What Is the Vacant Residential Land Tax?

The Vacant Residential Land Tax (VRLT) is a state tax introduced by the Victorian Government as part of its broader strategy to increase housing availability and improve affordability. It aims to discourage property owners from leaving residential properties vacant for extended periods, particularly in areas where housing demand is high.

Initially, the tax applied only to inner and middle Melbourne suburbs. As of 1 January 2025, significant changes have come into effect, expanding the tax's reach beyond inner and middle Melbourne to cover all residential land across Victoria (except for land in an alpine resort). This means that many more property owners may now be subject to the tax, including those who may not have previously needed to consider it.

Which Properties Are Affected?

Any residential property in Victoria (except for those in an alpine resort) may be subject to VRLT if the property remains vacant for more than six months in the previous calendar year. These six months do not need to be consecutive — the tax applies if the property is unoccupied for a total or more than six months throughout the year. This includes:

• Houses, apartments, townhouses, and units.
• Properties that are capable of being lived in (i.e. habitable) but remain unoccupied.
• Vacant land intended for residential development.

Owners of residential land should carefully review their property holdings, especially if they did not live in the property or rented it out for less than six months during the previous calendar year.

How Much Is the Tax and How Is the Tax Calculated?

The VRLT is charged at 1% of the capital improved value (CIV) of the land for the first year, 2% on the second consecutive year if the land remain liable for VLRT and 3% on the third consecutive year. The CIV is the total market value of the land and any improvements (buildings, landscaping, etc.) and can be found on your local council rate notice.

For example, if your property has a Capital Improved Value (CIV) of $1 million, the tax in the first year would be $10,000. If the property remains liable for VRLT in the second consecutive year, the tax would increase to $20,000. In the third consecutive year, the tax would rise again to $30,000.

Key Exemptions

There are several important exemptions where the VRLT will not apply, with the most common including:

1. Holiday Homes Properties used as holiday homes by the owner or their relatives for at least four weeks per calendar year may be exempt, provided the owner has a principal place of residence in Australia.
2. Property under construction or renovation Properties that are undergoing construction or renovation may be exempt, provided that no more than two years have passed since the works commenced. It’s important to note that the commencement date is considered to be the date on which the relevant building permit was issued.
3. Change of Ownership Properties that change ownership during a calendar year are exempt from VRLT in the following year.
4. Temporary Absences If the property is the owner’s principal place of residence and the owner is temporarily absent for legitimate reasons (ie, overseas work, medical treatment), the property may be exempt. However, the owner must demonstrate that the absence is temporary and that they intend to resume living in the property as their principal place of residence once the absence ends. It’s important to note that exemptions are not automatic — owners must notify the State Revenue Office (SRO) and provide appropriate evidence where required.

Owner Obligations

The VRLT operates on a self-assessment basis, which means that owners are responsible for monitoring the use of their properties and notifying the SRO if their property is vacant.

Failure to comply can result in:

• Penalties and interest charges
• Retrospective tax liabilities
• Audits or investigations by the SRO

Owners must lodge a vacancy notification each year if the property was vacant for more than six months. Notifications are generally due by 15 January each year for the previous calendar year.

How RKL Lawyers and Consultants Can Help

Understanding and navigating your VRLT obligations can be complex — especially if you own multiple properties, live interstate or overseas, or are unsure whether your property meets the exemption criteria.

Our team can assist with:

• Reviewing your property portfolio for potential VRLT exposure
• Advising on exemptions and documentation
• Preparing and lodging vacancy notifications
Responding to SRO queries or audit requests

Incorrect VLRT Assessment and Objection

If you believe you have received an incorrect VLRT assessment, it’s crucial to lodge an objection within 60 days. Failure to do so may prevent you from disputing the assessment, unless you can provide a valid reason that satisfies the State Revenue Office (SRO).

If you’re uncertain about the accuracy of your VLRT assessment or whether you qualify for an exemption, please do not hesitate to contact us. We can review your assessment and if applicable, assist in preparing a formal objection to the SRO.