Last reviewed: May 2026 · Financial year: 2025–26 · Authority: Cross-referenced against ATO published guidance, every state revenue office, the G Global High Court decision (October 2025), and the relevant 2026–27 state Budget Papers.

TL;DR — the eleven biggest changes affecting Australian property investors in 2025–26:
1. NSW foreign duty surcharge raised from 8% to 9% (1 January 2025) — highest in Australia
2. NSW land tax thresholds frozen ($1,075K / $6,571K) until 2027 review
3. NSW PPOR exemption now requires 25% ownership (effective February 2024)
4. Victorian VRLT goes state-wide (1 January 2025), capital improved value basis
5. Victorian short-stay levy (7.5%) on stays under 28 days (1 January 2025)
6. Victorian COVID Debt Levy confirmed continuing to 2033 (May 2026 Budget)
7. Tasmanian land tax threshold raised to $125,000 (1 July 2025)
8. Queensland AFAD raised from 7% to 8% (1 July 2024)
9. G Global High Court decision (15 October 2025) — state foreign surcharges confirmed valid
10. ATO draft TR 2025/D1 — interest deductibility guidance
11. ATO draft PCG 2025/D6 + PCG 2025/D7 — property structures and holiday homes

If you own (or are planning to buy) Australian investment property, the rules have shifted in 2025–26 in ways that may not show up in your tax software or your accountant's standard pack until the next update cycle. Some of these changes are subtle (the NSW threshold freeze). Some are dramatic (Tasmania's threshold raise; Victoria's VRLT). All of them affect your after-tax return.

This is the comprehensive 2025–26 changes briefing — sourced exclusively from official ATO publications and state revenue office gazettes.

1. NSW foreign duty surcharge raised to 9% (highest in Australia)

Effective: 1 January 2025 What changed: NSW lifted the surcharge purchaser duty from 8% to 9% on residential property purchased by foreign persons. Impact: A foreign buyer purchasing a $1M Sydney investment property now pays roughly $129,412 in total duty (standard $39,412 + 9% surcharge of $90,000). Up from approximately $119,412 under the previous 8% rate. Why it matters: This is the highest combined foreign buyer rate in Australia. Combined with NSW's 5% foreign land tax surcharge (no threshold), the cost of foreign-owned residential investment in NSW is now materially higher than in any other state.

Source: Revenue NSW, Surcharge purchaser duty rates, gazetted late 2024.

2. NSW land tax thresholds frozen until 2027

Effective: From the 2025 land tax year What changed: The 2024–25 NSW Budget froze the general threshold at $1,075,000 and the premium threshold at $6,571,000. Both will be reviewed by 1 June 2027. There is no annual indexation. Impact: The headline numbers don't change, but rising land values automatically pull more investors over the threshold each year. With NSW's 3-year averaging system, this is a slow-burn effect — investors who were comfortably below the threshold three years ago may now be above it without buying anything new. Why it matters: This is the single biggest structural reason NSW investor land tax bills are climbing year-on-year despite no rate increases. Worth modelling forward — many NSW investors with current 3-year average land values around $950,000 will cross the threshold over the 2026–27 period.

Source: Revenue NSW, Land tax thresholds and rates, 2024–25 Budget Paper No. 1.

3. NSW PPOR exemption now requires 25% ownership

Effective: February 2024 (still applies in 2025–26) What changed: All persons occupying a property as their home must collectively own at least 25% of it to claim the principal place of residence exemption. Impact: The previous loophole — where a parent could hold 99% of a property while a child lived there and claimed the full PPOR exemption based on a 1% stake — is closed. Existing minority owners may have transitional protection but should verify with Revenue NSW directly. Why it matters: This is a structuring change that most accountants have absorbed by now, but it's still catching investors who set up arrangements in 2022–2023 and haven't reviewed since. Particularly relevant for parent–child structuring of family homes that have moved towards investment use.

Source: Revenue NSW, Principal place of residence exemption, current guidance.

