Vacant Residential Land Tax

Main legislation

Land Tax Act 2005 (Vic) (noting the important amendments made by the State Taxation Acts and Other Acts Amendment Act 2023 (Vic)).

Importantly, where applicable, VRLT is imposed in addition to general land tax (as described above). Further, unlike general land tax (which is imposed on the unimproved value of land), VRLT is imposed on the capital improved value of the relevant land. The VRLT tax rate is 1% p.a.in the first year, and in the case of consecutive years of vacancy, it is generally 2% in the second year and 3% in the third and subsequent years.

There are various VRLT exemptions and exceptions that may be available (e.g. for holiday homes, homes under construction and unsold new homes). However, each of these have specific criteria that must be satisfied.

The VRLT now applies to all ‘residential’ properties throughout Victoria. The landowner must notify the SRO by 15 January if ‘residential land’ was ‘vacant’ in the previous calendar year.

For the 2026 land tax year onwards, the concept of ‘residential land’ will be extended to cover unimproved land in specified Melbourne municipal council areas that is deemed 'vacant' over a 5-year period (therefore the vacancy of certain unimproved land in years prior to 2026 can be relevant). This measure has been introduced to help encourage development of residential stock.

‘Residential land’ will generally be treated as 'vacant' for the purposes of a land tax year (i.e. a calendar year) if it has not been 'used and occupied' in the immediately preceding calendar year for a period of more than 6 months (whether continuously or in aggregate) by:

• the owner of the residential land, as the principal place of residence of the owner or
• the owner's permitted occupant, as the principal place of residence of the occupant or
• a natural person under a lease or short-term letting arrangement, provided that the arrangement is not made for the purpose of avoiding the payment of the VRLT.

Special rules apply for the purposes of determining whether certain types of land (e.g. land on which a residence is being constructed or renovated) is deemed to be 'vacant' for VRLT purposes.

Changes to state taxes December 2023 | State Revenue Office

Snapshot of Major Victorian Property Tax Changes | LPLC

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