What is property tax?

Imagine you’ve just invested in a property with the plan to develop it and sell it on for a profit, when you’re asked to pay goods and services tax.

Australia doesn’t have a universal “property tax”, rather, there are many sorts of taxes that apply to different circumstances.

If you’re buying, selling, investing, or simply owning land, the sort of tax you’ll pay will be specific to your situation.

With so many tax varieties, requirements and rules out there, navigating the world of property tax can be difficult and even confusing.

We’ve put together this handy guide to answer the question ‘what is property tax in Australia?’ and to determine what might apply to you and your property.

Understanding How Property Tax Works in Australia

In Australia, property tax is managed by state and territory governments and applies differently depending on the type of property you own and where it’s located.

The key charges include land tax, council rates, and stamp duty.

• Land Tax applies to property owners beyond their main home and is calculated using progressive thresholds set by each state. Your principal residence is usually exempt, but investment and commercial properties are taxable.
• Council Rates are levied quarterly by local councils to fund community services and infrastructure.
• Stamp Duty is paid when property changes hands and varies depending on the property’s value and your state’s rate.

Many owners also qualify for the main residence exemption, which can reduce or eliminate land tax and capital gains tax (CGT) when selling their home.

However, only one property can qualify at a time, and eligibility depends on residence status, ownership structure, and land use.

What types of properties and deals are taxed?

You’ll need to pay different sorts of tax on the following properties.

Property taxes may apply to individuals, companies, and other legal entities that own property.

Your home

While you will need to pay transfer duty, formerly known as stamp duty, when you buy a home, you may be exempt from paying capital gains tax (CGT) if your home has been your and your family’s main residence for as long as you’ve owned it.

Many jurisdictions also offer a home exemption, which can reduce or eliminate property tax on your primary residence if you meet certain criteria, providing additional tax relief for homeowners.

It’s likely you’ll also be exempt from any CGT when you sell, too.

Residential rental property

If you own a rental property, you may be able to claim tax deductions on loans, rates, maintenance, capital works, and borrowing expenses, but it’s important you do your research to be sure of your particular entitlements.

In some areas, property tax assessments for rental properties may be based on the property’s rental value, which reflects its potential income.

Vacant land and subdividing

Any vacant land is usually regarded as a capital asset and therefore subject to CGT.

If you subdivide your land, the original parcel becomes two assets that attract CGT when they are sold.

Property development

If you’re building or renovating a property, you may need to register for goods and services tax (GST) if the turnover from your transactions is greater than the threshold and your work is viewed as an enterprise.

You may need to pay this GST when your property is sold.

Business property

If you’re the owner, landlord or tenant of business property, you must declare any rental income and may be able to declare tax deductions on some property expenses.

Property taxes on tangible personal property, such as machinery and equipment, can significantly influence the investment decisions and growth of businesses.

If there’s any capital gain when you sell, you’ll need to pay CGT and you may need to register for GST if you are viewed as conducting an enterprise and receive a turnover higher than the threshold.

Holiday homes

If you own a holiday home, you’ll only be able to claim tax deductions during the time in which your home is rented or available for lease.

If you don’t rent the property, you may need to pay CGT when it comes time to sell.

What taxes must be paid when selling or buying a property?

When you sell or buy a property, you may be subject to different taxes.

Taxpayers involved in property transactions must comply with the relevant tax code and regulations.

Income tax

Income tax is paid on anything you earn over the tax-free threshold, which currently sits at $18,200.

Paying income tax might apply in the case of rental properties.

It’s crucial you declare any income you receive from your tenant, either as cash or as goods and services, and any payments you receive in the course of operating a rental.

These might include fees you keep when renters or holiday-makers cancel an accommodation booking, any insurance payouts after a damage or disaster claim, and any payments for deductible expenses.

Capital gains tax

Capital gains tax features as part of your income tax.

It applies when any property sale generates a profit.

If you’re determined to have a capital gain, the amount of tax you’ll need to pay will increase.

Vacant and subdivided land is commonly subject to capital gains tax as it is viewed as an asset.

Goods and services tax

Broadly speaking, goods and services tax is a 10% tax incurred on goods, services and other items sold within Australia.

Depending on the type of property you own, and on how it’s used, you may be required to pay goods and services tax.

GST is usually not required if you’re building or selling your family home, or if the rent you receive from your property is residential.

If you receive a turnover from any property transactions above the GST threshold, and if your activities such as buying land with the view to developing are viewed as an enterprise, you will need to register for GST.

This might apply to you even if you’re not operating as a business, so it’s important you are aware of the particular requirements and how you might be affected.

If you do need to register for goods and services tax, you will require an Australian business number (ABN).

If you don’t register for GST when required, you may still end up needing to pay GST on any sales made after the date you needed to register.

What taxes must be paid on a business property?

Business properties are subject to several types of tax. Local governments and other authorities levy property taxes, including real estate tax and other local taxes, on business properties.

In addition to local taxes, business properties may also be subject to state taxes, such as land tax or stamp duty, depending on the jurisdiction.

In some regions, water boards or similar agencies may levy charges or taxes on business properties to fund water management and infrastructure.

Stamp duty

Stamp duty, transfer duty, or duty is paid in the event of a transaction, such as a property sale.

