Vacant Residential Land Tax Impacting Victorian Homeowners
Attention property owners! The state government has recently issued a new Vacant Residential Land Tax (VRLT). Initially introduced in 2017, this annual tax has gradually expanded its reach and, as of January 1, 2025, its scope and rates are set to increase significantly.
What is the Vacant Land Residential Tax?
The VRLT is a tax on residential properties that have been unoccupied for more than 6 months (in the preceding calendar year). This means that in 2025, when the expansion occurs, it’s 2024 that will be relevant. The 6 month period does not need to be continuous.
A property will be deemed ‘vacant’ unless it has been occupied by:
- The owner or the owner’s permitted occupier as their principal place of residence (PPR)
- A person under a Lease or short-term letting arrangement
From 2025, the tax rate will increase from 1% to 3% of the Capital Improved Value (CIV) and up from the 2024 rate of 1%, which is based on the 2023 occupation. While currently, the tax is limited to some inner areas of Melbourne, the increased rates will apply statewide.
If a property changes hands, it is not subject to tax the following year. Holiday homes have an exemption, but there are criteria. Additionally, homes held in discretionary trusts are not eligible for the exemption. The prior year’s occupation history will need to be checked for rented or rentable properties.
What About Deceased Estates?
When it comes to deceased estates, if a deceased person’s property:
- Had been used and occupied as the owner’s principal place of residence immediately before the owner’s death, the property is not subject to the tax for up to 3 years.
- If, however, it had not been used and occupied as the owner’s principal place of residence immediately before the owner’s death, the property would be subject to the tax regime (just as it would have in the hands of the owner).
A deceased person who lived 6 months in Victoria and 6 months elsewhere presents an issue that the Executor will need to scrutinise.
Will I Need an Assessment?
Landowners of vacant residential properties must notify the SRO by the 15th of January each year. As matters stand, land tax is covered by self-assessment. There is an online portal to help you with the criteria. If an owner fails to notify the SRO, they may be subject to fines.
What is the Unimproved Land Category?
The Unimproved Land category is due to commence in 2026. This relates to unimproved land with no residence on it, where the zoning allows a residence to be built on it.
How Do I Stay Informed?
Property owners in Victoria must stay informed about these tax regulations to avoid penalties and ensure compliance with the evolving tax landscape. If you’re unsure which situation applies to you, contact McNab McNab & Starke now to discuss your options. You can send us an online enquiry or call the office nearest you.