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Land tax has become a convenient villain.
The word alone is enough to make investors blacklist an entire state. Deals get rejected before they're modelled. Conversations end before numbers are run.
That reaction feels rational. It isn't.
The common belief is that Victorian land tax makes the state uninvestable. But serious portfolios don't avoid costs. They understand them.
Where the filter breaks is not in the policy itself. It's in how investors are using it as a decision rule without running the numbers first.
Take two regional houses at a $700,000 price point. One in Victoria at a conservative 4.25 percent yield, with land tax applying. One in Townsville, where yields that once sat comfortably above 6 percent have compressed to between 4.25 and 4.75 percent in most pockets today, with no land tax in personal name.
That yield compression matters. The original case for accepting Townsville's higher holding costs was built on a yield premium that has largely closed.
At a $700,000 purchase, 80 percent LVR, and 6.5 percent interest rate, here is what the holding cost comparison looks like at a conservative 4.25 percent yield across both markets.
Victoria: $348 per week. Queensland: $363 per week.
Queensland costs $15 per week more to hold than Victoria at the same yield point. The full land tax figure is already inside the Victorian number.
The table below shows the full cost breakdown and how the gap moves across yield scenarios.
The Victorian land tax figure used is $1,500 per year. That is based on a $350,000 site value, a conservative 50 percent land to asset ratio on a $700,000 regional purchase, entered into the SRO Victoria land tax calculator for 2026, non-absentee individual owner. You can run your own figure at the Victorian State Revenue Office website. The actual amount will vary depending on the council-assessed site value and the total taxable value of all Victorian land held.
Land tax on a rental property is also generally treated as a deductible expense. Confirm the position for your specific circumstances with your accountant.
What the sentiment doesn't show
Townsville's LGA recorded growth of 17.8 percent on a rolling twelve month basis year to date, according to Htag Analytics. That is a real number and the market isn't being dismissed here. But it is now producing yields in the same range as the Victorian markets investors are avoiding, with higher holding costs to carry at those yields.
Over the same period, Htag Analytics records Wodonga LGA at 17.84 percent and Bendigo LGA at 11.10 percent on the same rolling basis. Established regional centres, moving while investor attention was pointed elsewhere.
Vacancy rates are tight across all markets mentioned. The rental demand picture is comparable regardless of state.
The sentiment and the data are pointing in opposite directions. That gap is where patient investors tend to find room.
The trade-off most investors miss
You can accept a visible, predictable state-based cost in a market where others have exited on sentiment.
Or you can avoid that cost and compete in markets where yield compression and strong recent growth have already tightened the numbers considerably.
One decision is based on structure. The other is based on discomfort with a headline.
There is real risk on both sides. If land tax pushes your holding position beyond what you can service comfortably, the deal fails that test and should be rejected. That is a legitimate constraint, not an irrational one.
But if the exclusion is being driven by the policy headline rather than modelled numbers, that is emotional allocation with a rational-sounding explanation attached to it. The cost has been assigned a role it hasn't earned.
How to think about it
Every market has friction. Land tax. Higher holding costs. Higher entry prices. Economic concentration. The question is not which market is frictionless. It is which friction sits inside a market with durable long-term demand and can be held comfortably through an ordinary period.
A sound location decision runs in order. Does the market have the structural depth and population base to justify long-term representation? Can the asset be held if conditions stay ordinary for two or three years? Only after those questions are answered does the specific cost you're hesitating on deserve close attention.
Land tax is an input in that process. Not the verdict.
The problem isn't the tax. It's a filter that mistakes noise for risk.
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Disclaimer
The information in this article is general in nature and does not take into account your personal objectives, financial situation, or needs. It is not financial, legal, or tax advice. The Nelis Group accepts no liability for actions taken based on this content. You should seek independent advice from a relevant licensed professional before making any decisions and always confirm the latest rules and thresholds with your state revenue office or relevant authority.
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