust threshold is lower than for individuals, and NSW has special rules for trusts that haven't disclosed beneficiaries. Check your trust deed and the state revenue office before buying.
What happens if the previous owner didn't pay land tax?
In NSW and Victoria, unpaid land tax is a first charge on the land and can pass to the buyer. That's why buyers obtain a land tax or property clearance certificate before settlement, and why your conveyancer should check the certificate shows nothing owing or that any amount is paid at settlement.
Do lenders care about land tax?
Yes. A lender lending against commercial property includes land tax in its view of the property's running costs and asks for evidence that rates and taxes are current. Because land tax can outrank the mortgage, a lender's security is only as clean as the land tax position, so expect a clearance certificate or a statement as a settlement condition.
Can I borrow to pay a land tax bill?
You can use working capital or a secured facility to pay a bill, but check first whether the revenue office will agree a payment arrangement. If you hold several properties, the bill may also show that the structure or the holding costs need a rethink, which is worth sorting before taking on more debt.