Vacant Residential Land Tax (VRLT)

If your residential property was vacant for more than 6 months in the preceding calendar year, you may be subject to vacant residential land tax.

VRLT for any year is assessed on the previous year’s occupation of the property. For example, VRLT in 2024 (1 Jan 24 to 31 Dec 24) is based on a property’s vacancy in 2023 (1 Jan 23 to 31 Dec 23)

The definition of residential land includes:

• land with a home on it
• land with a home which is being renovated or where a former home has been demolished and a new home is being constructed
• land with a home on it that has been uninhabitable for 2 years or more.

Residential land does not include land without a home on it (sometimes called unimproved land), commercial residential premises, residential care facilities, supported residential services or retirement villages.

According to the SRO website, the Victorian Government introduced VRLT from 1 January 2018 to help address the lack of housing supply in Victoria. Perhaps though the VRLT is just another tax on property to help fund the Victorian State Governments rising debt.

VRLT is assessed by calendar year (1 January to 31 December) and the owner of the property is liable for it. VRLT is different to land tax and the absentee owner surcharge.

From 1 January 2025, VRLT’s scope is changing. These changes include:

VRLT will apply to residential land across all of Victoria if the land is vacant for more than 6 months in the preceding calendar year.  Prior to 1 January 2025, the VRLT only applied to vacant residential land in inner and middle Melbourne.

A new progressive rate of VRLT will apply to non-exempt vacant residential land across all of Victoria based on the number of consecutive tax years the land has been liable for VRLT:

• 1% of the capital improved value of the land for the first year the land is liable for VRLT where the land was not liable for VRLT in the preceding tax year
• 2% of the capital improved value of the land where the land is liable for VRLT for a second consecutive year
• 3% of the capital improved value of the land where the land is liable for VRLT for a third consecutive year.

The VRLT holiday home exemption will be amended to enable the usage and occupancy requirement to be satisfied by a relative of the owner.

The VRLT exemption for new residential premises will be extended to allow a maximum exemption period of 3 years, provided the owner has made genuine and reasonable efforts to sell the land. If the property continues to be unoccupied and unsold after this time, the land will be liable for VRLT at the rate of 1% until sold.

You must notify the State Revenue Office by 15 January (after the calendar year) if you own residential land and it is vacant for more than 6 months in the preceding calendar year.

What does ‘vacant’ mean?

A property is considered vacant if, for more than 6 months in the preceding calendar year, it has not been lived in by:

• the owner, or the owner’s permitted occupant, as their principal place of residence (PPR), or
• a person under a lease or short-term letting arrangement made in good faith.

The occupation does not need to be by the same occupant or for a single continuous period, and a beneficiary of a discretionary trust can be a permitted occupant.

It is not enough that the property is available for occupation, such as by listing on a short-term rental website. It must actually have been used and occupied for more than 6 months.

It is not enough for the property to be used intermittently or on a casual basis by friends or family of the owner. The use and occupation must be either as a PPR or subject to a bona fide lease or letting arrangement.

Exemptions

Homes that are exempt from land tax are also exempt from vacant residential land tax. However, an exemption from VRLT does not mean that your property is exempt from land tax.

Exemptions from VRLT

In addition, homes that are unoccupied for more than 6 months of the preceding calendar year may be exempt from VRLT if:

• Ownership of the property changed during that year (i.e. the preceding year)
• The property became a residential property during that year
• The property became a residential property during the previous 2 calendar years and ownership is unchanged. From 1 January 2025, this exemption will be extended to allow a maximum exemption period of 3 years, provided the owner has made genuine and reasonable efforts to sell the land. If the property continues to be unoccupied and unsold after this time, the land will be liable for VRLT at the rate of 1% until it is sold
• The property was used as a holiday home and occupied by the owner for at least 4 weeks of that year and the owner has a PPR in Australia. From 1 January 2025, the 4-week use and occupation requirement can also be satisfied by:
  • relatives of the owner
  • eligible shareholders or beneficiaries of a company or trust or their relatives
• The property was occupied by the owner for at least 140 days of that year for the purpose of attending their workplace or business, and the owner has a PPR in Australia (homes owned by companies, associations or organisations are generally not eligible for this exemption).

