Vacant residential land tax — frequently asked questions

VRLT is calculated on the capital improved value (CIV) of the taxable land.

The CIV of a property is the value of the land, buildings and any other capital improvements made to the property as determined by the general valuation process. It is displayed on the council rates notice for the property.

For 2018–24, VRLT is an annual tax of 1% of the capital improved value (CIV) of taxable land. For example, if the taxable land has a CIV of $500,000, the tax is $5,000.

The rate is changing from 1 January 2025 when a progressive rate of VRLT will apply to non-exempt land with a vacant residential property anywhere in 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.

Vacant residential land tax calculator

Is there a taxable value threshold?

No. Unlike land tax, there is no taxable value threshold for VRLT. This means land with a vacant residential property may be liable for VRLT regardless of its CIV.

I already pay VRLT on a property. What rate will I pay in 2025?

This depends on where your property is located and the number of years it has been liable for VRLT.

From 1 January 2025, if your property has continued to be vacant in prior years you may be liable for VRLT of up to 3% per annum of the capital improved value.

For example, for vacant residential land in inner and middle Melbourne which has been liable for VRLT in 2023 and 2024 and continues to be liable in 2025, you will be taxed at 3% in 2025. If it is liable in 2024 and continues to be liable in 2025, you will be taxed at 2% in 2025.

The first year that vacant residential land in the rest of Victoria can be liable for VRLT is 2025 (based on vacancy in 2024) and the rate will be 1%. Assuming your vacant residential land is liable in 2025 at 1%, 2026 is the first year it can be liable at 2% per annum, and 2027 is the first year it can be liable at 3% per annum.

My property is exempt from land tax. Is it liable for VRLT?

Properties which are exempt from land tax are not liable for VRLT. You do not need to make a VRLT notification where the property is exempt from land tax.

Is the COVID Debt Repayment Plan applicable to VRLT?

No. It only applies to land tax.

What is the difference between VRLT and Foreign Investment Review Board (FIRB) vacancy fee?

The Victorian Government introduced VRLT from 1 January 2018 to help address the lack of housing supply in Victoria. VRLT is assessed by calendar year (1 January to 31 December) and the owner of the property is liable for it.

The vacancy fee is a fee which is administered by the Australian Government.

How are joint owners assessed?

If you own a vacant residential property with others, all owners are jointly assessed for the tax as if the land was owned by a single person. Unlike land tax, individual joint owners do not receive a secondary assessment for their interest in the property.

Where can I get more information?

We are using our website, which is continually being updated, to make sure land owners are aware of their obligations and requirements for exemptions. You can join our subscriber list to receive notifications about VRLT.

Definitions

What is residential property/residential land?

Residential land includes:

• land with a home on it
• land with a home which is being renovated or where a former home has been demolished and a new home is being constructed
• land with a home on it that has been uninhabitable for 2 years or more.

Residential land does not include land without a home on it (sometimes called unimproved land), commercial residential premises, residential care facilities, supported residential services, retirement villages or land in alpine resorts.

What is meant by 'vacant'?

Land with an existing home on it is considered vacant unless it was occupied for more than 6 months in the preceding calendar year by:

• the owner, or the owner’s permitted occupant, as their principal place of residence, or
• a person under a lease or short-term letting arrangement.

The occupation does not need to be for a continuous period or by the same occupant, and a beneficiary of a discretionary trust can be a permitted occupant.

A permitted occupant is a person who uses and occupies the property with the permission of the owner. For example, a family member, friend or employee.

A principal place of residence is the home you occupy and where you primarily reside.

Residential land is also considered vacant if, at the end of the calendar year preceding the tax year:

• the land has a residence that has been under construction or renovation for more than 2 years since the building permit was issued, and that work is not complete.
• the land has a residence that has been uninhabitable for 2 years or more.

The Commissioner of State Revenue can extend the period these lands are considered not vacant if he is satisfied that there is an acceptable reason for the delay in completing construction or renovation or making the land habitable.

What do the codes on my assessment mean?

The following is a list of codes used on VRLT assessments, with their meaning:

• HOL — property is exempt as a holiday home.
• WRK — property is exempt as land occupied for purposes of attending place of business or employment.
• RES — property is exempt as it became residential land during the preceding year.
• TFR — property is exempt as ownership of the property was transferred to you during the preceding year.

