Changes to Victoria’s Vacant Residential Land Tax
From 1 January 2025, the scope of Vacant residential land tax (“VRLT”) is changing. Whilst VRLT is not a new tax, it now must be considered by landowners across the whole state of Victoria.
In particular, owners of holiday homes in their own name, or held by companies or trusts prior to 28 November 2023, should consider whether VRLT applies, and where available, should apply for an exemption from VRLT for property used and occupied for at least 4 weeks per year.
You must notify the State Revenue Office (SRO) in writing by 15 January each year if you are the owner of vacant residential land – including if an exemption from VRLT applies. Failure to do so may result in a penalty tax of 25% to 75% of the tax shortfall.
VRLT will apply to residential land anywhere in Victoria if the land is vacant in the preceding calendar year. This means that if you own residential land anywhere in Victoria that is vacant in 2024, you may be liable for VRLT in 2025. VRLT is assessed by calendar year (1 January to 31 December) and the owner of the property is liable for it.
VRLT may apply to:
residential land with an existing home on it that is vacant for more than 6 months in the calendar year preceding the tax year
residential land with a home on it that has been under construction or renovation for 2 years or more
residential land with a home on it that has been uninhabitable for 2 years or more.
VRLT for any year is assessed on the previous year’s occupation of the property.
VRLT does not apply to land without a home on it (sometimes called unimproved land), commercial residential premises, residential care facilities, supported residential services, retirement villages or land in alpine resorts.
Land that is otherwise exempt from land tax, such as principal places of residence (PPR) or primary production land, is also exempt from VRLT, regardless of whether it is vacant for six months.
From 1 January 2025, a progressive rate of VRLT applies to non-exempt vacant residential land across all of Victoria. VRLT is calculated on the capital improved value (“CIV”) of taxable land. This is, the value of the land, buildings and any other capital improvements made to the property, and it is displayed on the council rates notice for the property. The VRLT annual tax is set at 1% of the CIV of taxable land, and is in addition to land tax that you are required to pay.
An important exemption from VRLT is for holiday homes, which applies when the SRO is satisfied that a property is used and occupied by the owner as a genuine holiday home for at least 4 weeks of the year (continuously or in aggregate). For the exemption to apply, the owner must be a natural person, and have their PPR elsewhere in Australia.
Previously, the holiday home exemption only applied to properties owned by a natural person or vested beneficiary of a trust. This meant that properties held by a company or by a trustee, which is common for asset protection reasons, did not qualify for the exemption. However, on 4 June 2024, further amendments received Royal Assent that expanded the holiday home exemption to apply to existing trust or company-owned properties used and occupied as a holiday home by a “specified person” or their relative.
A “specified person” means:
a natural person shareholder with at least 50% of the shares in the company;
a unit holder or a beneficiary of a fixed trust with at least 50% of the beneficial interest in the unit trust or fixed trust; or
a “specified beneficiary” of a discretionary trust, being a beneficiary “specifically named in the trust deed or specifically declared in writing pursuant to the trust deed”,
who uses and occupies the property as their holiday home for the requisite 4-week period, and uses and occupies other land in Australia as their PPR.
Please note that the holiday home exemption will only apply to one property per calendar year.
These provisions are ‘grandfathered’, meaning that to qualify for the exemption the company or trustee must have owned, or entered into a contract to purchase, the land on 28 November 2023 (being the day that the VRLT expansion was announced), and continuously held the land since that time without change in beneficial ownership.
It is critical for those looking to purchase holiday homes to be aware that the holiday home exemption will not apply to properties purchased within discretionary trust or company structures after 28 November 2023.
If you believe you are entitled to an exemption from VRLT, please make a notification to the SRO advising of your exemption from VRLT using the online portal in the below link by 15 January 2025.
The VRLT year you are applying for is 2025, and you will need to confirm:
the number of days during the year preceding the tax year that the land was used and occupied by the specified beneficiary or relatives as a holiday home
your SRO client number and assessment number which can be found on any land tax notice.
Vacant Residential Land Tax | State Revenue Office Victoria
Should you have any queries in relation to the above, please feel free to contact us on +61 3 9527 5041.