It is the land owners obligations to notify the SRO of the relevant exemption by 15 Jan 2025.

Example – Holiday House

John has a holiday house in Blairgowrie.  The house is unoccupied for more than 6 months during the year, however this house is the family holiday house.  The house is used by both John and his kids for 11 weeks a year – this includes – Christmas holidays (4 weeks), Easter (1 week) and the remaining school holidays (6 weeks).  John has noted all stays by himself and the family in the calendar located in the kitchen.  John is required to notify the SRO via the online customer portal by 15 Jan 2015 that he is applying the holiday house exemption.

Construction and renovation

Homes undergoing significant renovations or construction will not be considered vacant for up to 2 years from the date a building permit for the construction or renovation was issued. The Commissioner of State Revenue can extend this period under certain circumstances.

You do not need to notify the SRO about such property for the first 2 years after the building permit was issued but you must notify the SRO in the third year.

Notification requirements

If you own a property that was unoccupied for more than 6 months during a calendar year, you are required to notify the SRO about the property by 15 January of the following year using the SRO’s online portal.

Owners who miss the deadline are encouraged to notify the SRO about vacant property as soon as possible through the portal.

Failing to tell the SRO that you own vacant residential property is a notification default under the Taxation Administration Act 1997.   When this happens, you will be liable for penalty tax on the amount assessed in accordance with the SRO’s revenue ruling on penalty tax and interest. This may be penalty tax of:

• 5% if you make a voluntarily disclosure about your vacant residential properties before the start of an investigation
• 20% if you tell the SRO about your vacant residential properties after the SRO start an investigation.
• up to 90% if the SRO believe that you intentionally disregarded the law and hindered our investigation.

Late disclosures are treated more favourably than vacant properties identified through an investigation if the State Revenue Office is to consider remission of penalty tax.

Notify the SRO via our online portal

The portal allows owners or their representatives to claim an exemption from VRLT, change their contact details, and nominate a representative to receive future correspondence about VRLT.

Existing State Revenue Office customers can enter their customer information to have their property details pre-populated into the portal, making the notification process quicker.

Examples from the SRO website.

Example 1

The Grange in Toorak was unoccupied in 2023 and 2024 and was assessed for VRLT of 1% of the CIV in 2024 (based on 2023 vacancy) and 2% of the CIV in 2025 (based on 2024 vacancy). It remained unoccupied throughout 2025. As such, it will be assessed for VRLT at 3% of the CIV in 2026. This is because 2025 is the third consecutive year it has been liable for VRLT.

The owner of The Grange was required to make a notification in the portal by 15 January 2024, advising that The Grange was vacant for 6 months or more in 2023. As The Grange continued to remain vacant the owner does not need to make another annual notification unless the occupation of the property changes. Failing to make a notification may result in an assessment being issued with penalty.

Example 2

Four Oaks in Shepparton was unoccupied in the 2023 and 2024 calendar years. It will not be assessed for VRLT in 2024 (based on 2023 occupancy) as VRLT did not apply to regional properties until 2025. As Four Oaks was vacant in 2024, it will be assessed for VRLT at 1% in 2025 (based on 2024 vacancy) and 2% in 2026 if it remained unoccupied throughout 2025. If it continues to remain vacant in 2026, it will attract VRLT at 3% in 2027.

The owner of Four Oaks is required to make a notification in the portal by 15 January 2025 and 2026 advising that Four Oaks was vacant for 6 months or more in 2024 and 2025. Failing to make a notification may result in an assessment being issued with penalty.

Further changes to come in 2026. 

From 1 January 2026, VRLT will apply to all unimproved residential land in metropolitan Melbourne that has remained undeveloped for at least 5 years and is capable of residential development. New VRLT exemptions will be introduced for:

• unimproved residential land that is contiguous to a principal place of residence (PPR)
• unimproved land incapable of being used or developed for residential purposes.

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Click here for Mark O’Brien’s video on Vacant Residential Land Tax