4. Victorian VRLT goes state-wide (capital improved value)

Effective: 1 January 2025 What changed: Vacant Residential Land Tax (VRLT), previously confined to inner-Melbourne, expanded to apply across all of Victoria. From 1 January 2026, the definition expands further to include unimproved residential land in certain Melbourne metropolitan areas that has remained undeveloped for at least 5 years. Impact: A Victorian residential property vacant for more than 6 months in a calendar year now attracts:

Year 1: 1% of capital improved value
Year 2: 2% of capital improved value
Year 3+: 3% of capital improved value

Calculated on capital improved value (total property value, not just land). A $700,000 Mornington Peninsula holiday home left vacant 7 months attracts $7,000 in year one — rising to $21,000 in year three.

Why it matters: This catches holiday homes (Mornington Peninsula, Phillip Island, Daylesford), inherited properties left vacant during probate, and properties held for development. The holiday home exemption requires owner-occupation of at least 4 weeks per year — confirmed in the May 2026 Budget. VRLT is self-notifying — you must notify the SRO if your property is vacant. Failure to notify results in penalty tax. The SRO has flagged VRLT compliance as a 2026 enforcement priority.

Source: State Revenue Office Victoria, Vacant Residential Land Tax; 2026–27 Victorian Budget Paper No. 5 (5 May 2026).

5. Victorian short-stay levy — 7.5%

Effective: 1 January 2025 What changed: Victoria introduced a 7.5% levy on short-stay accommodation (stays under 28 days) — Airbnb, Stayz, and similar platforms. Impact: Platforms typically collect the levy directly. The portion the landlord ultimately bears is deductible against rental income, and the income reported to the ATO is net of the levy. For an Airbnb operator earning $40,000/year, the levy is approximately $3,000. Why it matters: Combined with VRLT (which only kicks in for genuinely vacant property), Victoria has effectively introduced a "use it or lose it" tax structure. Short-stay operators face higher costs, and properties that are neither short-stay nor long-term rented face VRLT. The intended effect is to push idle stock into long-term residential use.

Source: State Revenue Office Victoria, Short stay levy; Short Stay Levy Act 2024 (Vic).

6. Victorian COVID Debt Levy confirmed continuing to 2033

Effective: Continuing — confirmed unchanged in May 2026 Budget What hasn't changed: The COVID Debt Levy on land holdings is legislated to apply until 30 June 2033. The 2026–27 Victorian Budget (handed down 5 May 2026) did not announce any early end, extension, or rate change. Impact: Forecast revenue from the levy is $1.2 billion in 2026–27, growing at average 4.9% per year through the forward estimates. The levy is built into the standard land tax rate tables — it's not a separate line item. Property owners receive land tax assessments that reflect both general land tax and the levy. Why it matters: Victorian investors hoping for an early sunset on the levy didn't get one in the 2026–27 Budget. Cash flow forecasts on Victorian holdings should plan around 30 June 2033 as the levy end date.

Source: 2026–27 Victorian Budget Paper No. 5 (Statement of Finances), 5 May 2026, p. 175.

7. Tasmanian land tax threshold raised to $125,000

Effective: 1 July 2025 What changed: SRO Tasmania raised the tax-free threshold from $99,999 to $124,999.99. Many guides still cite the older $99,999 figure, or even the much older $87,000 threshold. Impact: Approximately 10% of Tasmanian investors who were previously paying land tax now fall below the threshold. For investors above the threshold, the first $124,999.99 of taxable land value is exempt — saving up to $50 + 0.45% × $25,000 = ~$163 per year compared to the prior threshold. Why it matters: It's a small win, but it's notable as the only pro-investor threshold change in Australia in 2025–26. Tasmania has used the tax system more deliberately than other states to encourage long-term rental supply — combined with the new home rental exemption (up to 3 years for properties with first occupancy permits 8 Feb 2018 – 30 June 2026) and the short-to-long conversion exemption (1 year, extended to 30 June 2026).

