Alert: Changes to Vacant Residential Land Tax (VRLT) in Victoria from 1 January 2025.

Author Annie Lillico Lewis

Expert Reviewer Paul Kearney, CPA, CFP®

From 1 January 2025, Vacant Residential Land Tax (VRLT) will apply to all vacant residential land across Victoria, unless an exemption applies. This annual tax is in addition to Land Tax and targets residential properties that were unoccupied for over six months in the preceding calendar year.

Who is affected by changes to Vacant Residential Land Tax?

Currently, Vacant Residential Land Tax applies only to specified council areas in inner and middle Melbourne. However, starting 1 January 2025, VRLT will apply to all council areas across Victoria.

VRLT may apply to properties that were not:

• Used as the owner’s (or a permitted occupant’s) principal place of residence; or
• Subject to a lease or other good faith arrangement.

How your property was used throughout 2024 will determine whether a VRLT liability arises in 2025.

How Is Vacant Residential Land Tax Calculated?

Vacant Residential Land Tax is calculated as a percentage of the Capital Improved Value (CIV) of the property. The CIV represents the market value of the land, including any improvements such as buildings, and can be found on your annual council rates notice.

• Current Rate: 1% of CIV.
• From 1 January 2025: VRLT rates can progressively increase based on how long the property remains vacant:
  • Year 1: 1% of CIV.
  • Year 2: 2% of CIV.
  • Year 3 and beyond: 3% of CIV.

The State Revenue Office (SRO) is expected to provide further details about how VRLT will apply to unimproved residential land.

Exemptions to Vacant Residential Land Tax.

An exemption to Vacant Residential Land Tax may apply if the property:

• is a holiday home, used and occupied for at least four weeks of the year.
• is exempt from land tax (e.g. a Principal Place of Residence).
• had a change in ownership in the year prior (e.g. if sold in 2024, a property will be exempt from VRLT in 2025).
• is used for genuine work purposes.
• is Unimproved Residential Land that shares a common boundary with your Principal Place of Residence (e.g. your home is on two titles).
• has recently been converted to residential land (e.g. rezoned in the past two years).

Key deadlines.

Landowners must take action by 15 January 2025:

• Notify the State Revenue Office (SRO) if your property was vacant for over six months in 2024.
• Apply for any exemptions (e.g., holiday home) via the SRO online portal.

More on your obligation to notify.

Joint ownership.

If a property is jointly owned, only one owner is required to notify the SRO.

Notification in subsequent years.

Once notified, the SRO will presume that notification remains current for future years. However, you must make a subsequent notification if the information given previously is no longer current.

Renovations or Construction of Homes & VRLT.

Vacant Residential Land Tax does not apply to properties undergoing significant renovations or construction for up to two years from the date a building permit is issued.

The SRO has the discretion to extend this period if necessary. Since this is not a formal exemption, there is no requirement to notify the SRO during the initial two years.

Penalties for Non-Notification.

Failing to notify the SRO that your property is vacant may result in a notification default, triggering penalties.

• Penalty Tax:
  • Typically, 25% of the assessed VRLT.
  • May range from 5% (for early voluntary disclosure) to 90% (if intentional non-compliance is determined).
• Mitigating Circumstances:
  The SRO may waive penalties if it finds reasonable care was taken to notify, or if the default occurred due to circumstances beyond the owner’s control.

Additionally, interest charges may be applied to any overdue penalty tax.

What to do now.

If you think VRLT might apply to your property, it’s essential to review how it has been used throughout 2024 and start gathering the necessary information.

For more information regarding the coming changes to Vacant Residential Land Tax, download the below Fact Sheet or speak to your advice team.