Land Tax Perth
Land tax is, at its most basic, a tax on land. This simple comment fundamentally surprises many families in business – because land tax is not a tax on the buildings they own. Only the value of vacant land held on 30 June is assessed.
Land tax is often ignored by many tax advisors simply because land tax is often not significant. The family home is generally exempt from land tax, agricultural land is exempt and the business premises are often rented.
However, for families with significant real estate holdings, the cost of land tax can become very substantial very quickly. In fact, many of our families we assist – the business of purchasing, holding, selling, managing, administration and developing the property portfolio is the family business.
If you are a diverse property development family it is important to note that land tax is a marginal tax. The rates are below.
| Aggregated taxable value of land | Rate of land tax |
| $0 – $300,000 | Nil |
| $300,001 – $420,000 | Flat rate of $300 |
| $420,000 – $1,000,000 | $300 + 0.25 cent for each $1 in excess of $420,000 |
| $1,000,000 – $1,800,000 | $1,750 + 0.90 cent for each $1 in excess of $1,000,000 |
| $1,800,000 – $5,000,000 | $8,950 + 1.80 cents for each $1 in excess of $1,800,000 |
| $5,000,000 – $11,000,000 | $66,550 + 2.00 cents for each $1 in excess of $5,000,000 |
| $11,000,000 + | $186,550 + 2.67 cents for each $1 in excess of $11,000,000 |
Run the taxable value of your land through a land tax calculator. You can quickly see how, for larger families with a diverse property portfolio, land tax can become a significant cost burden and (in some instances) the most considerable tax cost incurred by the family.
Even if the land held is commercial real estate, so that the cost of land tax is passed onto the tenant, the higher variable outgoings incurred by the tenant will ultimately lead to lower rents to the family (so the family does eventually incur this cost). A tenant will actively look at the total rent cost when making a decision (so rent plus vo recovery).
Of course, land tax is not payable in every instance – agricultural land, the family home, subdivided residential land, and newly constructed homes can be instances where you will enjoy a land tax reduction. And because land tax is marginal many families have separate holding structures to facilitate family succession, asset protection and also enjoy (sometimes) a reduction in land tax.
If you are a family with significant property holdings, you should engage with Westcourt because:
- We have dedicated property tax specialists in-house.
- We understand that property structure includes land tax, share rates, capital gains tax, GST, income tax, FIRB, principal residence, asset protection, succession, stamp duty and estate planning.
- We are leaders in the tax profession through the Tax Institute, giving us deep networks for transfer duty lawyers and property lawyers who understand the intricacies of transferring property across different land parcels.
- We are part of GGI Global Alliance Network, so we have local on the ground advisors in the Eastern States and overseas for clients buying property offshore – including tax expertise on transfer pricing, thin capitalisation, foreign buyer surcharge and the registered foreign ownership.
Frequently Asked Questions
Land tax in Western Australia (WA) is a tax imposed on the owners of land in the state. The tax is calculated based on the unimproved value of the land, which is the value of the land without any buildings or improvements.
The following are the key features of land tax in WA:
Threshold: In WA, there is a land tax threshold, which means that owners of land with a combined unimproved value below the threshold are not required to pay land tax.
Taxable value: The taxable value of the land is calculated based on the unimproved value of the land, and the tax rate is applied to the taxable value.
Tax rates: The land tax rate in WA varies depending on the taxable value of the land. For the 2022-2023 financial year, the land tax rates range from 0.15% to 2.6% of the taxable value of the land.
Payment: Land tax in WA is usually payable annually, and owners of land are required to pay the tax by a specified due date.
It’s important to note that the rules and regulations surrounding land tax in WA can be complex, and it’s a good idea to seek advice from a tax professional if you need help with your land tax obligations. A tax professional like Westcourt can help you understand your land tax obligations and ensure that you comply with the relevant land tax rules and regulations.
Yes, you can claim land tax as a tax deduction if you own a property that is generating assessable rental income and the property incurs land tax. Land tax is considered a cost of owning rental property and is tax deductible for income tax purposes (there can be some limited exceptions to this rule however).
When you prepare your income tax return, you can claim a deduction for the amount of land tax you have paid on your rental property as an expense of earning rental income. To claim the deduction, you will need to provide details of the land tax you have paid, including the amount and the period for which it was paid.
It’s important to keep accurate records of all expenses incurred in the course of earning rental income, including land tax, to ensure that you are able to claim all relevant deductions when you prepare your income tax return.
It’s also important to understand that the rules and regulations surrounding tax deductions for rental properties can be complex, and it’s a good idea to seek advice from a tax professional like Westcourt if you need help with your tax obligations. A tax professional can help you understand your tax obligations and ensure that you comply with the relevant tax laws and regulations.
