Property tax rise hits landlords
A stealth land tax increase of about $1.5 billion will impact commercial and residential landlords, holiday homes, and businesses in NSW. This could lead to property investors leaving the state, reducing the already limited rental supply and increasing rents as landlords pass the land tax increase on to tenants.
NSW is the third state under a Labour government to raise land taxes for multiple property owners, following similar actions in Victoria and a planned but abandoned increase in Queensland.
The 2024-2025 State Budget announced that the tax-free threshold for unimproved land tax will be frozen at the 2024 level of $1.075 million, up from the previous years $969,000, and will no longer increase annually with property prices.
From 2024 onwards, the land tax thresholds will be applied as follows:
General threshold: $100 plus 1.6 per cent of land value above the threshold, up to the premium threshold.
Premium threshold: $88,036 plus 2 per cent of land value above the threshold.
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Land tax is applied for the full year following the taxing date of 31 December, and no pro-rata calculation applies.
This tax rise means more investment properties, holiday homes, and commercial real estate properties will be subject to NSW land tax, and existing land taxpayers will progressively pay more.
Real Estate Institute of NSW chief executive Tim McKibbin said: “The land tax is going to capture more and more properties and replicate the unconscionable bracket creep in stamp duty”.
As land values rise, more properties will cross the threshold and be taxed, providing the state government with an estimated $1.5 billion or more in tax revenue over four years.
There are concerns that commercial and residential investors will increase rents, and business owners will increase their prices to cover the land tax increases.
References
Financial Review , “Shock property tax rise hits landlords, holiday homes”, Campbell Kwan and Nila Sweeney
Financial Review , ”Stealth’ land tax could drive investors from NSW and push up rents”, John Kehoe
Revenue NSW, Website