Victoria to expand vacant residential property tax

Vacant residential land tax (VRLT)

The Victorian government has introduced legislation to expand the vacant residential land tax to the entire state from 2025 in a bid to free up developable land and boost housing supply.

Key points

  • VRLT currently applies in 16 Melbourne councils to residential properties unoccupied for over six months in a calendar year
  • The state-wide expansion of VRLT, including regional areas, will commence from 1 January 2025
  • VRLT will extend to include certain unimproved land (generally land which has been unimproved for 5 years or more) in Metropolitan Melbourne from 1 January 2026.

The annual tax, which is charged at one per cent of the total capital improved value of the property, currently applies to existing residential properties in certain Melbourne council areas that have been vacant for more than six months in the preceding calendar year.  Furthermore, landholders must self-assess and notify the State Revenue Office by 15 January each year if they hold affected real estate.  Failure to do so can result in penalties of up to 90% in some circumstances.

The change means the VRLT program will be expanded to include land zoned as residential across Victoria that has been waiting to be developed for more than five years, estimated to apply to 3,000 undeveloped properties.

Victorian Treasurer Tim Pallas said the changes were aimed at encouraging landowners to develop vacant property rather than just holding it.

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Author

Aaron Fitchett

Partner

Aaron is the tax partner at Baumgartners.  He is a Chartered Tax Adviser with 18 years’ experience advising private and corporate clients on a wide range of tax and commercial matters.  Aaron also represents clients in disputes with the Australian Tax Office and state revenue authorities.  Aaron holds a Master of Taxation from UNSW and is an active member of the Taxation Institute of Australia.