Investing in Australian property: gearing and land tax
How an Australian purchase is taxed: transfer duty, land tax and negative gearing, plus the rules a foreign buyer meets before making any offer at all.
Updated on 9 August 2026.
What does an investment purchase cost above the price?
For an Australian resident, allow 4% to 5%. Transfer duty is nearly all of it, and in New South Wales it is banded like income tax. Conveyancing, a building and pest inspection and the registration fee make up the remainder. A foreign buyer adds 9% surcharge duty on the whole value, roughly tripling the bill.
Negative gearing: a rental loss against your other income
Negative gearing means deducting a loss on a rental property from your other income, such as salary or business profit. Australia allows this without a cap and without a waiting period. If the loss exceeds your other income, the remainder carries forward to the next year (ATO, rental properties guide).
That mechanism explains the whole Australian investment model. Investors accept years of negative cash flow, because the tax office refunds part of the loss and capital growth is expected to cover the rest.
There is a catch that decides whether the model works for you at all. The loss offsets Australian taxable income. Without Australian income there is no annual refund, only a loss carried forward against later Australian profit.
Transfer duty in NSW, and the 9% a foreign buyer adds
Transfer duty in Australia is a state tax, not a federal one. Every state sets its own bands and its own surcharges. Below is New South Wales, the state containing Sydney and the one BRIX Calc models.
| Slice of the value (A$) | Rate FY2026-27 |
|---|---|
| 0 to 18,000 | 1.25% |
| 18,001 to 38,000 | 1.5% |
| 38,001 to 103,000 | 1.75% |
| 103,001 to 387,000 | 3.5% |
| 387,001 to 1,290,000 | 4.5% |
| 1,290,001 to 3,870,000 | 5.5% |
| Above 3,870,000, residential | 7% |
| Foreign purchaser surcharge, whole value | plus 9% |
Source: Revenue NSW, transfer duty rate table and surcharge purchaser duty, financial year 2026-27. Consulted 3 August 2026. The band thresholds move with indexation each year.
The 9% surcharge applies to the entire value, including the slice taxed at 1.25%. On a million dollar home that is A$90,000 on top of the ordinary duty.
Land tax on land value, and the surcharge with no threshold
Land tax in Australia is an annual state tax on the unimproved land value, set by the Valuer General. It is separate from council rates, which you also pay. Your own home is exempt; an investment property is not.
| Land value (A$) | Land tax, 2026 tax year |
|---|---|
| Up to 1,075,000 | Nil |
| 1,075,001 to 6,571,000 | 100 plus 1.6% above 1,075,000 |
| Above 6,571,000 | 88,036 plus 2% above 6,571,000 |
| Foreign owner surcharge | 5% of the whole land value |
Source: Revenue NSW, land tax thresholds and rates. Thresholds fixed since 1 January 2025, foreign owner surcharge raised from 4% to 5% on 1 January 2025. Consulted 3 August 2026.
Read the last row against the first. Ordinary land tax has a tax-free threshold above a million dollars. The foreign owner surcharge has none. You can therefore owe zero ordinary land tax and thousands in surcharge on the same parcel.
Foreign buyers cannot buy an established home until 2029
Since 1 April 2025, foreign persons in Australia may not buy an established dwelling, with narrow exceptions. The measure originally ran to 31 March 2027. The 2026-27 federal budget announced an extension to 30 June 2029.
New builds, near-new dwellings and vacant land with a build obligation remain open. Each purchase needs prior approval from the Foreign Investment Review Board, applied for through the ATO. Get the approval before you sign, or write in a condition, because buying without it risks a forced sale.
Worked example: an A$865,000 house in Western Sydney
A house bought in 2026 by an Australian resident investor. Land value assessed at A$520,000. Financing: 70% of the price, interest only, at 6.3%.
| Item | Amount (A$) |
|---|---|
| Purchase price | 865,000 |
| Transfer duty across the bands | 33,113 |
| Conveyancing | 1,650 |
| Building and pest inspection | 650 |
| Transfer registration fee (NSW LRS) | 183 |
| Lender application fee | 600 |
| Total investment | 901,196 |
Transfer duty = 11,602.50 + 4.5% × (865,000 − 387,000) = 33,112.50
Rent is A$720 a week, so A$37,440 a year. Operating costs: council rates A$1,750, water A$820, insurance A$1,450, management A$2,471, maintenance and vacancy A$2,246.
| Measure | Value | What it means |
|---|---|---|
| Costs above the price | A$36,195 | 4.2% of the price, low by European standards |
| Gross yield on the price | 4.3% | Sydney is a growth market, not a yield market |
| Net operating income | A$28,703 | Rent less operating costs, before debt |
| Ordinary land tax | A$0 | Land value of A$520,000 sits below the threshold |
| Cash shortfall after interest | A$9,444 | Interest of A$38,147 on a A$605,500 loan |
| Marginal rate | Tax saved on the loss | After-tax shortfall |
|---|---|---|
| 30% | A$2,833 | A$6,611 |
| 37% | A$3,494 | A$5,950 |
| 45% | A$4,250 | A$5,194 |
Rates shown are an illustration of the mechanism, not a published schedule. What the table does show is the shape. Gearing softens the loss, it never erases it, and you fund the gap from salary while betting on capital growth.
Now switch one setting. The same house bought by a foreign person adds A$77,850 of surcharge duty at purchase. It also adds A$26,000 of surcharge land tax every year, because that surcharge has no threshold.
Against a A$37,440 rent, that annual surcharge alone takes 69% of the gross. One checkbox, and the property is no longer the same investment.
Six states, two territories, eight rulebooks
Australia has six states and two territories, each with its own duty, its own land tax and its own foreign buyer surcharges. Only income tax, capital gains tax and the FIRB test are federal.
So a comparison between Sydney and Brisbane is not only about rent and value. The entry cost and the annual charge move too, and sometimes by more than the yield difference. BRIX Calc models New South Wales only, so figures for Melbourne or Brisbane will not match.
Check the net operating income the tool produces. Run a rental stress test on the shortfall. Or compare Australia with six other markets in international property investment.
Frequently asked questions
Does negative gearing work without Australian income?
Not as an annual refund. The loss offsets Australian taxable income only. Without any, the loss carries forward to later years with Australian profit, including the year you sell. That turns a yearly cash benefit into a deferred one, which changes the whole case for gearing.
Why would I owe land tax surcharge when ordinary land tax is nil?
Because the two use different bases. Ordinary NSW land tax only bites above a land value of A$1,075,000. The foreign owner surcharge has no tax-free threshold and charges 5% of the entire land value. On A$520,000 of land that is A$26,000 a year against nil.
Can I still buy new-build property as a foreign person?
Yes. The ban since 1 April 2025 covers established dwellings only. New builds, near-new dwellings and vacant land with a build obligation stay open, each needing prior FIRB approval through the ATO. The government announced an extension of the ban to 30 June 2029 in the 2026-27 budget.
What happens when a foreign resident sells?
Foreign residents do not get the 50% capital gains tax discount. On top of that, since 1 January 2025 the buyer withholds 15% of the sale price with no minimum threshold, unless you produce a clearance certificate from the ATO. Build that withholding into your exit plan.