Source: SRO Tasmania, Land tax 2025–26 guideline.

8. Queensland AFAD raised from 7% to 8%

Effective: 1 July 2024 (still applies in 2025–26) What changed: Queensland's Additional Foreign Acquirer Duty (AFAD) rose from 7% to 8% on the dutiable value of residential property purchased by foreign persons. Impact: A foreign buyer purchasing a $750,000 Brisbane property pays standard duty (~$19,600 with concession) + 8% AFAD ($60,000) = ~$79,600 total, vs ~$72,100 under the previous 7% rate. Why it matters: Many secondary sources online still cite 7%. The current rate is 8%. Queensland also legislated a "windfall tax" provision in 2025 that would have applied if foreign surcharges had been ruled constitutionally invalid — but the High Court's October 2025 decision in G Global upheld the surcharges, so the windfall tax provisions sit dormant.

Source: Queensland Revenue Office, Additional foreign acquirer duty.

9. G Global High Court decision — state foreign surcharges valid

Effective: Decision handed down 15 October 2025 What it decided: The High Court of Australia ruled that state and territory foreign stamp duty and land tax surcharges are valid. The decision in G Global Capital Pty Ltd v Chief Commissioner of State Revenue resolved a period of uncertainty arising from earlier challenges based on bilateral treaties (Germany, New Zealand) and the International Tax Agreements Act 1953. Impact: Foreign surcharges in NSW (5%/9%), VIC (4%/8%), QLD (3%/8%), TAS (2%/8%), and the ACT (0.75%) are confirmed enforceable. WA, SA, and NT do not impose foreign surcharges.

The decision background:

Bilateral treaties between Australia and Germany / New Zealand contained non-discrimination clauses
These were initially read by some practitioners as prohibiting state foreign surcharges
The federal government inserted section 5(3) into the International Tax Agreements Act 1953 on 8 April 2024, expressly limiting the effect of those non-discrimination clauses to "Australian tax" (income tax and FBT)
G Global tested this amendment — the High Court upheld it

Why it matters: Foreign investors who were holding off on Australian residential acquisitions pending the decision now have certainty that foreign surcharges apply. Foreign investors who had paid surcharges and were awaiting refunds based on the constitutional argument are now confirmed not to receive them. NSW's announced "Revenue NSW tax integrity program" (with $744m of additional funding over four years) is now able to enforce surcharge compliance with full confidence.

Source: G Global Capital Pty Ltd v Chief Commissioner of State Revenue [High Court of Australia, 15 October 2025]; International Tax Agreements Act 1953 (Cth) as amended.

10. ATO draft TR 2025/D1 — interest deductibility

Effective: Draft ruling published 2025; consultation in progress What it covers: TR 2025/D1 clarifies the deductibility of interest on borrowed funds used in property income production — particularly the treatment of mixed-purpose loans, redraws, refinancing, and the apportionment rules where loan funds are used for both income-producing and private purposes. Impact: Once finalised, this will be the authoritative ATO position on interest deductibility for property investors. The draft confirms (and tightens) the existing position that:

Redraws for private purposes taint that portion of the loan permanently
Refinancing does not "cleanse" a tainted loan — the historical purpose follows the borrowed funds
Offset accounts (where funds are merely set against the loan, not redrawn) do not taint the loan
Apportionment must be done on a strict purpose basis, not a "main purpose" approximation

Why it matters: The ATO's data-matching program (2021–22 to 2025–26) specifically targets investment loan transactions. Adjustments for incorrectly claimed interest are the single largest source of property investor adjustments. TR 2025/D1, when finalised, gives the ATO a stronger formal position to support those adjustments.

Source: ATO, draft Taxation Ruling TR 2025/D1.

