If you own vacant land or an unoccupied home in Victoria, you need to know that the government has made changes that could add to your tax bill. Exemptions are available to eligible applicants and must be submitted to the State Revenue Office. Contact us today if you would like us to apply on your behalf.

Vacant Residential Land Tax has historically applied to eligible residential properties that have sat vacant for more than six months in many middle and inner suburbs of Melbourne.

If you own a home or land and it has been unoccupied for more than six months of the calendar year, you must notify the state revenue office by the 15th of January every year. While some exemptions surrounding the tax may apply (more on this below), the state government still requires you to inform them of your property’s status. You can notify the state revenue office via their website.

As per The State Revenue Office, a property is deemed vacant if uninhabited for over six months in the previous calendar year 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.

Properties that may be exempt from the tax include:

• Properties where the ownership of the property changed during that year
• When the property became a ‘residential’ property during that year
• When the property became a ‘residential property’ during the previous two calendar years, and ownership was unchanged
• When the property was used as a holiday home and occupied by the owner for at least four weeks of that year, and the owner has a PPR in Australia
• When the owner occupied the property for at least 140 days of that year to attend their workplace or business, and the owner has a PPR in Australia

Note that the vacant residential land tax is different from land tax, the absentee owner surcharge and the federal annual vacancy fee.

This online tool can help you confirm if your property is eligible for the tax, or you can ask your accountant for more information.

Updates to Vacant Residential Land Tax

From 1 January 2025, a progressive rate of Vacant Residential Land Tax (VRLT) will apply to non-exempt vacant residential land across all of Victoria. VRLT is calculated on the capital improved value (CIV) of taxable land. The CIV of a property is the value of the land, buildings and any other capital improvements made to the property as determined by the general valuation process. It is displayed on the council rates notice for the property.

The rate of VRLT is based on the number of consecutive tax years the land has been liable for VRLT and is:

• 1% of the CIV 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 CIV of the land where the land is liable for VRLT for a second consecutive year
• 3% of the CIV of the land where the land is liable for VRLT for a third consecutive year.

Properties that were held in trust when the changes were announced will also be exempt.

Newly built homes may also be exempt from the additional vacant land tax for up to two years from the date a building permit for construction or renovation was issued. This will apply if the owner can prove that an active effort has been made to sell them at or below the price they expected to sell for when they began construction.

Changes for foreign investors

In addition to Victoria’s vacant residential land tax changes, it has been announced that foreign investors with unused residential land purchased as far back as 2017 will be hit with significantly increased vacancy fees. This applies at a nationwide level.

If you own a vacant property or vacant land in Melbourne or Victoria and it is not a holiday home or you don’t plan to lease it to tenants or build, you will need to update your budget to include the additional tax or contact us about an exemption.

Talk to our team at AFS & Associates for more information.