Understanding Victoria’s Vacant Residential Land Tax: Key Updates and Implications

The Victorian Government has recently updated their Vacant Residential Land Tax (VRLT) legislation to now include undeveloped land in Metropolitan Melbourne.

These changes make it essential to review how your property is used throughout the year and take steps now to ensure you understand your obligations and potential exemptions. 

Existing VRLT Requirements – From 1 January 2025 

From 1 January 2025, the VRLT will apply to any vacant residential property anywhere in Victoria, including regional areas. The only location-based exclusion is alpine resorts.

• The tax is liable to be charged based on your property’s usage in the preceding calendar year, meaning your use of the property in the current year will determine whether you are liable to pay the tax in the following year. 
• The tax rate is 1% of the property’s Capital Improved Value (CIV) in the first year. 

• The rate increases to 2% in the second consecutive year and 3% from the third consecutive year onwards. 

Example: A holiday home worth $1,000,000 that has sat vacant for more than six months since 1 January 2024 would have attracted a $10,000 tax in 2025, and if the property remained vacant, the tax would increase to $20,000 in 2025 and $30,000 in 2026.

Holiday Home Exemption 

If your holiday home is used for at least four weeks in a calendar year by family members and your principal place of residence (PPR) is in Australia, you may be exempt from VRLT. 

From 1 January 2025, the exemption is extended to: 

• Properties owned by a trustee or company where the sole shareholder or beneficiary uses the property as a holiday home and meets the PPR requirement. 

Who qualifies as “family” for the exemption?

Your spouse or domestic partner, children (and their partners), siblings (and their partners and children), parents, grandparents, and grandchildren. All qualifying family members’ use of the property can contribute to the 4-week requirement (continuous or aggregate). 

Important: Use by friends does not count towards the 4-week occupation period. 

If you qualify, you should have applied for an exemption by 15 January 2025. Failure to notify the State Revenue Office (SRO) would have resulted in a vacant residential land tax assessment notice being issued.  

Other Exemptions 

In addition to the holiday home exemption, other VRLT exemptions include: 

• The property changed ownership during the year. 

• The property became a residential property during the year. 

• The property became a residential property in either of the previous two years and ownership has not changed. 

• The owner occupied the property for at least 140 days during the year to attend their workplace or business, and the owner has a PPR in Australia (not available to companies, associations, or organisations). 

Upcoming Changes – From 1 January 2026 (To Now Include Undeveloped Properties) 

VRLT is being extended to include land in metropolitan Melbourne that has remained undeveloped for five years or more and is capable of residential development. 

 This includes: 

• land without a home on it 

• land with a residence that was partially built but abandoned 

• land with a residential unit, such as a unit, apartment or flat, that has a partially completed fit out but has not been occupied.  

Metropolitan Melbourne is made up of the Banyule, Bayside, Boroondara, Brimbank, Cardinia, Casey, Greater Dandenong, Darebin, Frankston, Glen Eira, Hobsons Bay, Hume, Kingston, Knox, Manningham, Maribyrnong, Maroondah, Melbourne, Melton, Merri-bek, Monash, Moonee Valley, Mornington Peninsula, Nillumbik, Port Phillip, Stonnington, Whitehorse, Whittlesea, Wyndham, Yarra and Yarra Ranges council areas. 

Exemptions may be available if: 

• the undeveloped land is incapable of being used or developed for residential purposes. This may be due to the size or shape of the land, its natural features or its environmental condition. It is intended to apply when development is practically impossible, not due to it being uneconomical or inconvenient. 

• undeveloped residential land is next to or adjoins a principal place of residence. For example, a garden, a swimming pool or a tennis court. 

How to Apply for Exemption 

If your property has been unoccupied for more than six months or undeveloped for five years or more but qualifies for an exemption, you must notify the SRO on their online portal by 15 January 2026 via their online portal: 

You can apply for an exemption directly through the SRO website.

NOTE:  If you have already previously applied for an exemption, provided that there are no changes to your personal circumstances or the property’s use, you don’t need to reapply for an exemption. If your property is no longer exempt, you will need to notify the SRO, which can be done on the online portal.  

How Can Morrows Help? 

Please speak to your Morrows Tax Advisor if you have any questions or concerns regarding your property investments and responsibilities.

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