Vacant Residential Land Tax Reinstated: Key Impacts on Property Owners

As of January 1, 2025, the Victorian government has reinstated the Vacant Residential Land Tax (VRLT) after temporarily pausing it for the 2023 and 2024 tax years. Designed to address Melbourne’s housing availability, this tax targets residential properties that remain unoccupied for more than six months annually. Here’s what you need to know about the return of the VRLT and how it may impact you.

What is the Vacant Residential Land Tax?

The Vacant Residential Land Tax applies to residential properties in Melbourne’s inner and middle suburbs that are unoccupied for over six months in a calendar year. The tax rate is set at 1% of the property’s taxable value, as assessed by the State Revenue Office (SRO). Unlike other property taxes, this one specifically incentivises property owners to either occupy, lease, or sell their properties rather than leave them vacant.

This tax is part of a broader strategy to ensure that existing housing stock is utilised effectively, reducing the strain on Melbourne’s housing market. It targets properties in areas where housing demand is most acute, promoting better use of residential properties and discouraging speculative vacancies.

Why Was There a Temporary Holiday?

The Vacant Residential Land Tax was paused for the 2023 and 2024 tax years to encourage investment activity during the post-pandemic property market recovery. During this time, property owners were given an opportunity to adjust to changing market dynamics without the added pressure of vacancy taxes. The government’s decision to reinstate it reflects a renewed focus on tackling housing shortages and discouraging speculative property holding, ensuring that more homes become available for tenants and buyers alike.

Key Exemptions to Consider

Not all vacant properties are subject to the VRLT. Common exemptions include:

• Holiday Homes: If used as a vacation property for at least four weeks annually.

• Work-Related Absences: If the owner resides elsewhere for work purposes.

• New Developments: Properties under construction or renovation.

Other potential exemptions may apply depending on individual circumstances. To claim an exemption, property owners must notify the SRO and provide evidence supporting their eligibility. Failure to comply with reporting requirements could result in penalties, so it’s crucial to stay informed.

Implications for Property Owners

The reintroduction of the VRLT underscores the government’s commitment to addressing Melbourne’s housing crisis. For property owners, this means:

• Reviewing your property’s occupancy status: Ensure your property is either occupied, leased, or exempt to avoid unnecessary tax liabilities.

• Financial Planning: The VRLT can add a significant cost for owners of under-utilised properties. Factoring this into your financial strategy is essential.

• Making Decisions About Vacant Properties: Owners should consider leasing or selling properties unlikely to meet the occupancy requirements. Leasing offers the dual benefit of generating income and avoiding the vacancy tax.

Navigating the VRLT

If you believe your property’s taxable value or occupancy status has been incorrectly assessed, you may have grounds to object. However, navigating the objection process can be complex and time-consuming. Property owners must provide clear evidence to support their claims, which may include occupancy records, lease agreements, or other documentation.

How We Can Help

At Land Tax VIC, we specialise in helping property owners manage their land tax obligations, including the VRLT. Our services include:

• Comprehensive Tax Reviews: We ensure your property’s taxable value and status are accurately assessed.

• Exemption Guidance: We’ll help you determine if your property qualifies for exemptions and guide you through the application process.

• Objection Assistance: If you’ve received an incorrect assessment, we can prepare and lodge objections on your behalf to ensure you’re not overpaying.

The return of the Vacancy Tax presents both challenges and opportunities for property owners. While it may require adjustments for some, it also serves as a reminder of the importance of proactive property management. With the right advice and support, you can navigate these changes confidently and ensure compliance with the new regulations.

For expert assistance tailored to your needs, contact Land Tax VIC today and let us help you take control of your property tax obligations.