Everything You Need to Know About Land Tax in Western Australia
The success of your investment relies heavily on abstract legal considerations, one of which is taxation. Take land tax as a reference – in the financial year of 2024-2025, the land tax revenue collected in Western Australia is forecast to be $987m, an increase of $58.2m (6.3%) year on year.
In 2024-2025, will you be contributing to this revenue collected? Understanding whether your land is taxable and how land tax is calculated, is key. This guide explains everything you need to know about the topic.
How Does Land Tax Assessment Work in Western Australia?
According to the Government of Western Australia, land tax is “an annual tax on land not used as your principal place of residence. You will receive a notice of assessment for the land you owned at midnight on 30 June.”
In other words, once a year, the WA Valuer-General calculates the total aggregated unimproved value of all the land under your name (except for your primary residence) from the previous financial year.
When the term “unimproved values” is mentioned, it refers to combining only land owned under the same ownership for land tax calculation. It also refers to the value of the land alone, not assessed based on any properties or structures on it or structural improvements.
After the land tax assessment at midnight on 30 June, the government imposes a land tax on a marginal basis, for which you receive an assessment notice.
Who Pays Land Tax in WA?
Generally speaking, anyone who owns land in Western Australia pays land tax for their lands, excluding exempt land. However, the combined land value must exceed $300,000. To elaborate, your land may be worth less, but if the total value of your multiple land holdings is over the threshold, you must pay land tax.
If you build a commercial property on your land, your tenant will most likely pay the land tax along with property outgoings. Now, let us elaborate on land tax exemptions.
Primary Residences
According to the Land Tax Assessment Act, your primary residence is typically exempt from the land tax. You may also be granted a land exemption if your private residence is under development or construction for a maximum of two years (and you are not living on another property that you own).
If you plan to sell your old home, the Act exempts you from paying the tax as you are building a home on land you have just acquired. Additionally, if you are in the process of moving between two properties and do not make rent from either, you are exempt from paying the land tax on the second home. And if the owner of the private residences passes, you may not have to pay the land tax.
Even if you leave the home to move to a hospital, nursing home, or other facilities providing full-time care, you remain exempt from the tax.
Despite the exemption of primary residences, some circumstances entitle you to only a proportionate exemption. That includes sharing ownership with others when some of them do not live on the estate and owning land used for dual purposes, such as an office and home.
Finally, some circumstances deem you ineligible for the land tax exemption, mainly if you own your place of residence via a company or trust. However, if the holder of the trust is the executor or administrator of the estate, exemptions apply. The same applies to land held as a primary residence for a disabled beneficiary.
Other Exemptions
Apart from main residences, other exempt land examples include:
- Land used for primary production
- Subdivided residential land
- Land built to rent
- Inner City living rebate
- Land owned by charities
- Non-profit or sports associations
- Religious institutions
- Educational institutions
- Aged care facilities
- Retirement villages
- Caravan parks
- Land owned or vested in the Crown, local government, or an agency of the Crown
- Lands with public or religious hospitals
- Land held as mining tenements
- Land used for zoological, agricultural, or other public purposes
- Land owned by a veteran’s surviving partner or mother
- Land held under an approved conservation covenant
- Land vacated for sale by mortgagee
How Land Tax is Calculated in WA
The Valuer-General determines your land tax rates according to the range value your taxable land held is within. Below are the taxes for each taxable value:
- Up to $300,000: N/A
- $300,000 to $420,000: $300
- $420,000 to $1 million: $100 plus 0.25% of every dollar over $420,000
- $1 million to $1,800,000: $1,750 plus 0.9% of every dollar over $1 million
- $1,800,000 to $5 million: $8,950 plus 1.8% of every dollar over $1,800,000
- $5 million to $11 million: $66,500 plus 2% of every dollar over $5 million
- Over $11 million: $186,550 plus 2.67% of every dollar over $11 million
Accordingly, land tax assessment may deem your $268,000-worth land not subject to land tax rates, your $420,560-worth land subject to a land tax of $440, or your $4 million-worth land subject to a land tax of $53,730. If you find calculating the aggregated taxable value of your land difficult, you can refer to this online government calculator.
What Do I Need to Do as a WA Property Investor?
For the next steps, you may want to want to know what applies to you as a property investor. For that purpose, below are the categories you should be attentive to relating to tax compliance and revenue generation.
For Tax Compliance
Land tax is self-assessed, so, as a landowner, you need to register for it. Following that, you will receive your tax assessment notice, including an outline of your land and its land tax liability stance.
If you find errors, you can notify the State’s Land Tax Office of any changes. Similarly, if you disagree with the land tax assessment value, you can object within 60 days from the assessment issuance date.
For Revenue Generation
As a commercial property investor, how is the land tax in WA relevant to you? Do you not simply transfer the expense to your tenants? Yes, they pay land tax and the net rent, which is what you receive after subtracting the property outgoings and what you make from the investment property.
However, while you think in terms of net rent, tenants think in terms of gross rent, which is the sum of the net rent and outgoings because it is the amount they are paying.
An overly high gross rent puts negative pressure on rent rates, resulting in more median days and higher vacancy rates, which is bad for business. The same applies to reducing gross rent because you are not cutting down on the outgoings required by the WA government – you are cutting down on your portion to offset the high cost of outgoings.
With continuous market research, you can find the average gross rent prices in your area for similar properties. Then, you can set a competitive rent price for your property that is low enough to attract tenants and high enough to generate good revenue.
What Is the Metropolitan Region Improvement Tax?
Aside from land tax, property investors in Perth’s metropolitan area should also be aware of the Metropolitan Region Improvement Tax (MBIT) imposed on land with a land tax liability. This tax is a rate of 0.14% for every dollar over $300,000 of the land’s unimproved value. Its purpose is to maintain the metropolitan areas’ public facilities.
Plan for Land Tax in Your Investment Strategy
Your property investment strategy should consider land tax along with income tax considerations and asset protection. This article has given you general information about the tax, but how do you learn about land tax implications for your unimproved land size and their impacts on your investment goals, finances, and needs?
What you need is a thorough discussion with a property expert about land tax in WA and how it pertains to your unique circumstances. Get in touch, and our team will be glad to help you plan for land tax and protect your property investment!
