Do you own property through a trust, company or another ownership structure?
These arrangements can be really handy – we see them work well all the time. They let you pool funds, protect assets, share income flexibly, and plan for tax or succession.
However, if your trust or company isn’t structured correctly, or exemptions aren’t applied properly, you could end up stumping up an unexpected land tax liability.
Revenue NSW is getting sharper at spotting deeds that aren’t ‘fixed for land tax purposes’ – and they can backdate assessments if issues pop up later. Here’s what you need to know so you don’t get caught out.
See also: What is succession planning and why is it so important?
What is land tax?
Land tax is an annual tax Revenue NSW charges based on the unimproved value of your land at midnight on 31 December each year. Unimproved value means the value of the land only – buildings and improvements excluded.
If you own land individually or jointly, you only pay land tax if the total value of your NSW land exceeds the yearly threshold. Each year, Revenue NSW issues a land tax assessment notice showing how much you owe – with a 60-day due date.
But if your land is owned through a trust, company, or another special structure, the rules can be different.
Current thresholds and land tax rates
The current land tax threshold is $1,075,000. If your land value goes over that, you’ll pay $100 plus 1.6% of the amount above the threshold.
There’s also a higher ‘premium’ rate that kicks in if your land is worth more than $6,571,000.
What land does land tax apply to?
Land tax applies to the following land owned:
- Empty or vacant land (rural or urban)
- Homes, flats, or units
- Holiday houses
- Investment properties
- Company title units
- Residential, commercial properties or industrial units (even car spaces)
- Shops, factories, warehouses
- Land leased from the government
- Parts of property signed up for land tax, owned by someone normally not included, but only if your total land value is over the threshold
It doesn’t usually apply to:
- Your family home (principal place of residence)
- Land used for farming and primary production
- Land used for charity or community services, including childcare, hospitals and aged care facilities
- Any land held below the threshold
What does ‘fixed for land tax purposes’ mean?
Being ‘fixed for land tax purposes’ basically means a trust ticks Revenue NSW’s boxes to be treated like a single owner, so it gets the land tax threshold.
If your trust doesn’t meet the criteria to be considered fixed or concessional, it’s classified as a special trust. Special trusts don’t get the threshold, so land tax can apply from the very first dollar, potentially adding thousands to your bill.
Family and discretionary trusts fall straight into the special trust camp. Concessional trusts can still get some concessions even if they aren’t fixed.
Even unit trusts, which usually give unitholders defined rights to income and capital, are treated as special trusts unless they qualify as fixed.
See also: Estate planning: Q&As for small business owners
Not all fixed trusts are created equal
Even if your trust structure is fixed, that doesn’t always guarantee equal tax outcomes. NSW will apply a secondary assessment to the underlying owners of the trust.
If owners are in different structures or hold other NSW property, equal shares can lead to very different land tax bills.
Here’s an example:
- A fixed unit trust has two unitholders – one individual and one discretionary family trust, each owning 50%
- The individual is assessed on their 50% share and gets the land tax-free threshold, paying tax only above that
- The discretionary family trust is also assessed on 50% of the land value, but is liable from the first dollar, creating a much higher tax bill – even though both technically hold equal units
The takeaway is that being a fixed trust (or similarly structured entity) doesn’t automatically mean equal tax outcomes – careful planning and advice are essential.
Heads up: if your trust doesn’t specifically exclude foreign beneficiaries, it could face an additional 3% land tax on any residential land it owns.
See also: The big question: how can I reduce my tax?
Get it right before 31 Dec
If your property is held in a trust, company or other special structure, now’s the time to act. The 31 December deadline is fast approaching!
Here’s what to do:
- Check your deed or governing documents – Make sure it’s structured correctly for land tax; a lawyer can help amend it if needed.
- Talk to your accountant or tax advisor (us!) – Confirm whether your structure should be fixed or otherwise adjusted and guide any updates.
- Ensure you’re registered for land tax – You don’t necessarily pay yet, but it protects you as land values increase.
- Review exemptions and other holdings – Make sure all applicable exemptions are correctly applied, and consider how other properties or structures might affect tax for all owners.
By ensuring your paperwork is on point, you can avoid a hefty land tax payable bill.
