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Find out if you need to pay land tax on your crown lease and understand your obligations as a crown land lessee in NSW.
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Crown land overview
Crown land is defined as land owned by the Government or local government bodies. Generally, this land is held by:
the Crown (the NSW Government)
local councils or county councils
NSW statutory and public authorities
It accounts for approximately half of all land in New South Wales and provides public spaces for recreation, protects important environments, and supports economic activities across the state.
Unlike private land, you cannot buy Crown land outright - you can only lease it or get permission to use it from the NSW Government.
Crown land in NSW can include:
reserves
cemeteries and crematoria
commons
waterways, estuaries and beaches
western lands
crown roads
national parks and state forests
school of arts
More information about types of crown land can be found on the NSW Crown Lands website.
Crown land leases
The NSW Government and the community work in partnership to manage Crown land. Much of this land is managed through leases and licenses, especially in rural and western NSW.
People or organisations can rent Crown land for things like farming, shops, or community groups, but the government still owns it. If you rent Crown land, you are referred to as the lessee.
A lessee of Crown land has exclusive use over a particular piece of land for a specified term and purpose.
All Crown land leases are issued for specified terms and are usually recorded on the title of that land.
Obligations for lessees and lessors of crown land
Lessees must keep information up-to-date and lodge an annual return
It is the responsibility of the lessee to lodge an annual return and keep their personal and land holding information up to date in Land Tax Online. Read more about how to update land tax details and lodge a return in Land Tax Online.
Lessors must provide a land tax disclosure statement to the lessee
From 1 January 2018, it is the responsibility of the lessor Crown or council that is leasing land to provide a land tax disclosure statement to the lessee. The disclosure statement must advise of the potential for the lessee to be liable to land tax on the property being leased. This requirement applies to leases entered into, or renewed after 1 January 2018.
When lessees of crown land are liable for land tax
Land leased from the Crown or a council may be liable for land tax. Under Section 21C (2) of the Land Tax Management Act 1956, a lessee is deemed to be the ‘owner’ of the land or any part of the land they lease. Therefore, based on the value of the land, the lessee can be liable for land tax for the term of their lease, unless they qualify for an exemption or concession or are deemed not liable for one of the reasons stated below.
Situations where land tax is not payable
Lessees are not liable for land tax where:
the term of the lease is less than 12 months
the lessee is the Crown, a local or county council or a public authority
for land leased from the Crown:
the lease was entered into before 1 January 1987, and
the terms of the lease relating to rent payable remain unchanged
for land leased from local and county councils and NSW public authorities:
the lease was entered into before 1 January 1991, and
the terms of the lease relating to rent payable remain unchanged
lessees of Commonwealth land are exempt from land tax. If you lease land directly from Commonwealth of Australia or a Commonwealth authority, you are not required to pay land tax on that property. This exemption applies because Commonwealth entities are not classified as 'owners' under land tax legislation.
the lease is a sub-lease
the lease is part of a monthly hold-over
What is a sub-lease?
A sub-lease is when someone who is already renting government or council land decides to rent out part or all of that land to another person.
When this occurs, there are three parties involved:
The government/council (the original landowner)
The original tenant (who rents from the government/council)
The sub-tenant (who rents from the original tenant)
A monthly holdover is a mutual agreement between the Crown and the lessee to continue a month-to-month tenancy after a lease has expired, and the parties have not extended or renewed the lease.
Lessees are not liable for land tax under section 21C when this type of agreement is in place.
How land tax is calculated for crown leases
The method of calculating land tax is a standard approach. Refer to how land tax is calculated for more information and examples.
How land tax is calculated when multiple people lease the same property
When multiple people lease different parts of the same property, we take the following steps to determine your land tax liability.
1
Get rental information
The landlord (Crown/Council) provides rental values for the entire property.
If any part is empty, the Crown/Council must provide the market rental value for that area.
2
Calculate your share of the land value
Your land value = (Total property value) × (Your rent ÷ Total property rent)
3
Alternative method via Valuer General
If unable to determine land values using the above method, you can ask the Valuer General to determine your land value directly.
4
Calculate your tax
Once you know your land value, land tax is calculated using the standard rates.
Example: If the total property is worth $100,000 and your rent is $500 out of $2,000 total rent, your share would be:
$100,000 × ($500 ÷ $2,000) = $25,000
Surcharge land tax and crown leases
If you are a foreign person who leases land from the crown in NSW, you must pay surcharge land tax in addition to any land tax you may already pay. Read more about surcharge land tax.
