What Is Vacant Residential Land Tax?

Marco Saccotelli

Special CounselAitken PartnersView Profile

Understand when Vacant Residential Land Tax (VRLT) applies in Victoria, available exemptions, and what to do if you receive an SRO assessment.

What is the Vacant Residential Land Tax in Victoria?

Vacant Residential Land Tax (VRLT) was introduced on 1 January 2018 with its stated policy being to encourage (with a stick) the occupation, renting out or development of residential land due to housing supply issues in Victoria. It originally only applied to certain designated Local Government Areas but now applies Victoria-wide (subject to some exceptions for vacant land not within metropolitan growth councils or located in parks or reserves).

VRLT can affect a wide range of Victorian residential property owners. Whether you own an investment property, inherited home, holiday house or vacant block of land, understanding when the tax applies and whether an exemption may be available is essential.

Many property owners are surprised to receive a VRLT assessment because they assumed an exemption applied or didn't even realise the VRLT existed given that they already pay land tax on non-principal place of residence property.If you're unsure whether your property is liable for VRLT, believe an exemption should apply, or you want to challenge an assessment by the State Revenue Office (SRO), it’s worth getting legal advice early.

VRLT is an annual tax that applies to some vacant residential properties and to undeveloped residential land in Victoria. It only applies to residential properties or land that is capable by zoning of being developed into residential properties. Accordingly, industrial or commercial land and premises are exempt from VRLT. Unlike land tax which is assessed on the land value only, VRLT is assessed on the full market value of land and improvements.

Do I need to pay Vacant Residential Land Tax?

You’re generally liable if you own residential land in Victoria on 31 December of the relevant calendar year, and your property falls into one of these categories:

• You own a residential home that was unoccupied for more than six months during the previous calendar year.

• You own a property that has, for two years or more, been:

• uninhabitable

• under construction

• undergoing substantial renovation

(The 2 year period may be extended where delays are due to acceptable circumstances outside the owner's control.)

• You own land in metropolitan Melbourne that’s capable of residential development but you haven’t developed it for five years or more. (An extension to the 5 year limit may be considered if there’s been a genuine change in ownership during this time, or you’ve experienced what the SRO deems an acceptable delay in the development.)

When do I pay the Vacant Residential Land Tax in Victoria?

If VRLT applies to your property, you will pay the tax annually. Note, the VRLT is based on a property’s occupancy during the previous, rather than the current, calendar year (1 January to 31 December). So, if your property was not occupied for more than six months in 2026, you’ll receive a VRLT assessment in 2027 for that 2026 calendar year.

Are there Vacant Land Tax Exemptions?

Yes. A number of exemptions and exclusions apply to the VRLT, depending on the property and how it is used.

Common exemptions and exclusions from VRLT include when the property:

• Is your principal place of residence, including when you are temporarily absent due to circumstances such as receiving medical care or residing in aged care, provided the exemption requirements are met.

• Changed ownership in the previous calendar year.

• Is under construction, substantial renovation or temporarily uninhabitable, and falls within the applicable exemption period (or the SRO has exercised its discretion to extend that period).

• Is used as a holiday home by you, or certain relatives, for at least four weeks during the calendar year by family and friends (eligibility requirements apply).

• Is used for work accommodation.

• Is used to provide commercial residential accommodation (e.g. hotels, motels, hostels, boarding houses, serviced apartments and caravan parks). Note, an ordinary residential property used for short-term accommodation, such as Airbnb, is not exempt meaning that both the short stay levy and VRLT can be payable if the property is not let out for periods exceeding 6 months in the prior year.

• Operates as a retirement village.

• Operates as a residential care facility or supported residential service.

• Is located in Victoria's declared alpine resort areas or Dinner Plain for obvious reasons of seasonal use. Undeveloped residential land may be exempt from VRLT if:

• It only recently became residential land and qualifies for the applicable exemption period. Depending on the circumstances, this exemption may apply for up to three years.

• It’s incapable of residential development.

• Development has been delayed for acceptable reasons outside the owner's control and the SRO has exercised its discretion to extend the relevant period.

How is the VRLT Enforced?

The State Revenue Office (SRO) actively enforces VRLT through data matching, utilities usage, compliance reviews, investigations and other information sources. In 2024–25, the SRO completed 956 VRLT investigations, assessing almost $38.5 million in additional VRLT liabilities.

How is the VRLT calculated?

The VRLT amount payable depends on the type of property you own.

Residential properties across Victoria (such as houses, units and townhouses)

If your residential property remains vacant for more than six months during the previous calendar year, you’ll be taxed upon a percentage of the property's CIV or Capital Improved Value (the total value of the land and any buildings or other improvements on it, as determined by council valuation). Obviously this could be a significant amount of tax – for example a house with a market value of $1m would attract a $30,000 VRLT liability if it was left vacant (or not used more than 6 months) for 3 or more years. On top would be penalties for non-notification to SRO and interest.

The VRLT will be:

• Year 1: 1% of CIV

• Year 2: 2% of CIV

• Year 3 and beyond: 3% of CIV

Undeveloped residential land in metropolitan Melbourne

If your land remains undeveloped for five years or more, the VRLT will be a flat rate of 1% of the land’s CIV. (Currently, these provisions don’t apply to undeveloped residential land elsewhere in Victoria.)

