New Statewide Vacant Land Tax in Victoria: Are You Prepared for the 2025 Changes?

Understanding Victoria's evolving tax landscape is crucial for property owners, especially with the upcoming changes to the Vacant Residential Land Tax (VRLT). Starting on 1 January 2025, VRLT will apply to all vacant residential property across Victoria. Note that this tax is in addition to the standard land tax on non-principal place of residence properties.

What is the VRLT?

Introduced in 2018, the VRLT encourages the use of vacant residential properties. By motivating property owners to rent or sell these homes, the tax aims to increase housing availability.

The VRLT is levied on residential properties left unoccupied for more than an aggregated period of six months in a calendar year. The current tax rate is 1% of the property's Capital Improved Value (CIV) – the total value of land and improvements, such as buildings, which can be costly for owners of vacant homes, apartments and units.

Current Application (2018-2024)

From 1 January 2018 to 31 December 2024, VRLT applies only to residential properties in 16 inner Melbourne councils. Residential properties include:

• Land with a home on it
• Land where a home is being renovated or rebuilt
• Land with a home that has been uninhabitable for 2 or more years

New Application (From 2025)

Starting on 1 January 2025, VRLT will apply to properties throughout Victoria, including regional areas.

Future Application (From 2026)

From 1 January 2026, the VRLT will expand to cover:

• all vacant residential properties in Victoria, including regional areas
• unimproved land in the Melbourne Metropolitan Area, defined as Land without a home that is capable of residential development and has remained undeveloped for 5 or more years (since 1 January 2020)

Progressive Tax Rates

VRLT rates increase based on how long the property has been vacant:

• 1% of CIV for the first year of liability
• 2% of CIV for the second consecutive year
• 3% of CIV for the third consecutive year and beyond

Impact on Holiday Homes

A common concern for property owners is the impact on holiday homes, which are often left unoccupied for extended periods. Holiday homes may be subject to VRLT if vacant for more than an aggregate of six months in a year. However, exemptions starting on 1 January 2025, include:

• Holiday homes used by owners or close relatives for at least 28 days in the preceding calendar year
• Holiday homes held by a company or trustee as at 28 November 2023 and used by specified beneficiaries for at least 28 days in the preceding calendar year

Owners should maintain records proving occupancy to claim exemptions.

Other exemptions

Additional exemptions exist for properties vacant for more than an aggregate of six months in the preceding year:

• Work accommodation (occupied for at least 140 days for work purposes)
• Properties newly purchased and settled in the preceding calendar year
• Properties which became new residential land during the preceding calendar year

Reporting to the State Revenue Office

Property owners must report their vacant residential property’s status to the State Revenue Office (SRO) by 15 January each year (unless there has been a prior notification, and the circumstances of that property have not changed). This involves declaring if a property was vacant and whether it is eligible for an exemption. Declarations can be submitted online via the SRO portal, using the Assessment Number from their Land Tax Assessment Notice. To access the notification portal, go to sro.vic.gov.au/vacantportal (Please note that the VRLT portal is a different portal from the standard land tax portal). Once the initial notification is made a notification in future years need only be made for a property if the circumstances for that property have changed.

When reporting, owners must provide precise occupancy information for the preceding year. It is important to keep accurate records in support of any exemption claimed.

Failing to report or providing incorrect information may result in penalties and interest being imposed.

Key Takeaways

• VRLT applies statewide from 2025
• Progressive tax rates increase with consecutive years of vacancy
• Exemptions require proper documentation and timely reporting

Need Assistance?

Navigating VRLT regulations can be complex. Our experienced team at Hicks Oakley Chessell Williams can help ensure compliance and optimise your property strategy. Contact us today for advice and expert guidance.

Disclaimer: The content provided in this publication is intended for general informational purposes only and should not be construed as tailored advice to address specific individual or organisational circumstances. While we strive to offer accurate and up-to-date information, we cannot guarantee its accuracy at the time of receipt or its continued accuracy in the future. Readers are encouraged to seek professional advice or consult relevant authorities regarding their unique situations.