Land Value Tax in Australia 2025: Policy, Pros, and Housing Impact

As Australian property prices continue to rise and the debate over housing affordability intensifies, one policy idea is gaining renewed attention: the land value tax (LVT). While not new, the LVT is being reconsidered in 2025 as a tool to address some of the most pressing issues in Australia’s housing market, including speculation, inequality, and inefficient land use. But what is a land value tax, how would it work, and what impact could it have on our cities, investors, and everyday Australians?

What is a Land Value Tax (LVT)?

A land value tax is a levy on the unimproved value of land, excluding any buildings, homes, or other improvements. Unlike stamp duty or traditional property taxes that are based on the total value of real estate, an LVT targets only the underlying land value. The goal: discourage speculation, promote more productive use of land, and generate stable public revenue.

• Unimproved land value: LVT is charged only on the value of land itself, not on buildings or structures.

• Annual charge: It’s typically collected yearly, unlike stamp duty which is a one-off cost.

• Broad base: LVT applies to all landowners, from homeowners to investors and developers.

Economists from Henry George to modern policy advisers have lauded LVT as one of the most efficient and least distortionary forms of tax. In 2025, with pressure mounting to address housing unaffordability and state budget woes, the concept is making a serious comeback in policy circles.

Why is LVT Back on the Agenda in 2025?

Australia’s housing market is at a crossroads. Property prices have outpaced wages for decades, and the gap between renters and owners continues to widen. State governments, heavily reliant on stamp duty and council rates, face declining revenues as property transactions slow. These challenges have revived interest in LVT for several reasons:

• Housing affordability: By taxing land rather than homes, LVT removes the disincentive to build, potentially increasing housing supply.

• Tax reform: Several state governments, led by the ACT’s ongoing transition, are considering replacing stamp duty with broad-based land taxes for more predictable revenue.

• Reducing speculation: LVT discourages holding vacant or underutilised land, nudging owners to develop or sell to those who will.

In 2025, New South Wales and Victoria are actively reviewing their property tax systems, with pilot LVT schemes in select local government areas. The ACT’s staged shift from stamp duty to LVT, begun in 2012, is often cited as a real-world case study. Early evidence suggests the transition is slow but feasible, with less distortion to the housing market and improved revenue stability.

The Pros and Cons: Who Wins and Who Loses?

Potential Benefits:

• Encourages development of idle land, boosting housing supply and urban density.

• Reduces property speculation, stabilising prices over the long term.

• Provides state and local governments with a reliable revenue source, less volatile than stamp duty.

• Can be designed to protect low-income homeowners via thresholds or concessions.

Challenges and Concerns:

• Transition pain: Swapping stamp duty for LVT means some homeowners pay more, especially those who stay put for decades.

• Valuation complexity: Assessing land-only value, separate from improvements, can be contentious and administratively complex.

• Political resistance: Many voters dislike new annual taxes, even if they replace unpopular upfront costs.

For example, a family in Sydney’s inner west who bought decades ago may face higher ongoing costs, while newer buyers could benefit from not paying hefty stamp duty. Investors holding undeveloped land in growth corridors may see their holding costs rise sharply, pushing them to develop or sell.

LVT’s Future: Will Australia Make the Leap?

With housing at the top of the political agenda in 2025, momentum for LVT is building—but widespread adoption remains uncertain. The ACT’s gradual rollout is being closely watched, and state-level pilots in NSW and Victoria could pave the way for broader reform. The Federal Government’s 2025 Intergenerational Report even highlighted LVT as a potential lever for sustainable revenue and housing reform.

In the end, LVT is not a silver bullet. But as state budgets tighten and the need for affordable housing grows, expect land value tax to remain a central part of the national policy conversation. Whether it’s adopted broadly or not, the pressure to rethink how Australia taxes property is here to stay.