11. ATO draft PCG 2025/D6 + PCG 2025/D7

Effective: Drafts published November 2025; consultation in progress

PCG 2025/D6 — practical compliance guideline on the application of the integrity rules in property structures. Targets arrangements where investors have used trust structures, related-party arrangements, or non-arm's-length transactions to inappropriately reduce tax. Confirms ATO compliance focus on:

Inflated valuations on related-party transfers
Deductible expenses claimed where the property was not genuinely available for rent
Loss-making rental arrangements that don't pass the commercial-rental test

PCG 2025/D7 — practical compliance guideline specifically on holiday home and short-stay property arrangements. Provides ATO factors for assessing whether a property was "genuinely available for rent" — particularly relevant for properties that mix personal use with rental use. Risk indicators include:

Advertised rent materially above market for extended periods
Restrictive tenant criteria
Personal occupancy during periods claimed as available for rent
Long vacancies without documented marketing efforts

Why both matter: These two PCGs effectively codify the ATO's risk approach for 2025–26 and 2026–27 audit cycles. Investors with holiday homes, short-stay properties, or related-party arrangements should review their records against the PCG criteria before lodging.

Source: ATO, Practical Compliance Guidelines PCG 2025/D6 and PCG 2025/D7.

What's not changing in 2025–26 (also worth knowing)

For the avoidance of doubt:

Negative gearing remains legal and unrestricted. No changes have been announced for 2025–26. Both the ability to deduct rental losses against other income and the 50% CGT discount remain.
CGT main residence exemption continues unchanged — including the 6-year absence rule.
Travel deductions for residential investment property remain non-deductible since 1 July 2017 (eight years on, this is now established law).
Division 40 restriction on second-hand plant continues unchanged. SMSFs and family trusts are still not exempt.
Land tax in the Northern Territory — still none. NT remains the only Australian jurisdiction without land tax.
Foreign land tax surcharges in WA and SA — still none.

Implications by investor profile

NSW investors

The big 2025–26 NSW story is the threshold freeze and the 9% foreign duty surcharge. If your three-year average land value is approaching $1,075,000, the freeze means you're more likely to cross the threshold each year regardless of policy. If you're a foreign investor or considering foreign-owned structures, the 9% (and the 5% land tax surcharge) make NSW residential investment materially more expensive than any other state.

→ Full NSW guide

Victorian investors

Victoria has the most overlapping tax regime in Australia in 2025–26. General land tax, COVID Debt Levy, VRLT, absentee surcharge, and the new short-stay levy can all hit the same property. The May 2026 Budget confirmed nothing is ending early. Cash flow forecasts on Victorian holdings need to plan for all of these layers through to at least 30 June 2033.

→ Full VIC guide

Queensland investors

The biggest QLD-specific change is the AFAD increase to 8%. The 30 June assessment date remains the tactical lever for QLD timing — settling on 1 July saves an entire year of land tax compared to 30 June. The interstate aggregation rule was reversed in 2023; if your accountant or tax software still treats interstate land as aggregating into QLD, that's wrong.

→ Full QLD guide

Tasmanian investors

The threshold rise to $125,000 is genuinely good news. Combined with the new home rental exemption (up to 3 years) and the short-to-long conversion exemption, Tasmania is the most actively pro-rental-supply tax regime in Australia. Worth modelling specifically — many TAS investors qualify for exemptions they don't realise exist.

→ Full TAS guide

WA, SA, ACT, NT investors

These jurisdictions had the fewest 2025–26 changes — broadly stable settings with the exception of WA's expanded first home buyer concessions (March 2025). For ACT investors, the long-term reform program continues — falling stamp duty, rising recurring property tax. For SA investors, the annual indexation of thresholds (the $763,000 figure for 2025–26 was gazetted 5 June 2025) continues to provide some protection against bracket creep that NSW and Victorian investors don't have.

→ Full WA guide → Full SA guide → Full ACT guide → Full NT guide

What to do before lodging your 2025–26 return

If you're a property investor, three actions before lodging:

Review your loan history for any redraws since you bought the property. Calculate the apportionment correctly. The ATO sees this through bank data matching — TR 2025/D1 will give them a stronger formal position.

