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 applying it without modelling the actual numbers.
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 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 is the part most investors haven't updated their thinking on. 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 the holding cost comparison 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. The full land tax figure is already inside the Victorian number.
The Victorian land tax figure used is $1,500 per year, based on a $350,000 site value entered into the SRO Victoria land tax calculator for 2026, non-absentee individual owner. You can run your own figure at sro.vic.gov.au/owning-property/land-tax/land-tax-calculator. The actual amount will vary by council-assessed site value and total Victorian land holdings. Land tax on a rental property is generally treated as a deductible expense. Confirm the position for your specific situation 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. Real growth. But the market is now delivering yields in the same range as the Victorian markets investors are avoiding, with higher holding costs at those yield levels.
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 pointed in opposite directions. That gap tends to close.
The trade-off
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 recent growth have already tightened the numbers.
One decision is based on structure. The other is based on discomfort with a headline.
If land tax pushes your holding position beyond what you can service, the deal fails that test and should be rejected. But if the exclusion is driven by the policy headline rather than the modelled numbers, that is emotional allocation with a rational-sounding explanation attached to it.
How to think about it
Every market has friction. 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 to justify long-term representation? Can the asset be held if conditions stay ordinary? Only then does the specific cost giving you pause deserve close attention.
Land tax is an input. Not the verdict.
The problem isn't the tax. It's a filter that mistakes noise for risk.
If you want a structured framework for making your next property decision, the free 10-day email series covers each decision in order. www.nelisgroup.com.au/insights
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.