If your business has invested in a property, you will be required to pay stamp duty to the government in your state or territory.

It’s important to note that the stamp duty rates and rules are governed by individual states, so you’ll need to be aware of what applies to your particular location.

If you inherit the property, or the property has been transferred to you from your spouse or partner, you may be able to claim an exemption.

It’s crucial you are aware of the particular requirements of your relevant government.

Rates

Rates, often referred to as council rates, are municipal taxes assessed by local councils and are typically paid annually based on the value of your property.

You’ll likely receive a rates bill if your business owns property.

And there’s no flat rate you’ll need to pay because the amount you’ll incur will depend on your property value, which can depend on your particular local council.

Local councils are responsible for levying and managing council rates and other property-related fees within their jurisdictions.

You may also find yourself subject to different types of rates, including general rates, rates on utilities such as gas, stormwater or waste management, and one-off charges or special rates.

Your council will use the rates it receives to keep itself running and to maintain particular amenities, including roads, kerbs, parks, immunisation, libraries, planting of trees, and eradicating pests.

Land tax

Land tax is charged by state and territory governments on an annual basis, and it’s likely you’ll incur a land tax charge if your business owns property.

Territory governments may have different rules regarding land tax; for example, the Northern Territory does not impose land tax.

Property owners must pay land tax annually based on the combined unimproved value of their taxable land holdings, though this generally doesn’t include your main home or permanent residence.

When you pay land tax, it’s important you’re aware of the particular regulations of your state and territory government, and of what you’re entitled to.

Some organisations such as aged care or supported accommodation facilities may be exempt from land tax.

Estimating and Managing Your Land Tax Liability

To estimate your property tax, determine the total taxable value of your properties and apply the relevant state thresholds and rates.

For example, New South Wales adjusts these thresholds yearly to reflect market conditions, encouraging investment through higher thresholds or discouraging multiple ownership with higher surcharges.

Property tax payments must be made by a specified due date each year.

Missing the due date can result in penalties or fines, so it is important to keep track of these deadlines.

Example (NSW):

• 2022 general threshold = $822,000; premium threshold = $5,026,000.
• Tax above these limits is charged progressively (e.g., 1.6%–2% for premium holdings).

Because rates and exemptions differ between states, it’s essential to review them each financial year and use official resources like Service NSW for up‑to‑date information.

Whether you own residential, commercial, or investment properties, working with a qualified financial advisor can help you:

• Optimise eligibility for exemptions,
• Forecast annual tax costs, and
• Integrate property tax planning into a broader investment or development strategy.

Pherrus Financial Services provides expert advice to help property owners estimate taxes accurately, reduce liability, and improve long‑term financial outcomes.

Do you need help determining your property tax?

Don’t get caught out by complex tax laws or overpay what you don’t owe.

At Pherrus, our Sydney-based tax consultants and accountants specialise in helping property owners and investors navigate property tax efficiently, from land tax and transfer duties to business property obligations.

We’ll assess your unique situation, uncover potential deductions, and ensure you meet all compliance requirements while keeping your tax payments low.

Protect your property investment with expert tax advice.

Call Pherrus today on (02) 9099 9109 or book your consultation online to get clear, strategic property tax guidance tailored to your goals.

Pherrus — your partner in smarter tax and stronger financial outcomes.

FAQs

What Determines the Amount of Property Tax I Have to Pay?

The amount of property tax you pay is determined by the property tax rate set by your local government, which is typically applied to the assessed value of your property.

The assessment of your property’s value is typically determined annually, often as of a specific date in the calendar year, and this assessed value is used to calculate your property tax.

The assessed value is calculated by a local tax assessor and is based on factors such as the property’s market value, location, and property type.

Property tax rates can vary significantly between different areas and property types, with residential property taxes often being lower than those for commercial or investment properties.

Some properties, such as a permanent residence, may be exempt from certain taxes or eligible for reduced rates, helping to ease the tax burden for homeowners.

How Frequently Do I Need to Pay Property Tax?

Property taxes are usually paid annually or semiannually, and the process is straightforward: the local government multiplies the specific property tax rate by your property’s assessed value to calculate your annual tax liability.

Property taxes are typically assessed and paid on a calendar year basis, with a specific due date each year by which payment must be made.

If you believe your property’s assessed value or tax rate is incorrect, you have the right to contest it with your local council or tax authority.

Are There Any Other Types of Property Related Taxes I Need to Be Aware Of?

In addition to property taxes, property owners may also encounter other tax obligations, such as income tax on rental income, capital gains tax when selling a property, and transfer tax during property transactions.

Understanding these various taxes is crucial for managing the overall cost of property ownership and ensuring compliance with all relevant tax laws.

Why is Property Tax Necessary?

Local governments depend on property tax revenue to fund essential services and maintain community standards.

Property tax is often the major source and primary source of revenue for most local governments, making it essential for funding local services such as schools, emergency services, infrastructure, and public facilities.

As a result, property taxation plays a vital role in supporting the quality of life in your area.

By staying informed about property tax rates, exemptions, and your responsibilities as a taxpayer, you can make better decisions about your property investments and avoid unexpected costs.

Whether you own a residential property, rental property, or business premises, understanding how property taxes are calculated and paid is essential for every property owner.