Homes capable of being used for residential purposes

What does 'capable of being used for residential purposes' mean?

A property is capable of being used solely or primarily for residential purposes if it:

• can be occupied,
• is occupied, or
• is intended to be occupied

as residences or for residential accommodation, regardless of how long the occupation is for.

This includes land on which there is one or more houses, units or flats which are fit for occupation. It refers to land with premises that provide shelter and contain basic living facilities.

Residential property in a minor state of disrepair or in need of minor reinstatement are still considered capable of being occupied as a residence. Residential property which does not meet the minimum standards for rental properties under the Residential Tenancies Regulations 2021 may still be considered capable of being used and occupied for residential purposes.

For example, a property that does not have window locks or heating that meet the Residential Tenancies Regulations 2021 standards may still be capable of being used as a residential property and may be liable for VRLT.

Is an apartment in a serviced apartment building, which is generally leased out, considered ‘capable of being used for residential purposes’ or is this more akin to a hotel room?

A serviced apartment building generally comes within the definition of commercial residential premises. However, an individual apartment in a serviced apartment building will generally not come within this definition.

This means that an apartment purchased individually is capable of being used as a residence, and is therefore residential land for the purposes of VRLT. It will be subject to VRLT if it is vacant for more than 6 months in a year and meets all the other tests.

Does VRLT apply to residential properties used as display homes?

No. VRLT is not applicable to residential land used for commercial activities such as a genuine display home.

A display home in this case would be regarded as a home designed and built to showcase unbuilt houses or estates, which is made available for open inspection on a regular basis.

However, once a property stops being used as a display home, it is considered to be capable of being used and occupied for residential purposes and will become subject to VRLT if it is left vacant for more than 6 months in a calendar year.

Residences under construction and renovation

How does VRLT apply to properties being constructed or renovated?

Residences undergoing significant construction or renovation will not be considered vacant for up to 2 years from when construction or renovation starts. There will, therefore, generally be 2 years where VRLT will not apply to a property being constructed or renovated. Under certain circumstances the Commissioner can extend this period.

When does the 2-year period start?

The 2-year period starts from the date the building permit for construction or renovation is issued.

However, residential land outside of inner and middle Melbourne (i.e. outer Melbourne and regional Victoria) with a residence that was under construction or renovation as at 31 December 2023 is treated differently because VRLT only applies to this land from 1 January 2025. The date on which the construction or renovation commenced is deemed to be 31 December 2023. These residential lands will not be regarded as vacant until 31 December 2025. This means they may only be liable for VRLT from the 2026 tax year.

What constitutes renovation?

The renovation must be substantial enough to warrant a building permit, which will trigger the start of the 2-year period when VRLT will not apply.

What if building my residential home takes more than 2 years to complete?

If the Commissioner is satisfied that there is an acceptable reason for the construction or renovation exceeding the initial 2-year period, he can extend it. An acceptable reason is usually something beyond the control of the landowner which delayed the completion of the work necessary for the home to be occupied.

Uninhabitable residences

How does VRLT apply to land with an uninhabitable residence?

Properties with an uninhabitable residence will not be considered vacant for up to 2 years. Therefore, there will generally be 2 years where the tax will not apply to a property that is uninhabitable. Under certain circumstances, the Commissioner can extend this period.

However, residential land outside of inner and middle Melbourne (i.e. outer Melbourne and regional Victoria) with a residence that was uninhabitable as at 31 December 2023 is treated differently because VRLT only applies to this land from 1 January 2025. The date when the residence became uninhabitable is deemed to be 31 December 2023. These residential lands will not be regarded as vacant until 31 December 2025. This means they may only be liable for VRLT from the 2026 tax year.

What is an uninhabitable residence?

Whether a residence is uninhabitable will depend on the nature and state of the residence during the calendar year. Generally, a residence will be considered uninhabitable if the amount of work required to return the residence to a state in which it could be used for residential purposes is significant or the residence is incapable of being used for residential purposes.

If the work required is minimal, the property would be considered capable of being used for residential purposes and will be liable for VRLT if the property has not been used and occupied for 6 months or more. A property will not be considered uninhabitable simply because it does not meet certain minimum standards for rental properties under the Residential Tenancies Regulations 2021.

