When someone dies owning property in New South Wales, land tax on the deceased estate in NSW falls to the executor or administrator, who is treated as the owner of the estate’s land until it is transferred to beneficiaries. The deceased’s former home can remain exempt for up to two years from the date of death, but once that window closes the estate’s tax position can change sharply, and in some cases the standard tax-free threshold disappears altogether.
Who Pays Land Tax After a Death
Land tax in NSW works off a single snapshot. Whoever owns taxable land at midnight on 31 December is liable for the tax year that follows.1NSW Legislation. Land Tax Management Act 1956 No 26 When the owner has died, Revenue NSW treats the executor named in the will, or the administrator appointed by the court, as the owner of the deceased’s land for as long as it stays in the estate.
So if the estate still holds taxable land on 31 December, an assessment will issue against the executor the following year. Probate not yet finalised is not a reason the clock stops. Executors need to set aside estate funds for these assessments, because unpaid tax attracts interest and can lead to personal liability.
The Two-Year Exemption for the Deceased’s Home
NSW law shields the family home from land tax for a limited period after death. Under clause 9 of Schedule 1A of the Land Tax Management Act 1956, if the deceased used and occupied the property as their principal place of residence immediately before death, the exemption continues as though they were still alive and living there.2NSW Legislation. Land Tax Management Act 1956 No 26 – Schedule 1A Clause 9 The protection runs until whichever comes first: two years from the date of death, or the date the property is transferred to someone other than the executor or a beneficiary.
The exemption has conditions. If the executor rents the property out for a continuous period exceeding six months, or for more than 182 days in the calendar year before the taxing date, the home can lose its exempt status. The one carve-out is where rental income does not exceed the cost of maintaining the property, excluding mortgage payments.
Extending the Exemption Beyond Two Years
Some estates cannot be wound up within two years. The Chief Commissioner of State Revenue has a discretion to extend the exemption, but the conditions are strict. All three of the following must be true:2NSW Legislation. Land Tax Management Act 1956 No 26 – Schedule 1A Clause 9
- The property has not been leased to anyone since the date of death.
- The property has not been transferred to anyone other than the personal representative.
- Someone is living in the property as their principal place of residence, and that person is likely to be the beneficiary who will ultimately receive it.
Extensions must be granted in writing and can be withdrawn by the Chief Commissioner at any time on written notice. If an executor thinks an extension may be needed, apply well before the two-year mark, not after the first taxable assessment lands.
What Happens Once the Two Years Are Up
This is where estates commonly get stung, and the answer depends on how the will is structured.
Fixed Testamentary Trusts
If the will creates a fixed trust where specific beneficiaries own identifiable shares of the land, that trust receives the standard land tax threshold. For 2026 the general threshold is $1,075,000, so land valued below that attracts no land tax.3Revenue NSW. Land Tax Thresholds and Rates
Discretionary Testamentary Trusts
If the will creates a discretionary trust where the trustee decides how to distribute, the treatment shifts after two years. During the first two years following the testator’s death, a discretionary testamentary trust is not treated as a special trust and keeps the tax-free threshold. After two years it becomes a special trust. Special trusts get no tax-free threshold at all. Land tax is calculated on every dollar of land value, starting from the first dollar.4Revenue NSW. How Trusts Are Assessed for Land Tax
Special trusts are taxed at a flat 1.6% on land value up to the premium threshold of $6,571,000, then 2% above that. Under a standard assessment the first $1,075,000 is entirely tax-free and only $100 plus 1.6% is charged on value above the threshold.5Revenue NSW. How Land Tax Is Calculated On land worth $1,500,000, a standard assessment produces around $6,900 in land tax. A special trust assessment on the same land produces $24,000. The gap widens as land value rises.
2026 Thresholds and Rates
For the 2026 land tax year, based on ownership at midnight on 31 December 2025, the thresholds are:3Revenue NSW. Land Tax Thresholds and Rates
- General threshold: $1,075,000 in total taxable land value.
- Premium threshold: $6,571,000 in total taxable land value.
The rates applied above these thresholds are:5Revenue NSW. How Land Tax Is Calculated
- General rate: $100 plus 1.6% of land value above $1,075,000.
- Premium rate: 2% on land value exceeding $6,571,000.
Revenue NSW aggregates all taxable land held by the estate to work out total liability. If the deceased owned multiple investment properties, the combined value can push the estate into higher brackets. For multi-property estates it pays to get a land valuation early so the exposure is clear.
Capital Gains Tax on the Same Two-Year Clock
Land tax is not the only tax worth watching. When the estate or a beneficiary eventually sells inherited property, federal capital gains tax may apply. The ATO gives a full exemption from CGT in several situations:6Australian Taxation Office. Inherited Property and CGT
- The property is sold under a contract that settles within two years of the death, regardless of whether it was lived in or rented during that period.
- From the date of death onward, the property is used only as the main residence of the deceased’s spouse, a person with a right of occupancy under the will, or the beneficiary.
- The deceased acquired the property before 20 September 1985 (though major improvements after that date may still attract CGT).
The two-year CGT window lines up with the two-year land tax exemption. Selling the family home within two years can avoid both. Delay past that point, and both can bite at once. Where no full exemption applies, a partial exemption may be available based on how long the property served as a main residence relative to total ownership. Foreign residents and estates where the deceased was a foreign resident are generally not entitled to the main residence exemption.6Australian Taxation Office. Inherited Property and CGT
Foreign Owner Surcharge
NSW imposes a surcharge land tax on residential land owned by foreign persons, currently 5% of the land value on top of the standard rate.7Revenue NSW. What Is Surcharge Land Tax Where an estate has foreign beneficiaries, or where the executor is a foreign person, the surcharge may apply to residential land held by the estate. Executors managing estates with any foreign connection should get specific advice on whether the surcharge applies and whether concessions are available.
Interest and Penalties for Late Payment
Revenue NSW charges interest on overdue land tax at a rate made up of a market component and a premium component. For the first half of 2026 the total interest rate sits between 11.65% and 11.96% per year.8Revenue NSW. Interest and Penalty Tax Interest compounds, and the fact that the estate is still going through probate is not a ground for waiver.
On top of interest, Revenue NSW can impose penalty tax where the executor fails to take reasonable care. Penalties can reach 30% where reasonable care was not taken, and between 15% and 90% where the law was intentionally disregarded, with the exact figure depending on whether a voluntary disclosure was made and when.8Revenue NSW. Interest and Penalty Tax An executor who spots a missed assessment is much better off making a voluntary written disclosure before Revenue NSW starts investigating. Early disclosure can reduce a penalty by up to 80%.
Notifying Revenue NSW of a Death
Notify Revenue NSW as soon as practicable after receiving the Grant of Probate or Letters of Administration. You will need:
- The Grant of Probate or Letters of Administration.
- A certified copy of the death certificate.
- The title reference or land tax account number from previous assessments or title deeds.
Updates can be lodged through Revenue NSW’s online portal, which accepts document uploads and issues confirmation. Provide the exact date of death, the full legal names of all executors or administrators, and details of all land held by the estate. Lodging early triggers the concession period on the record and means the estate receives correct assessments rather than default bills that then have to be disputed. For multi-property estates or complicated ownership, expect processing to take several weeks.