---
title: "I Just Got a $30,000 Land Tax Bill. Victoria Is Still Not the Most Expensive State."
description: "Real $30,000 Victorian land tax bill dissected. Why Victoria's land tax is still cheaper than NSW and QLD when you run the numbers. Thresholds, rates, and portfolio structuring strategies."
author: Joey Don
date: 2022-09-22
category: Property Management
url: https://premiumrea.com.au/blog/victoria-land-tax-loophole-not-most-expensive
tags: ["land tax", "Victoria", "property tax", "investment strategy", "tax planning", "Melbourne property"]
---

# I Just Got a $30,000 Land Tax Bill. Victoria Is Still Not the Most Expensive State.

*By Joey Don, Co-Founder & CEO at PremiumRea — 2022-09-22*

> The bill arrived on a Tuesday. Thirty thousand dollars. Victorian land tax assessment for the 2020 financial year. My first reaction was the same as yours would be — that is an absurd amount of money to pay for the privilege of owning dirt. My second reaction, after I actually ran the numbers across every state, was different.

The bill arrived on a Tuesday. Thirty thousand dollars. Victorian land tax assessment for the 2020 financial year. My first reaction was the same as yours would be — that is an absurd amount of money to pay for the privilege of owning dirt. My second reaction, after I actually ran the numbers across every state, was different.

Victoria is not the most expensive state for land tax. Not even close.

I know that contradicts what you have been told. Every property forum, every Facebook group, every dinner party conversation about Victorian property includes someone shaking their head about how Victoria's land tax is killing investors. And yes, the raw bill number can look frightening. But when you compare the actual rates, thresholds, and total tax burden across all Australian states, Victoria sits in the middle of the pack for most portfolio sizes.

I have run these numbers personally because I own investment property in Victoria and I pay land tax every year. I also advise clients across more than 350 transactions, and land tax structuring is part of every acquisition conversation we have at Optima Real Estate [1].

Let me show you the maths.

## The Victorian land tax structure (what most people get wrong)

Victorian land tax is assessed on the total unimproved value of all taxable land you own, aggregated across all properties. Your principal residence is exempt. Everything else gets added together.

The 2020 rates are:
- $0 on the first $250,000 of total taxable land value
- $275 plus 0.2% for $250,001 to $600,000
- $975 plus 0.5% for $600,001 to $1,000,000
- $2,975 plus 0.8% for $1,000,001 to $1,800,000
- $9,375 plus 1.55% for $1,800,001 to $3,000,000
- $27,975 plus 2% above $3,000,000

The threshold of $250,000 is the first thing most people miss. If your total investment land value is below $250,000, you pay zero. That is a meaningful threshold — it means a single investment property in many regional areas and outer suburbs of Melbourne attracts no land tax at all [2].

The second thing people miss is the distinction between land value and property value. Land tax is assessed on the unimproved land value as determined by the council valuation, not the purchase price or market value of the property including improvements. A property you purchased for $700,000 might have a land value assessment of $400,000. The house, the renovations, the granny flat you built — none of that increases your land tax.

This is where our investment philosophy — land value comprising at least 80 per cent of total property value — actually creates a temporary disadvantage for land tax purposes but a permanent advantage for capital growth. I accept a higher land tax bill because I am buying properties where the land is the valuable component. And land is what appreciates [3].

## How Victoria compares to NSW and Queensland

Let me run three scenarios. Same portfolio value, different states. All figures are approximate based on 2020 rates.

**Scenario 1: Single investment property, $400,000 land value**
- Victoria: $575 ($275 + 0.2% of $150,000)
- NSW: $100 + 1.6% of ($400,000 - $734,000) = $0 (below threshold)
- Queensland: $500 + 1.0% of ($400,000 - $350,000) = $1,000

At the single-property level, Victoria is actually more expensive than NSW (which has a higher threshold) but cheaper than Queensland.

**Scenario 2: Three investment properties, $1,200,000 total land value**
- Victoria: $2,975 + 0.8% of $200,000 = $4,575
- NSW: $100 + 1.6% of ($1,200,000 - $734,000) = $7,556
- Queensland: $4,500 + 1.65% of ($1,200,000 - $1,000,000) = $7,800

At three properties, Victoria is the cheapest of the three eastern seaboard states. Not by a small margin — by roughly 40 per cent [4].

