New year, New Land Tax Changes – Key Things to Know in 2025

2025 is just around the corner, and NSW property investors will want to take note of some significant changes to land tax. Start your year by being on top of these new rules, including adjustments to tax-free thresholds, rate freezes, and increased costs for foreign investors. Here’s a breakdown of what’s new, what it means, and how you can tackle the year ahead. 

What’s new with the land tax threshold? 

As part of the 2024-2025 state budget, the NSW government raised the land tax-free threshold to a combined property value of $1,075,000 – an increase of $106,000 from the previous year. This might sound like good news, but there’s a catch. This higher threshold will now be frozen, rather than adjusted annually to reflect rising property values. This means that while property values continue to rise, more property owners will gradually be pulled into the land tax net over time, a phenomenon known as ‘bracket creep’. 

In other words, even if your property portfolio stays the same, increasing valuations over time will likely mean more property owners, including smaller investors, will start paying land tax each year. 

Updated land tax rates for 2025 

On 31 December 2024 – the date that land tax is calculated for the coming year – property owners will face the following rates: 

• Land valued over the tax-free threshold of $1,075,000: $100 plus 1.6% of the combined property value over the tax-free threshold 

• Land valued over the premium threshold of $6,571,000: $88,036 plus 2% of the combined property value over the premium threshold 

With these thresholds now frozen, the rates are likely to impact a growing number of property holders as values increase. 

It is worth noting that if you've received a Notice of Valuation from the Valuer General and you disagree with your land value or your property description, you can lodge an objection online through Service NSW to have the assessment reviewed. 

The knock-on effect 

The land tax is primarily aimed at investment properties, vacant land, and holiday homes, meaning principal residences, and working farms remain exempt. However, landlords and property investors will shoulder the additional tax burden, a cost many in the industry argue will ultimately be passed down to renters through higher rents. 

The Real Estate Institute of New South Wales has raised concerns about the impacts on the rental market, warning that additional taxes could lead some landlords to increase rents or consider selling, potentially taking rental properties out of an already tight market.  

Changes for Foreign Investors 

Higher charges for foreign investors are also being introduced in 2025. From 1 January 2025: 

• The foreign investor duty surcharge will rise from 8% to 9% 

• The land tax rate for foreign property owners will increase from 4% to 5% 

These changes apply to all foreign-owned residential properties in NSW, even those not subject to land tax. With an estimated 20,000 foreign-owned residential properties in the state, these adjustments are expected to generate significant additional revenue and, according to the NSW government, may free up more properties for local residents. 

Preparing for 2025 and beyond  

Here are some steps to consider as a property owner to prepare for 2025’s changes and beyond:  

• Review your property portfolios current value: Regularly updating your property valuations can help you stay prepared for any changes in tax obligations. 

• Factor in land tax when buying: If you’re considering expanding your property portfolio, build in the potential costs of land tax into your calculations. This will ensure there aren’t any surprises when it comes time to pay up. 

• Seek professional advice: Navigating tax obligations, especially when you have multiple properties, can be a lot of work. Consulting with an advisor can help you with this. 

• Consider the implications for rental properties: If you are a landlord, you might want to explore ways to manage costs while considering the impact on tenants. 

As we welcome 2025, it’s important for you to be on the ball with these changes. Staying informed and preparing in advance are key. 

With changes like these, being part of the property landscape can seem like a bit of a balancing act. With the right approach and the right guidance, you can walk the tightrope with ease and make the most out of your investments in 2025. 

Need the help of a professional? We’re here to guide and assist you through your financial journey.