Land tax surcharge for foreign property owners in Australia

How land tax works in Australia

Standard land tax is a state-level tax assessed annually on the total unimproved value of all taxable land owned by a person in that state. Each state has a tax-free threshold below which no land tax is payable, and rates that increase progressively above that threshold.

In most states, your principal place of residence is exempt from standard land tax. This means that an Australian citizen living in their own home pays no land tax on that property. Investment properties and vacant land are subject to land tax.

The foreign owner land tax surcharge is an additional charge on top of any standard land tax. Critically, in most states, the principal residence exemption does not apply to the foreign owner surcharge — meaning a temporary visa holder living in their own home still pays the surcharge even though they would be exempt from standard land tax.

State-by-state surcharge rates

New South Wales imposes a 4% surcharge land tax on residential land owned by foreign persons (Revenue NSW). This is calculated on the unimproved land value, separate from the standard land tax assessment. The standard land tax threshold and general rates are separate calculations.

Victoria imposes a 4% absentee owner surcharge on land owned by foreign persons (State Revenue Office Victoria). Victoria uses the term "absentee owner" which covers foreign persons, including temporary visa holders living in Australia. The surcharge applies regardless of whether the property is the owner's principal residence.

Queensland imposes a 2% foreign surcharge on land owned by foreign individuals, companies, and trusts (Queensland Government). The surcharge applies in addition to standard land tax.

Western Australia has introduced a foreign owner land tax surcharge. Check the current rate with the WA Department of Finance.

South Australia imposes a 2% foreign ownership surcharge.

Tasmania and the ACT have their own provisions — check current rates with the relevant revenue office.

These rates are current as of recent assessments but are subject to change. State governments have adjusted these rates multiple times since their introduction.

How the surcharge is calculated

The surcharge is calculated on the unimproved land value of the property, which is assessed by the state's Valuer-General. The unimproved land value represents the value of the land alone, excluding any buildings, improvements, or fixtures.

For example, a property in Sydney worth AUD 1.2 million total might have an unimproved land value of AUD 800,000. The NSW foreign owner land tax surcharge of 4% would be AUD 32,000 per year. This is in addition to any standard land tax that may apply.

In Victoria, the same property with a land value of AUD 800,000 would attract a surcharge of AUD 32,000 per year under the 4% rate.

Land values are reassessed periodically (usually annually), meaning the surcharge amount can increase as land values rise even if the surcharge rate stays the same.

The principal residence exception (or lack thereof)

One of the most significant aspects of the foreign owner land tax surcharge is that it typically applies even to the owner's principal place of residence. Under standard land tax rules, your home is exempt. Under the foreign owner surcharge, it is not.

This means a temporary visa holder who buys a AUD 750,000 home (with AUD 500,000 in unimproved land value) in Victoria pays a surcharge of AUD 20,000 per year to live in their own home — a cost that an Australian permanent resident would not incur.

Some states have considered or implemented exemptions for temporary visa holders who use the property as their principal residence, but these provisions vary and change frequently. Check the current rules in your state.

When the surcharge ceases

The foreign owner land tax surcharge ceases to apply when you are no longer classified as a foreign person — typically when you are granted permanent residency or Australian citizenship. From the date of your status change, the surcharge should not appear on your next land tax assessment.

You may need to notify the state revenue office of your changed status and provide evidence (such as a visa grant notice showing permanent residency). Without notification, the revenue office may continue to apply the surcharge based on its records of your visa status at the time of purchase.

If the surcharge has been applied to an assessment period during which you became a permanent resident partway through, some states will apportion the surcharge. Others may apply it for the full year if you were a foreign person at any point during the assessment period. Check with the relevant state revenue office.

Impact on the financial case for buying

The annual land tax surcharge significantly affects the cost-benefit analysis of property ownership for foreign persons. Combined with the stamp duty surcharge at purchase and the FIRB application fee, the total additional costs of foreign ownership can be substantial.

Consider a temporary visa holder buying a AUD 900,000 property in NSW with an unimproved land value of AUD 600,000. The additional costs in year one include a FIRB fee of AUD 14,100, a stamp duty surcharge of AUD 72,000 (8% of AUD 900,000), and a land tax surcharge of AUD 24,000 (4% of AUD 600,000). Total additional first-year cost: AUD 110,100. In subsequent years, the land tax surcharge of AUD 24,000 continues annually.

If permanent residency is obtained after three years, the total additional costs over the period of foreign ownership are approximately AUD 158,100 (AUD 86,100 in one-off costs plus AUD 72,000 in land tax surcharges over three years). This is the premium for buying before permanent residency rather than after.

Whether this premium is justified depends on property price growth during the waiting period, rental costs during the same period, and the likelihood and timing of permanent residency. If property prices increase by more than the surcharge costs during the waiting period, buying early may still be financially advantageous — but this requires property price growth that is not guaranteed.

Compliance obligations

Foreign property owners must ensure they are correctly assessed for the land tax surcharge. In most states, the revenue office sends an annual land tax notice that includes the surcharge. If you believe you have been incorrectly assessed (for example, if you have already obtained permanent residency), you should lodge an objection with the revenue office.

Failing to pay the land tax surcharge when due results in interest charges and potential enforcement action, including liens on the property. State revenue offices have the power to enforce unpaid land tax against the property itself.

If you sell the property, any outstanding land tax surcharge must be cleared at settlement. Your conveyancer will typically check for outstanding land tax as part of the settlement process.

Do I pay the surcharge if I live in the property?

In most states, yes. The principal residence exemption from standard land tax does not extend to the foreign owner surcharge. You pay the surcharge even if the property is your home. Some states have introduced limited exemptions — check current rules.

What is the difference between the stamp duty surcharge and the land tax surcharge?

The stamp duty surcharge is a one-time charge paid at the time of purchase. The land tax surcharge is an ongoing annual charge assessed on the unimproved land value for each year you own the property as a foreign person. Both apply, and both are separate costs.

Can I get a refund of the land tax surcharge if I get permanent residency?

You can stop paying the surcharge from the date you are no longer a foreign person, but past surcharge payments are generally not refunded. The surcharge paid for years during which you were a foreign person stands.

Is the land tax surcharge deductible?

For investment properties, land tax (including the surcharge) is generally deductible against rental income. For your principal place of residence, it is not deductible. Consult a registered tax agent for your specific situation.

How do I find the unimproved land value of a property?

The unimproved land value is assessed by the state's Valuer-General and appears on your annual land valuation notice and your council rates notice. You can also look up land values on the relevant state valuation authority's website.