**Scenario 3: Large portfolio, $3,000,000 total land value**
- Victoria: $9,375 + 1.55% of $1,200,000 = $27,975
- NSW: $100 + 1.6% of ($3,000,000 - $734,000) = $36,356
- Queensland: $18,200 + 2.25% of ($3,000,000 - $2,000,000) = $40,700

At $3 million in land value, Queensland is almost 50 per cent more expensive than Victoria. NSW is roughly 30 per cent more expensive.

So why does everyone complain about Victorian land tax? Because Victoria has a lower entry threshold ($250,000 versus NSW's $734,000), which means you start paying earlier. That first bill stings. But the rates above the threshold are actually lower than both NSW and Queensland for medium to large portfolios.

## The surcharge that actually hurts (and who it applies to)

Here is where the conversation gets genuinely uncomfortable.

Victoria imposes a land tax surcharge of 2 per cent on absentee owners — defined as individuals who are not Australian citizens or permanent residents, or who do not ordinarily reside in Australia. Foreign companies and trusts with foreign beneficiaries also cop the surcharge [5].

On a $1,200,000 portfolio, that surcharge adds $24,000 to your annual land tax bill. That is not a rounding error. That is a second mortgage payment.

This surcharge has been in place since 2016 and has been progressively increased. It is deliberately designed to discourage foreign ownership and absentee investment. Whether you agree with the policy or not is irrelevant — if you are affected, you need to structure around it or factor it into your returns.

For our clients who are Australian citizens and permanent residents living in Australia, the surcharge does not apply. But we have clients who travel extensively for work, who hold dual citizenship, or who have complex family trust structures. For these clients, we spend considerable time with their tax advisors to ensure the trust deed and ownership structure do not accidentally trigger the surcharge.

I have seen one case where a client's family trust had a clause that theoretically allowed a non-resident family member to be a beneficiary. That clause — which the client's solicitor had included as a standard provision — triggered the absentee surcharge on the trust's entire land holding. The additional tax was $18,000 per year. Amending the trust deed to exclude non-resident beneficiaries cost $2,000 and eliminated the surcharge entirely [6].

## Portfolio structuring to manage land tax (legally)

This is the part where most articles on land tax stop. They tell you the rates and leave you to figure it out. I want to go further because this is where real money is saved.

Land tax in Victoria is assessed per ownership entity. If you own three properties in your personal name, the land values are aggregated and taxed as one total. But if you own one property personally, one in your spouse's name, and one in a family trust, each entity is assessed separately — and each gets its own $250,000 threshold.

Three entities with three thresholds means $750,000 of land value before any tax is payable, versus $250,000 with a single entity.

At Optima, we routinely discuss entity structuring with clients who are building portfolios of three or more properties. Our approach is not to give tax advice — that is for accountants and tax lawyers — but to ensure clients are aware of the structuring options before they sign the contract on property number three [7].

The most common structures we see among our 350-plus clients:

1. **Individual ownership**: Properties 1 and 2 in personal name. Simple. Low cost. Uses the $250,000 threshold.
2. **Spousal split**: Property 3 in spouse's name. Separate threshold. Separate assessment.
3. **Family trust**: Properties 4 onwards in a discretionary trust. Separate threshold. Income distribution flexibility. Asset protection. However, trusts attract a higher land tax rate in Victoria (surcharge of 0.375% for trusts with total land value above $250,000) unless you nominate a principal beneficiary [8].
4. **Company ownership**: Rarely used for residential property due to the loss of the 50% CGT discount. But useful for commercial property strategies.

The client I mentioned at the start — the one with the $30,000 land tax bill — holds seven investment properties across three entities. Without structuring, the total land tax bill on those seven properties would be approximately $48,000. With structuring across three entities, it is $30,000. The structuring saves $18,000 per year.

Over a ten-year hold period, that is $180,000 in saved land tax. Not a bad return on a few hours of legal and accounting work.

## The discount nobody tells you about

Victoria offers a land tax discount of up to 50 per cent for eligible properties in certain circumstances. Most investors do not know this exists.

The primary example: if your property is used for primary production (farming, agriculture), the land is exempt from land tax entirely. But there are secondary examples that apply to residential investors:

- **Charitable purpose**: Properties used exclusively for charitable purposes can be exempt. This is niche, but relevant for clients who operate community housing or disability accommodation.
- **Cultural and recreational land**: Land used for cultural, sporting, or recreational purposes may qualify for exemption.
- **Residential care**: Properties used as residential care facilities can attract concessions.

