What is the VRLT?
Effective from 1 January 2018, the VRLT was introduced to address the lack of housing supply in Victoria. Under the changes, owners of vacant residential property will be encouraged to make them available for either purchase or rent.
As a result of the introduction of VRLT, an additional annual tax of 1% of the capital improved value (CIV) of land began to apply in certain geographical regions in Melbourne where residential land is unoccupied for a period of 6 months or more in the preceding calendar year. It is worth noting that this tax is on top of the standard land tax on non-principal place of residence properties.
Current Application of the VRLT
From 1 January 2018 to 31 December 2024, VRLT applies only to residential properties in 16 inner Melbourne councils. Residential properties include:
- Land with a home on it
- Land where a home is being renovated or rebuilt
- Land with a home that has been uninhabitable for 2 or more years
The VRLT is a self-reporting regime, meaning that residential property owners are required to notify the State Revenue Office (SRO) of Victoria when a property is vacant.
Changes to the VRLT from 1 January 2025
Starting on 1 January 2025, VRLT will apply to ALL vacant residential land in Victoria, including regional areas.
Although not commencing until 1 January 2025, whether land is vacant is determined by the use in the 2024 calendar year, and therefore the amendments are relevant for the 2024 calendar year.
VRLT will continue to be calculated on the capital improved value of land, however the rate will depend on the number of consecutive years the land has been liable for VRLT.
The relevant rates are as follows:
- 1% of the CIV of the land for the first year the land is liable for VRLT where the land was not liable for VRLT in the preceding tax year;
- 2% of the CIV of the land where the land is liable for VRLT for a second consecutive year;
- 3% of the CIV of the land where the land is liable for VRLT for a third consecutive year.
Further Changes to the VRLT from 1 January 2026
The VRLT will be expanded to include unimproved land in the Melbourne Metropolitan Area, defined as Land without a home, capable of residential development, and has remained undeveloped for 5 or more years (since 1 January 2020).
Holiday Home Exemption
There is currently an exemption from the VRLT for holiday homes, which has now been expanded such that land is exempt from VRLT when the following criteria are met:
- The owner of land can be an individual, a company or a trustee;
- There must be a minimum ownership interest of 50% in the landowner by one or more individual persons who must have used and occupied other land in Australia as a principal place of residence (those persons are referred to as “Specified Persons”);
- The land must be used and occupied as a holiday home for at least four weeks in total in a calendar year by a Specified Person or their relative.
| Owner of Land | Natural persons who must have a PPR ("PPR requirement") | Natural persons who must occupy holiday home for at least 4 weeks ("Usage requirement") |
|---|---|---|
| Company | Shareholders who owned at least 50% of the shares in the company | The shareholders or their relatives |
| Trustee of unit trust scheme | Unitholders who owned at least 50% of the shares in the scheme | The unitholders or their relatives |
| Trustee of fixed trust | Beneficiaries who held at least 50% of the beneficial interest in the trust property | The beneficiaries or their relatives |
| Trustee of discretionary trust | Specified beneficiaries of the trust or their relatives | The specified beneficiaries or their relatives |
However, an owner entitled to a holiday home exemption from VRLT in a tax year is excluded from claiming the same exemption in respect of any other land in that year (limited to one holiday home).
Other exemptions
The definition of residential land has been modified to exclude land in alpine resorts, therefore VRLT will not be applicable in such instances.
Additional exemptions exist for properties vacant for more than an aggregate of six months in the preceding year:
- Work accommodation (occupied for at least 140 days for work purposes);
- Properties newly purchased and settled in the preceding calendar year;
- Properties which became new residential land during the preceding calendar year.
Please see the below link for additional information regarding exemptions on the State Revenue Office (SRO) website.
Reporting to the State Revenue Office
Property owners must report their vacant residential property’s status to the SRO by 15 January each year. This involves declaring if a property was vacant and whether it is eligible for an exemption.
Declarations can be submitted online via the SRO portal, using the Assessment Number from your Land Tax Assessment Notice. To access the notification portal, go to this website. Once the initial notification is made, a notification in future years is only required if circumstances have changed.
When reporting, owners must provide specific occupancy details for the preceding year. It is important to keep accurate records in support of any exemption claimed. Failing to report, or providing incorrect information, may result in penalties and interest being imposed.
Further information can be found on the SRO website.
Should you require assistance in relation to the application of VRLT to your individual circumstances, please do not hesitate to contact us.