What actions do Victorian property owners need to take?

If you own vacant property in Victoria, you should:

• Check your VRLT obligations yearly to assess how your property was used during the previous calendar year, and if you need to pay VRLT.

• Let the State Revenue Office know if your property changes ownership or use, becomes vacant, or no longer meets the requirements of an exemption.

• Keep records if you want to make an exemptions. These would include things like evidence of occupancy, lease agreements, construction or renovation documentation, permits and so on.

Can you dispute a VRLT assessment?

Yes. You can dispute an assessment if you believe:

• your property has been incorrectly classified as vacant

• an exemption should apply, or that the SRO has overlooked evidence supporting your circumstances

• the Capital Improved Value has been incorrectly assessed

Objection time limits apply and supporting evidence is often critical, so if you want to challenge an assessment, seek legal advice as early as you can.

If your objection is unsuccessful, you may have further review rights through the Victorian Civil and Administrative Tribunal (VCAT) or the courts. Legal advice can help determine the appropriate course of action.

Navigating common VRLT issues

While the general VRLT rules are relatively straightforward, applying them to real-life situations isn't always. The following scenarios commonly raise questions about whether the tax applies or whether an exemption might be available.

1. Inherited properties

Beneficiaries commonly leave a home vacant while they decide whether to keep and renovate with a view to renting or sell the property. During this challenging time, tax issues are rarely what families are focussed on. Whilst initially there may be a VRLT exemption for a certain period of time in situations where there’s a change of ownership in the prior year (the passing from deceased to executor or beneficiary’s name on title) when that period ends, VRLT may become payable.

2. Moving into hospital or residential aged care

If you or a family member moves into hospital, respite care or residential aged care, the home may qualify for a VRLT exemption while the owner is temporarily absent. However, it is worth seeking legal advice before assuming the property will or won't be subject to VRLT.

3. Holiday homes

Many holiday home owners are surprised to learn their property is not automatically exempt from VRLT. A common example is a Melbourne family that keeps a coastal property for occasional weekends away. Many owners assume occasional use is enough, but in fact evidence of at least 4 weeks usage in the prior year by family and friends must be kept so as to ensure no VRLT is payable.

4. Extended building or renovations

You might assume you aren’t liable for the VRLT because you’re building or renovating your property, however there’s a limit to how long you can avoid the VRLT. If construction or renovations take more than two years, VRLT may apply Unless you get on the front foot and seek an extension from the SRO with a valid reason as to why the timeline exceeds 2 years.

5. Properties listed for lease or sale

If you’ve advertised your property for rent or sale, it doesn’t mean it’s exempt from VRLT. The State Revenue Office considers whether the property was actually occupied, rather than simply offered for rent or sale. Typically, however, given the housing shortages in Victoria, an advertised property is usually rented out quickly.

6. Short-term accommodation

If you list your property on a short-term rental site, it won’t qualify as a "commercial residential premises" because that only covers hotels, motels, inns, boarding houses, hostels and caravan parks. Hence, VRLT may apply in addition to land tax and the short stay levy. Therefore occasional use of a property for short stays can be uneconomic when the totality of Victorian taxes are taken into account.

7. Overseas or interstate owners

There can be confusion about what constitutes a principal place of residence, particularly if you keep your home but live temporarily outside Victoria. Generally, if your principal place of residence is elsewhere, a vacant Victorian property you leave behind may become subject to VRLT. The State Revenue Office considers a range of factors when determining where you ordinarily reside, including where you are enrolled to vote and where you receive your mail.

Another issue is when property owners living outside Victoria nominate a Victorian property as their ‘holiday home’ to access the holiday home exemption. To determine whether or not VRLT applies, the State Revenue Office will consider factors such as the owner's principal place of residence, the property's location, the distance between the home and their place of residence, and how the holiday home is actually used. For example, a typical suburban house is unlikely to be considered a ‘holiday home’.

8. Making assumptions about what counts as “occupancy”

The SRO runs a number of checks to determine whether occupancy is genuine or not, and evidence of realistic use of the property may be required. Getting friends, neighbours and family to occasionally visit a vacant property to mow the lawn or collect mail, will not prevent VRLT from being imposed.

9. Buying a property without checking its VRLT status

Buyers sometimes get caught out when they assume a previous outstanding VRLT liabilityis the responsibility of the former owner. This is incorrect. If a property has outstanding State Revenue Office liabilities, and they’re not identified and discharged as part of the conveyancing process, through an adjustment to the purchase price, then they become a liability of the new owner.

An up-to-date property clearance certificate from the SRO can reveal whether outstanding land tax or VRLT liabilities are recorded against the property. If VRLT is owing, a solicitor or conveyancer can assist with negotiating how these liabilities are dealt with prior to settlement.

Need support with a VRLT issue?

Vacant Residential Land Tax can have significant financial consequences. When you are unsure whether your property is or isn’t exempt, or you dispute a VRLT assessment, then getting some legal advice early can help you understand your options and avoid unnecessary costs. If you receive an assessment get advice immediately as strict timelines apply for objections.

The lawyers at Aitken Partners can advise whether VRLT applies to your circumstances, assist with exemption reviews, and represent you in objections or disputes with the State Revenue Office.