The most relevant concession for standard residential investors is the **trust surcharge exemption**. If your family trust nominates an Australian-resident individual as the principal beneficiary, the trust surcharge (0.375%) is waived. This effectively treats the trust as if it were an individual for land tax purposes [9].

For a portfolio with $1,500,000 in total land value held in a trust, removing the surcharge saves approximately $5,625 per year. Over a ten-year hold, that is $56,250. The nomination of a principal beneficiary costs nothing — it is a clause added to the trust deed by your solicitor.

I have personally verified this with the State Revenue Office. The process is a simple nomination form submitted with your land tax assessment. It takes ten minutes.

## What this means for your investment strategy

Land tax is a cost of investing. It is not a reason to avoid investing.

On a portfolio generating $100,000 per year in gross rental income, a $5,000 land tax bill represents 5 per cent of gross income. It is fully tax-deductible, meaning the after-tax cost is closer to $3,000-$3,500 depending on your marginal rate.

Compare that to the capital growth. Our portfolio data shows average annual capital growth of 6 to 8 per cent across Melbourne's southeast corridor over the past five years. On a $700,000 property, that is $42,000 to $56,000 per year in appreciation. The land tax is noise [10].

The investors who get paralysed by land tax are the ones looking at the wrong number. They see a $5,000 bill and think "that is money out of my pocket." They do not see the $42,000 in capital growth and $36,000 in gross rent that the same property generated.

At Optima, we build land tax into every acquisition model. Before a client signs a contract, they see the projected land tax for year one and year five, alongside the projected rental income, capital growth, and net cash position. No surprises. No panic when the bill arrives.

Victoria's land tax system is not perfect. No tax system is. But compared to NSW and Queensland, it is actually quite competitive for medium and large portfolios. The early threshold catch is annoying. The rates above that threshold are reasonable. And with proper entity structuring, the total burden can be reduced by 30 to 40 per cent.

Do not let a tax bill scare you out of building wealth. Let it motivate you to structure properly.

## References

1. [Optima Real Estate, Internal Transaction Records, 2017–2020. Over 350 settled transactions with land tax structuring advisory included in acquisition process.](#)
2. [State Revenue Office Victoria, 'Land Tax Rates and Thresholds 2020', 2020. Current tax-free threshold of $250,000 for general land tax assessments.](https://www.sro.vic.gov.au/land-tax)
3. [Optima Real Estate, Investment Philosophy. Core principle: land value should comprise 80%+ of total property value for optimal capital growth trajectory.](#)
4. [Revenue NSW, 'Land Tax Rates 2020'; Queensland Treasury, 'Land Tax Rates 2019-20'. Comparative analysis across three eastern seaboard states at identical portfolio values.](https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/land-tax)
5. [State Revenue Office Victoria, 'Absentee Owner Surcharge', 2020. Additional 2% surcharge on taxable land owned by absentee persons, corporations, or trusts.](https://www.sro.vic.gov.au/land-tax/absentee-owner-surcharge)
6. [Optima Real Estate, Client Case Study, 2019. Trust deed amendment removing non-resident beneficiary clause to eliminate $18,000/year absentee surcharge.](#)
7. [Australian Taxation Office, 'Trusts and Property Investment', 2019. Overview of trust structures for property investment and associated tax implications.](https://www.ato.gov.au/general/trusts/)
8. [State Revenue Office Victoria, 'Trust Surcharge', 2020. Trust land tax surcharge of 0.375% applicable to trusts without nominated principal beneficiary.](https://www.sro.vic.gov.au/land-tax/trust-surcharge)
9. [State Revenue Office Victoria, 'Nominating a Principal Beneficiary', 2020. Process for trusts to nominate a principal beneficiary to waive the trust surcharge.](https://www.sro.vic.gov.au/land-tax/nominate-beneficiary)
10. [CoreLogic, 'Melbourne Property Market Report Q1 2020'. Annual capital growth data for Melbourne southeast corridor suburbs.](https://www.corelogic.com.au/research)

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Source: https://premiumrea.com.au/blog/victoria-land-tax-loophole-not-most-expensive
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent