What is Land Tax?
Quick summary
Land tax is an annual NSW state tax assessed on the combined taxable land value of non-exempt land owned at midnight on 31 December each year. It is separate from council rates, stamp duty and income tax. The focus is the value and taxable status of the land, not whether the owner receives income from it.
For many landowners, the key questions are whether the property is taxable, whether any exemption applies, how ownership structure affects the threshold and whether the actual use of the land supports a primary production position.
Who generally pays land tax in NSW?
Revenue NSW states that land tax is payable when the combined land value of all non-exempt land owned in NSW exceeds the general threshold. The threshold is applied to the owner's combined taxable holdings, not separately to each property.
This means a person may have several properties below the threshold individually, but still be liable if their combined taxable land value is above the threshold. Ownership structure also matters. Joint ownership, companies, trusts and related entities can affect how the threshold applies.
What land value is used?
Land tax is based on land value, not the market value of the whole property including buildings and other improvements. Revenue NSW uses land values determined for valuation purposes. For the 2026 tax year, Revenue NSW explains the land value calculation using a three-year average.
Because the assessment is based on land value and ownership at the taxing date, a property owner's land tax position can change even if the property is not sold, developed or rented.
Current NSW thresholds and rates
Revenue NSW lists the fixed land tax thresholds that apply from 1 January 2025 onward. As at the date this resource was prepared, the current general threshold is $1,075,000 and the premium threshold is $6,571,000.
| Threshold | Land value | Rate |
|---|---|---|
| General threshold | More than $1,075,000 but less than $6,571,000 | $100 plus 1.6% of the land value above $1,075,000 |
| Premium threshold | More than $6,571,000 | $88,036 plus 2% of the land value above $6,571,000 |
Different rules can apply to surcharge land tax, certain trusts, companies, joint owners and other ownership arrangements. Those situations need separate review.
What land may be exempt?
Some land is exempt or concessional for land tax purposes. Common categories include a principal place of residence and, for relevant rural and semi-rural properties, land used dominantly for primary production.
The primary production exemption is important because many rural lifestyle, land-bank and semi-rural properties have high land values but may not be used in a way that satisfies the dominant-use requirements. An exemption position should be grounded in the actual use of the land, not merely the owner's intention or a label applied to the property.
Primary production and land tax
Revenue NSW guidance explains that the primary production exemption applies to land used dominantly for primary production activities. The relevant Revenue NSW ruling refers to section 10AA of the Land Tax Management Act 1956 and identifies categories such as cultivation for sale, maintaining animals for sale or bodily produce, keeping bees for honey, commercial plant nurseries, and propagation for sale of mushrooms, orchids or flowers.
For rural land, the owner must be able to show that primary production is the dominant use of the parcel. For land that is not treated as rural land, additional commercial tests apply. Those tests require the primary production use to have a significant and substantial commercial purpose or character and to be carried on for profit on a continuous or repetitive basis, whether or not profit is actually made.
Dominant use is a practical test
The dominant-use question is practical. It compares the primary production use against other uses of the land. Relevant factors can include the area used, the intensity of activity, capital investment, labour, records, expected income and whether competing uses such as residential, recreational, rental, tourism or development activity outweigh the production use.
Revenue NSW's ruling also notes that mere intention to use land for primary production is not enough by itself. Preparatory work may be relevant, but the land use must be real and evidenced.
Examples of activities that may be relevant
Depending on the property, activities that may be considered in a primary production context include livestock grazing or breeding, beekeeping for honey, cultivation, commercial plant nursery activity, and propagation of orchids or flowers for sale. Suitability depends on land size, zoning, access, water, fencing, biosecurity, carrying capacity, continuity, commercial character and the presence of any competing uses.
Not every rural activity is enough. Token, occasional or intermittent activity may not support the position if it is too small or too disconnected from a commercial production purpose.
Records matter
Records do not create eligibility where genuine primary production does not exist, but they can help demonstrate the facts. Useful records may include property plans, operating plans, activity logs, photographs, stock or hive records, invoices, sales evidence, contractor records, pasture or infrastructure work records and annual summaries.
For owners who do not want to run the operation themselves, a professionally managed arrangement may help establish and maintain the operating discipline needed for a credible primary production enterprise.
How Bundilla Beef approaches this
Bundilla Beef assesses suitable NSW rural and semi-rural properties, designs practical primary production enterprises and manages agreed operations, records and property activity. The objective is to make the productive use of the land genuine, commercially credible and properly documented.
If land tax remains payable for an agreed Bundilla Beef managed enterprise, Bundilla Beef will waive its service fee for that period, provided no other owner-directed use or arrangement has caused primary production to not be the dominant use.
Key questions for property owners
- What is the combined taxable land value of your NSW holdings?
- Is the property currently taxable, exempt or partly exempt?
- What is the actual dominant use of each separately valued parcel?
- Are there competing residential, recreational, rental, tourism or development uses?
- Is the primary production activity commercially credible and continuous?
- Are operating records sufficient to show what is happening on the land?
- Does the ownership structure affect the threshold or assessment?
Source notes
This resource was prepared using official Revenue NSW and NSW legislation sources available on 28 June 2026. Source links should be checked periodically for changes.