Check whether your state's tax treatment has changed for any of your properties. Particular focus areas: NSW threshold freeze + 25% PPOR rule, Victorian VRLT (especially for holiday homes), Tasmanian threshold raise, Queensland AFAD 8%.

Update your records to ATO standards before tax time. The ATO's compliance focus for 2025–26 (PCG 2025/D7 in particular) assumes you've kept clean records. If you haven't — gaps in receipts, missing PM statements, no depreciation schedule — the safe outcome is walking away from claims you genuinely could have made.

Tracking deductions through 2025–26 changes

Most property investors discover the 2025–26 changes when they receive their next state revenue assessment, or when their tax agent picks them up at lodgement time. By then it's too late to plan for the cash flow impact, and too late to take advantage of any new exemptions.

Propperly's free Tax Centre is built for this — automatic state-by-state threshold tracking, AI bill scanning that reads your council rates and water bills as they arrive, depreciation schedule application that just runs every year, and an EOFY summary your accountant can lodge from.

Get started with Propperly's free Tax Centre →

No credit card required. Australian-built. Australian Tax Office aware.

Frequently asked questions

What's the most significant change for Australian property investors in 2025–26?

The combination of the NSW threshold freeze, the state-wide expansion of Victorian VRLT, and the increase in the NSW foreign duty surcharge to 9%. Tasmania's threshold raise to $125,000 is the largest pro-investor change.

Has negative gearing changed in 2025–26?

No. The current government has confirmed no changes to negative gearing or the 50% CGT discount for 2025–26.

When does the Victorian COVID Debt Levy end?

30 June 2033, as legislated. Confirmed unchanged in the May 2026 Budget.

Are state foreign buyer surcharges still legal after the High Court decision?

Yes. The High Court's October 2025 G Global decision confirmed state foreign surcharges are valid.

What's the most aggressive land tax regime in Australia?

Victoria, by some distance. Lowest threshold ($50,000), highest top marginal rate (>2.65% with COVID Debt Levy), state-wide VRLT, 4% absentee surcharge, 0.375% trust surcharge, plus the new 7.5% short-stay levy.

Which state had the most pro-investor change in 2025–26?

Tasmania — threshold raised to $125,000 effective 1 July 2025, plus continuing new home rental exemption and short-to-long conversion exemption.

What ATO rulings should I be aware of for 2025–26?

Draft TR 2025/D1 (interest deductibility) and draft PCG 2025/D6 (property structures) and PCG 2025/D7 (holiday homes and short-stay) are all in consultation. Once finalised, they form the ATO's authoritative compliance position.

Related resources

Land Tax Australia Comparison → Tax Deductions QLD → Tax Deductions NSW → Tax Deductions VIC →

Sources

ATO, Rental Properties Guide 2025 (NAT 1729)
ATO, draft Taxation Ruling TR 2025/D1
ATO, draft Practical Compliance Guidelines PCG 2025/D6 and PCG 2025/D7
ATO, TR 2000/2 (deductibility of interest)
ATO, TR 2023/2 (effective life of depreciating assets)
Revenue NSW, published rates and rulings 2025–26
State Revenue Office Victoria, published rates and 2026–27 Budget Paper No. 5 (5 May 2026)
Queensland Revenue Office, published rates and rulings
RevenueWA, published rates and Overview of State Taxes and Royalties 2025–26
RevenueSA, published rates (gazetted 5 June 2025)
State Revenue Office Tasmania, Land tax 2025–26 guideline
ACT Revenue Office, published rates 2025–26
NT Department of Treasury and Finance, published rates 2025–26
G Global Capital Pty Ltd v Chief Commissioner of State Revenue [High Court of Australia, 15 October 2025]
International Tax Agreements Act 1953 (Cth), as amended April 2024
Income Tax Assessment Act 1997 (Cth)

General information only — not personal financial, taxation, or legal advice. Consult a registered tax agent for advice specific to your circumstances. Last reviewed: May 2026.

What's New in Australian Property Tax 2025–26 | Propperly