Land tax in NSW is a large cost to many investors at 1.6% of land value per year. But careful planning allows the pain to be minimised - to a certain extent anyway. Individual Ownership structure Each individual receives a threshold of $432,000 (as of 2015) in NSW. This threshold excludes the main residence (ie the main residence doesn’t count). Spouse A may be able to own 2 cheaper investment properties before reaching this level Spouse B may also be able to own 2 cheaper investment properties before reaching this level. But properties purchased jointly will mean there is only one threshold between both persons so the couple may only be able to get 2 properties before hitting the threshold Absences The absence from PPOR rules for land tax are much be strict and complex than that for CGT. If you are absent from your PPOR and had previously lived in the property you may still be able to claim it as the PPOR and not pay land tax. Strict rules apply such as not leasing the property for more than 6 months and also moving back into the property after the absence. Using a SMSF In NSW a SMSF gets a separate threshold to an individual members of the fund. The Custodian trustee is a bare trust and the SMSF is considered the owner so the Custodian Trustee will also be entitled to a separate threshold to the individual members (but not an additional threshold to the SMSF). Where spouse A and B are involved in one SMSF the SMSF will get one threshold. However Spouse B could rollover his benefits to a new SMSF which could then get its own threshold. Company Ownership A company is a legal person and will get its own land tax threshold of $432,000. However it is not as simple as setting up new companies all the time to own new properties as there are laws which allow the aggregation of different companies which are controlled by the same person or persons. However it may be possible for spouse A to control company A and spouse B to control company B and for two companies controlled by the same family to get a separate land tax threshold. seek legal advice!! Timing When purchasing property if you settle before 01 Jan you will be liable for land tax for the full year ahead. However if you were to settle 02 Jan the vendor would have been liable for the full year ahead - they may attempt to make the purchaser pay this through terms of the contract of sale but this is open for negotiation. If you are about to rent your property and it is Dec consider waiting until new year. Although there is a rule that it has to be continuously occupied since July 1 for this to apply - or the Commission is satisfied that it is the main residence. Fixed Unit Trusts With fixed unit trusts the unit holder is assessed for land tax as if they were the title holds themselves. This doesn't really give any extra threshold but can provide flexibility while still getting the threshold. Carefully Drafted wills When leaving a main residence to a trustee of a discretionary testamentary trust in a will make sure there is a life interest given to the surviving spouse as he or she can then get the main residence land tax exemption while living in the property - despite discretionary trusts not normally benefiting by getting a threshold.