Land Tax On Vacant Land In NSW: The Holding Cost Before You Build

Land Tax On Vacant Land: Price the holding cost before the planning outcome

Most small developers price stamp duty carefully and then treat land tax as an afterthought. In New South Wales that habit is expensive, because land tax is a recurring cost that follows the site while you hold it.

Land tax is assessed on the unimproved value of the land you own at midnight on 31 December, and the assessment is not reduced for the part of the year you owned it. If you are holding a development site while you obtain a planning outcome, the bill can arrive well before the project makes a dollar.

What the charge actually is

According to Revenue NSW, you pay land tax when the combined value of all your non-exempt land exceeds the general threshold of $1,075,000. The general rate is $100 plus 1.6 per cent of the land value above that threshold, and there is a premium rate above $6,571,000. The thresholds and rates page confirms that the 2024-25 State Budget froze both thresholds for land tax years after 2024.

That freeze matters more than the headline rate. If values rise and the threshold does not, a holding that sits comfortably under the threshold this year can cross it after the next valuation, without you buying anything at all.

Why the threshold is a portfolio test, not a site test

The threshold is applied to your combined land value, not to each parcel in isolation. That is why Revenue NSW assesses an individual on 100 per cent of the land they own alone plus their interest share of anything they own jointly. Joint owners are treated as a single entity called the primary taxpayer, which means jointly held land attracts only one threshold between them.

A developer holding one site alone and a share of two others is not running three separate land tax positions. They are running one combined position, and the marginal parcel is what pushes them over.

The site test to run before you buy

Before you exchange on a development site in NSW, answer these questions on paper:

1. What is the unimproved value, not the asking price? Land tax follows the Valuer General value of the land, excluding the buildings on it. A tired house on a good block can carry a land value close to the purchase price.
2. What else do you already hold in NSW? Add the value of every non-exempt parcel you own alone, plus your share of every jointly owned parcel, and test that total against $1,075,000.
3. How many full taxing dates will you cross? Land tax is charged for the full year following 31 December. A site held across two taxing dates is a two-year cost even if you sell in eighteen months.
4. Does anyone in the structure have a different position? A joint venture partner, a company or a trust may be assessed differently from you as an individual. Ask the accountant to confirm who the taxpayer is before you model the number.
5. Is any exemption actually available? Revenue NSW lists purchasing vacant land for construction that may not qualify for an exemption as a common cause of a first liability. Treat an assumed exemption as unconfirmed until it is documented.

A worked scenario

Suppose you already own one investment property with an unimproved value of $700,000, and you buy a development site with an unimproved value of $620,000. Neither looks threatening on its own. Combined, the holdings are $1,320,000, which is $245,000 above the general threshold. At the published general rate, the annual charge works out at $100 plus 1.6 per cent of $245,000, which is roughly $4,020 a year.

That figure is not the deal breaker by itself. What matters is that it repeats every year the site is held, that it is not reduced if you sell part way through the year, and that a revaluation can push it higher while your planning application sits in the queue.

The TPC deal lens

Test the deal like this: add the modelled land tax for every full taxing date the site will be held, and then ask whether the project still clears your margin hurdle. If the margin only works because land tax was left out, the margin is not real.

Two adjustments make this test more honest. First, run the numbers on the unimproved value rather than the purchase price, because they are not the same. Second, keep the total in the feasibility rather than in a contingency line, since a recurring annual charge is not an unexpected event.

What to do with the answer

• Record the unimproved value of every parcel in the ownership structure, with the valuation date.
• Total the holdings the same way Revenue NSW does, including your interest share of jointly owned land.
• Count the taxing dates the site will cross on your realistic timeline, not your optimistic one.
• Carry the annual charge in the holding cost forecast and re-test it after each valuation.
• Ask the accountant to confirm the taxpayer identity and any exemption before settlement, not after.

Key Takeaway

Land tax in NSW is a holding cost, not a purchase cost. It is assessed on unimproved value across your whole NSW portfolio, it is not pro rata, and the thresholds have been frozen. Model it for every full year you plan to hold, and confirm the taxpayer identity before you commit.

Your Turn

Take a site you are currently assessing. What is its unimproved value, and what is your combined NSW land value once every other parcel and joint interest is included?

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