Vacant Residential Land Tax (VRLT) - Important Update for Victorian Property Owners

Key takeaway:

• VRLT is assessed annually.

• Exemptions may apply, e.g., holiday homes or certain personal circumstances.

• Penalties and interest can apply for non-compliance.

• If you have previously registered for an exemption, such as a holiday house, you do not have to make a further application for the exempt each year. If you have not applied for the exemption then you need to do so by 15 February.

We recommend reviewing your properties to determine whether VRLT applies. Please contact our office if you need assistance with exemptions or lodging notifications.

Victorian Vacant Residential Land Tax (VRLT) - Key Rules and Compliance Guide (Detail)

The Victorian Vacant Residential Land Tax (VRLT) is a state tax administered by the Victorian State Revenue Office (SRO). It applies to certain residential properties that are considered vacant for more than six months in a calendar year. Recent changes have expanded the scope of the tax beyond inner and middle Melbourne to all of Victoria and introduced additional rules for unimproved residential land. This newsletter summarises the key features, registration requirements, exemptions, and how to apply.

What is Vacant Residential Land Tax?

VRLT is an annual tax on residential land that is vacant for more than six months in the preceding calendar year. The tax is designed to encourage property owners to make housing available for occupation or rental.

The tax is generally calculated as a percentage of the capital improved value (CIV) of the property as determined for land tax purposes.

When does VRLT apply?

VRLT originally applied only to inner and middle Melbourne. It has now been expanded to apply across Victoria. Different rules may apply depending on whether the land contains an existing residence or is unimproved residential land capable of development.

You may need to pay VRLT if you own:

• residential land with an existing home that was vacant for more than 6 months in the previous calendar year

• residential land with an existing home that has been under construction or renovation, or uninhabitable, for 2 years or more

• from 1 January 2026, land in metropolitan Melbourne that has remained undeveloped for a continuous period of 5 years or more and is capable of residential development. The 5-year period may occur prior to 1 January 2026.

When is Property Considered Vacant?

A property is generally considered vacant if it is not occupied for more than six months (183 days) in the previous calendar year by:

• The owner as their principal place of residence

• A permitted occupant

• A tenant under a genuine lease or short term letting arrangement

Occupation periods can usually be aggregated across the year (i.e. they do not have to be continuous periods of occupancy). Evidence of occupation should be retained where occupation of the property is likely to be close to the time frames permitted under the legislation.

VRLT Rates (General Guide)

VRLT is commonly imposed at 1% of the property’s capital improved value (CIV). Higher progressive rates can apply where land remains vacant for multiple consecutive years under newer rules.

From 1 January 2025, a progressive rate of VRLT applies to non-exempt vacant residential land across all of Victoria. The rate of VRLT is based on the number of consecutive tax years the land has been liable for VRLT and is:

• 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.

Owner Notification and Registration Requirements

Owners of residential property in Victoria must notify the State Revenue Office as to whether their property was vacant or qualifies for an exemption.

If you have made a notification in the past, you only need to make a new one if your circumstances have changed. For example, if you stop being eligible for an exemption, you need to notify the SRO. If you have been granted an exemption, you do not need to re-apply each year where your circumstances and your eligibility for the exemption have not altered.

Key compliance steps include:

• Lodge an annual VRLT notification with the SRO

• Notifications are typically due by 15 February each year

• Notification is completed through the SRO online portal (My Land Tax)

• Owners must declare occupancy status and claim any exemptions at the time of notification

Failure to notify can result in penalty tax and interest, and the SRO may issue an assessment based on available data.

Common VRLT Exemptions

Common exemptions include:

• Principal Place of Residence (PPR) - Properties used as the owner’s principal place of residence are generally exempt.

• Genuine Occupation by Tenant - Properties rented out under a genuine lease or tenancy arrangement for more than six months are generally exempt.

• Holiday Home Exemption - A holiday home may qualify if it is used and occupied by the owner or permitted occupants for at least four weeks per year and is not used as a principal place of residence by anyone else.

• Work Related Absence - An exemption may apply where the owner is absent due to work or other qualifying reasons but intends to return.

• Recent Acquisition or New Construction - Exemptions may apply in the year of purchase, during construction, or where a property is newly completed and genuinely offered for sale or lease.

• Change of Ownership or Use - Certain transitional exemptions may apply where ownership or permitted use changes during the year.

• Undeveloped land adjoining your home or holiday home.

How to Apply for a VRLT Exemption

Exemptions are not automatic. Owners must actively claim the exemption with the SRO. The process is:

• Log into the SRO online portal (My Land Tax)

• Complete the annual VRLT notification

• Select the relevant exemption category

• Provide supporting information and documents if requested

• Retain evidence such as lease agreements, utility records, travel records, or occupancy proof

The SRO may review exemption claims and request additional supporting documentation.

Record Keeping

Owners should keep records for at least five years to support occupancy or exemption claims, including leases, utility bills, booking records, and correspondence.

Important Reminder

VRLT rules are detailed and subject to change. Property owners should seek professional advice where circumstances are unclear. This newsletter provides general information only and should not be relied on as legal or tax advice.