Property continues to be one of the most important assets for Australian families, however the tax and regulatory environment around real estate is shifting. Whether you own an investment property, a family home, or assets held through a trust or SMSF, it’s becoming more important to plan.
This month, we’re highlighting the major changes, potential reforms, and common “tips and traps” to help you make informed decisions about your real estate and estate planning.
State and Territory Taxes Are Increasing Pressure on Real Estate Planning
Across Australia, most states and territories have been tinkering with various property related taxes, often to increase the burden on the land owner.
While the specific details may differ, the overall trend is clear: holding property, particularly as an investment property, is becoming significantly more expensive.
Land Tax Changes and Their Impact on Real Estate Planning
Owners are now receiving their annual land tax bills, with many experiencing ever growing annual costs due to a combination of both higher rates and/or lower thresholds.
Below is a simplified comparison showing how thresholds and rates have changed over time in Victoria.
Victorian Land Tax Thresholds & Rates
General rates – Individuals:
| Land Tax Year | Tax Free Threshold | Notes on Changes | Rates |
|---|---|---|---|
| 2023 | $300,000 | Last year before major reforms. | • $375 plus • 0.2% on land value above $23000,000 • .05% above $600k • 0.8% above 1,000,000 |
| 2024 2025 2026 | $50,000 | Covid Debt repayment plan introduced and rising valuations. | • $500 • $975 above $100,000 $1350 plus 0.3% of amount > $300,000 • $2250 plus 0.6% of amount > $600,000 • $4650 plus 0.9% of amount > $1,000,000 • $11,850 plus 1.65% of amount > $1,800,000 • $31,650 plus 2.65% of amount > $3,000,000 |
Tip: Check your expected land tax amount each year. Consider your options to challenge the property values used in the calculation. If you own multiple properties, or a ‘holiday home’, consider whether your current ownership structure still makes sense for how you are using the properties.
Vacant Property Taxes
In recent years, several states have introduced or expanded taxes applying to homes which are left empty or vacant for extended periods of time.
Trap: Many people assume this only applies to holiday homes or inner city apartments. Rules vary by state and can be broader than expected, including in relation to properties awaiting development.
Possible Tax Changes in the Federal Budget
The Federal Government has begun to signal that the Capital Gains Tax (CGT) settings with respect to property are being reviewed and may change during the May budget. Whilst nothing has been formally confirmed yet, the key areas of potential change to CGT being discussed include:
- The current CGT discount which applies to property (50%) – Will it be removed?
- How gains are calculated – Will the percentage of the CGT discount change for certain assets, such as property?
- Concessions for higher value assets – Will there be a different tax regime introduced based on property value?
Tip: If you’re thinking about selling or transferring property, it may be worth reviewing the timing and possible impact on your CGT calculations in light of these potential changes.
Other Factors Impacting the Costs of Property as an Investment
- Interest costs have risen due to higher interest rates, increasing the overall cost of holding investment property.
- Council rates continue to climb as property valuations rise across many local government areas.
- Insurance premiums have increased significantly, driven by higher rebuild costs and broader market pressures
As a result of these, it is very timely to reevaluate whether your current structure and approach is the most tax effective and fit for purpose.
Real Estate Planning Tips and Traps
Real estate often makes up the largest part of any estate, which makes planning ahead to ensure all the intricacies of the outcomes upon death for estate essential.
Keep Your Will Updated
Property values and tax rules change. A will written years ago may no longer be fit for purpose.
Watch Out for Land Tax in Inheritance
Leaving multiple properties to one beneficiary can push them into higher land tax brackets. Have you considered the flow on impacts and costs and whether there are alternate structures or strategies?
Review Trusts and SMSFs
Trust deeds, vesting dates, and SMSF property strategies should be checked regularly to ensure they still work under current tax rules.
Vacant Property During Estate Administration
If a property sits empty while an estate is being finalised, vacant property taxes may apply depending on the state. Ensure you are aware of any deadlines and completion requirements.
The ATO’s draft determination TD 2026/D1 tightens the rules around when a deceased estate can access the CGT main residence exemption. The determination significantly narrows eligibility, introduces stricter time limits on how long a beneficiary can live in the property after the owner’s death, and increases documentation requirements. These changes mean beneficiaries may face unexpected CGT liabilities, making estate planning more important than ever.
This draft ruling places greater pressure on executors and beneficiaries to act within tighter timeframes, as delays in selling or occupying the property may now jeopardise access to the CGT main residence exemption.
What You Can Think About Now
A few simple steps can help you stay prepared:
- Review your property portfolio and consider what are your expected state taxes.
- Update your will and estate planning documents.
- Consider potential CGT outcomes and the upcoming possible budget changes as part of any of your potential property transactions.
- Seek advice early if you’re considering restructuring or gifting property, as there can be many unforeseen impacts.
What You Can Think About Now
Real estate remains a strong long-term asset, but the tax environment is shifting. With rising state taxes and possible CGT changes ahead, now is a good time to review your property portfolio and estate plan and ensure it is still tax efficient and aligned with your goals.
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