Key Highlights

  • Community housing groups propose a 2.9% land tax rate on holdings above $50 million.
  • They also propose a 7.5% levy on short-stay accommodation.
  • The proposals aim to fund 50,000 social and affordable homes.
  • The proposals are not government policy and the minister has not committed to them.

NSW landlords and short-stay hosts have a new set of tax ideas to watch. The Community Housing Industry Association NSW has put Options to the state government that include higher land tax rates, a new 2.9% rate on holdings above $50 million and a 7.5% levy on short-stay rentals. The ideas are not government policy, but they land as NSW heads towards a March 2027 election with its social housing waiting list at a record.

What has been proposed

The proposals come from the Community Housing Industry Association NSW (CHIA NSW), the peak body for community housing providers. Reports on 4 November said that the association commissioned analysis from the Labor-aligned McKell Institute and presented it in NSW Parliament.

They are options for government, not legislation or announced policy. CHIA NSW chief executive Luke Achterstraat said "We felt it was important to make a constructive contribution", and indicated the ideas were options rather than a full reform package.

The three main Revenue measures, as reported, are:

  • Land tax: lift the 1.6% general rate to 2%, lift the 2% rate on larger landholdings to 2.5%, and add a new 2.9% rate for holdings above $50 million.
  • Short-stay levy: a 7.5% levy on short-stay rentals booked through platforms like Airbnb and Stayz, raising about $135 million a year.
  • Rezoning windfall charge: a charge on increases in land value after rezoning, raising about $80 million a year.

The land tax changes in detail

Land tax is the big earner in the package. The McKell Institute analysis estimates the land tax changes would raise $25.9 billion over 10 years, according to reports.

The proposal would keep the current $1.075 million tax-free threshold and the exemption for the family home. That means owner-occupiers who own only their principal place of residence would not be affected by the rate changes.

The rezoning windfall charge is the smallest piece. It would target the increase in land value that can follow when a government rezones land for more intensive use.

The new top rate of 2.9% would apply only to holdings above $50 million, aimed at the largest landholders. Investors with one or two rental properties above the threshold would instead face the higher general rate.

Overall, reports say the package would raise about $26 billion over 10 years and support about 50,000 new social and affordable homes by 2050. The report does not set out how the individual measures add up to that total.

Hypothetical example: an investor above the threshold

Hypothetical example: a NSW investor holds rental land with a combined taxable land value of $2.075 million, which is $1 million above the $1.075 million threshold, and below the premium threshold.

NSW land tax is generally assessed on the combined taxable land value of land owned at midnight on 31 December, not on the property's sale price. Under the current structure, land tax is $100 plus 1.6% of the value above the threshold. That works out to $100 plus $16,000, or $16,100 a year.

If the general rate rose to 2%, as proposed, and the $100 component stayed, the bill would be $100 plus $20,000, or $20,100 a year.

That is an extra $4,000 a year, or about 25% more. An investor whose total taxable land value sits below $1.075 million would pay no land tax under either the current or the proposed rates. The figures are illustrative only. Land values, thresholds and individual circumstances vary, and the proposal does not specify every detail of how the new rates would be applied.

The short-stay levy, the Victorian model and the reaction

Observers described the proposed 7.5% short-stay levy as similar to Victoria's scheme. Victoria's levy, which started on 1 January 2025, applies at 7.5% to short-stay accommodation bookings of less than 28 days, including those made through platforms such as Airbnb and Stayz. The Victorian Government has said all of its revenue goes to Homes Victoria for social and affordable housing.

In NSW, Housing Minister Rose Jackson said the short-term rental framework is under review, with an update due "in due course".

Jackson also pointed to the government's $6.6 billion Investment and 8,400 new public homes. "We welcome constructive ideas from across the sector. Our focus is on getting more homes built and more people housed," she said.

The short-stay industry was cautious. Yoav Tourel, chair of the Australia and New Zealand Short Term Rental Association, said: "Our concern is whether a blanket 7.5 per cent levy on short-term accommodation is the most effective way to achieve that."

He added: "A levy may raise revenue for housing, but raising revenue and delivering additional homes are two different outcomes."

The Greens also doubted the levy. NSW Greens MP Jenny Leong said "Levies don't work to limit short-term rentals". The party wants a rent freeze followed by a 2% annual cap on increases.

Shadow Housing Minister Chris Rath criticised the government's record, saying the waiting list had grown "from 55,000 to 72,000 under their watch". He said the Coalition plans 12,000 homes on the Long Bay Correctional Complex site, 30% of them social and affordable.

Why it matters now

The NSW social housing waiting list stands at 72,000 households, which Achterstraat called an "all-time record". He argued that "funding should be turbocharged".

For property investors, the proposal adds to an already shifting tax landscape. Federally, the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 is enacted law. It limits negative gearing for residential property bought after 7:30pm AEST on 12 May 2026 to new builds from 1 July 2027, and replaces the 50% CGT discount with indexation and a 30% minimum tax for gains accruing from that date.

A higher state land tax would add to Holding Costs for investors already adjusting to those changes. None of the CHIA NSW measures has been adopted, and the government has not committed to any of them.

What to watch

  • In due course: the NSW government's update on its short-term rental framework review.
  • Coming months: whether any party adopts the land tax, short-stay levy or rezoning charge ideas before the election.
  • March 2027: the NSW state election.
  • 1 July 2027: the federal negative gearing and CGT changes start to apply.