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

With Jacinta Allan taking office as the new Premier of Victoria, the Victorian Labor Government is shifting its focus and allocating substantial resources to address the current housing crisis. Just one week after Daniel Andrews’ departure, the Allan Government plans to prepare a state-wide tax affecting property owners who hold vacant land for more than six months within a calendar year.

The Vacant Residential Land Tax (VRLT) is in addition to the current Land Tax and short-term rental tax property owners are now facing.

The State Taxation Acts and Other Acts Amendment Bill 2023 (Vic) was introduced in State Parliament on 4 October 2023 proposing significant changes to VRLT.

Effective Date:

If passed, the proposed amendments will be effective from 1 January 2025.

What are the current Victorian State Revenue Office Requirements?

The current Vacant Residential Land Tax applies to residential properties or land left idle or empty for more than six months and have not undergone significant renovation/reconstruction. The properties that are presently taxed are in the inner and middle suburbs of Melbourne within the following council areas:

Various exemptions apply, including the following:

• Ownership of the property changed during that year.
• The property became a ‘residential’ property during that year.
• The property became a ‘residential property’ during the previous two calendar years and ownership is unchanged.
• 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 (homes owned by companies, associations or organisations are generally not eligible for this exemption).
• 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 (homes owned by companies, associations or organisations are generally not eligible for this exemption).

What has changed?
The proposed changes will make any vacant land in Victoria assessable to this tax, including regional areas and government/state holdings. The rate will remain at 1% of the asset’s capital improved value (CIV), meaning $500,000 of vacant land will have an annual tax of $ 5,000. You can find your land’s capital improved value on previous council rates notice or a prior-year vacant residential land tax assessment (referred to as taxable value).

From 1 January 2026, the vacant residential land tax will be extended to unimproved residential land in established Melbourne suburbs which are undeveloped for a period of five years or more. Holiday homes and homes being renovated will be exempt from the changes.

As of the time of publication, the current exemptions and rulings apart from the above still apply beyond January 2025. (State Taxation Acts and Other Acts Amendment Bill 2023)

What are your responsibilities?
Individual property owners are responsible for keeping current on the legislation changes and notifying the State Revenue Office of any errors or omissions that may relate to your tax obligations.

Reason Behind the Tax:
Treasurer Tim Pallas has stated that these changes aim to influence the behaviour of land investors and current landholders, encouraging them to either develop or sell the land to someone who will.

How can Morrows Help?
Please speak to your Morrows Tax Advisor if you have any questions about these tax adjustments and how they may impact your financial situation. Our team of experts can assess your land assets and provide further information on managing and mitigating arising tax obligations.