Land tax and stamp duty: A guide for beginners

Every year, about 500,000 properties are sold in Australia – 200,000 of them in Victoria.

If you are planning on joining those ranks, understanding your land tax and transfer duty liabilities will be vital.

Here’s what you need to know to navigate the land tax and stamp duty rules and assess your costs.

What is land tax?

Land tax is an annual tax charged on land owned or co-owned above a certain value, levied by each state or territory government, except the Northern Territory.

In Victoria, land tax is levied when the total taxable value of all land owned, individually or jointly, at December 31 is equal to or exceeds $250,000, or $25,000 for land held in trust.

The rate paid depends on the total value of taxable land according to site values prepared by the local council.

From last year, an additional 2 per cent surcharge was also added to all Victorian land owned by an absentee owner.

What land is exempt?

Land tax does not apply to principal places of residence, primary production land, rooming houses, and charitable institutions.

Other land tax exemptions include Crown land, municipal and public land, and land used for sporting or recreation clubs, healthcare centres, not-for-profit clubs, caravan parks, retirement villages, and residential care centres.

How much land tax do I need to pay?

Land tax is calculated by applying the appropriate rate to the total taxable value of land holdings, excluding exempt land.

Land tax assessments are generally sent out between late January and May each year.

To find out more, use the State Revenue Office land tax calculator.

What is land transfer duty?

Land transfer duty, previously known as stamp duty, is a one-off government tax levied on most real estate purchases.

It is paid on homes, including first homes, investment properties, holiday homes, primary production land and sometimes even on business transfers.

Land transfer duty also applies when a property or interest in a property is acquired through other means, such as a trust or gift.

The amount of stamp duty paid varies depending on location, the value of the property, how it is to be used, residency, and if any exemptions or concessions apply.

What are the exemptions and concessions?

Land transfer duty is applied at a reduced rate for property purchased as a principal place of residence, up to the value of $550,000.

First home buyers receive a one-off duty exemption for their principal place of residence up to $600,000.

Exemptions also apply for deceased estates, transfers between spouses or partners, family farms, corporate consolidations and restructures, and charitable societies.

Concessions for land transfer duty include people purchasing off-the-plan, pensioners, and young farmers.

How much land transfer duty will I need to pay?

Land transfer duty is calculated on the dutiable value of a property – this is the price paid for the property or its market value, whichever is greater.

Duty is calculated on a sliding scale, starting at 1.4 per cent for properties valued at $25,000 and rising to 5.5 per cent for those valued at or above $960,000.

You can calculate land transfer duty using the State Revenue Office land transfer calculator.

Need help understanding land tax and land transfer duty?

If you need help working out your stamp duty and land tax responsibilities, LDB is here to help.

With a broad range of accounting, finance, and business expertise under one roof, LDB’s expert team is ready to support you and your business.

To get in touch, phone (03) 9875 2900 or send us a note via the contact form below.