What if the residence is uninhabitable for more than 2 years?

If the Commissioner is satisfied that there is an acceptable reason for the residence not having been made habitable within the required 2-year period, he can extend it. An acceptable reason is usually something beyond the control of the landowner which delayed or prevented the residence from being made habitable. If the Commissioner is not satisfied that there is an acceptable reason for not being made habitable after 2 years, the land will be considered vacant for the following tax year and liable for VRLT.

Vacancy

What if I allow family and friends to use the property for more than 6 months a year?

If the property is used and occupied as the principal place of residence of a family member or friend for more than 6 months in a calendar year, the property is not considered vacant and is not subject to VRLT.

However, if the property is only used intermittently or on a casual basis throughout the year, the property is considered vacant and liable for VRLT unless a specific exemption, such as the holiday home exemption, applies or there is a bona fide lease or letting arrangement in place.

A lease or letting arrangement made for the sole purpose of avoiding the tax is not considered a bona fide arrangement.

You need to apply for this exemption through our VRLT portal.

What if the property is used and occupied by an employee or employees of the corporate land owner?

If the property is used and occupied as the principal place of residence of an employee for more than 6 months in a calendar year, the property is not considered vacant and is not subject to the tax.

However, if the property is only used intermittently or on a casual basis throughout the year by one or more employees, the property will be considered vacant and liable for the tax unless occupation is under a bona fide lease or letting arrangement(s) and the cumulative period of such occupation is more than 6 months.

A lease or letting arrangement made for the sole purpose of avoiding the tax is not considered a bona fide arrangement.

You need to apply for this exemption through our VRLT portal.

What if I list my property for short term accommodation such as AirBnB or Stayz for more than 6 months? Is it subject to the 6-month occupancy requirement?

Where property is listed or advertised for rent or short-term accommodation, the property must be used for bookings for 6 months or more in a calendar year, regardless of how long it is advertised or listed for.

If it is not used for bookings for 6 months or more in a calendar year, you must make a notification in the portal by 15 January the following year advising that the property was vacant in the previous calendar year.

If you accept bookings for short stays in Victorian property, you may need to pay the short stay levy. 

What if I am away on holidays or for work for more than 6 months in a year and leave my home vacant? Am I subject to VRLT?

No. Land that is exempt from land tax because it is used as the principal place of residence of the land owner, or where the land owner is temporarily absent from their principal place of residence, is not subject to VRLT.

Is vacant property forming part of a deceased estate subject to VRLT?

It depends. If the property was used and occupied as the owner’s principal place of residence immediately before their death, the property is not subject to VRLT for up to 3 years.

If the property was the owner’s or sole shareholder of a landowning company’s holiday home, and a relative of the owner or sole shareholder has a PPR in Australia and continues to use and occupy the home for 4 weeks in the calendar year, the property may continue to be exempt from VRLT for the period outlined immediately above.

Other properties with a deceased owner will generally be subject to VRLT if they are vacant in the calendar year preceding the tax year.

What if a person has moved into a retirement home or residential care facility? Is their home subject to VRLT?

This depends on whether the former principal place of residence meets the exemption requirements under the existing land tax principal place of residence provisions. If the property is exempt from land tax, it will be exempt from VRLT.

What criteria is used to determine whether land is capable of being used as a residential care facility, supported residential service, etc.?

Most of these property types are already defined within the Land Tax Act, as generally they are exempt from land tax. These terms, including the concept of commercial residential premises, are also used in the residential property definition for the foreign purchaser additional duty. The same methodology is used for determining whether land is used or capable of being used as a residential care facility, supported residential service or retirement village.

Requests for advice on whether a property is a commercial residential premises, a residential care facility, supported residential service or retirement village should be directed to the Technical Advice and Review Branch.

Are holiday homes liable?

They can be, although there is an exemption available for properties used by an owner as their holiday home in some circumstances. More information about this exemption, including the conditions which must be met, is provided within the section detailing exemptions.

You need to apply for the holiday home exemption through the VRLT portal.

What if a vacant property is being actively marketed for sale? Is it exempt?

Generally, if a property is vacant for more than 6 months in a calendar year it is subject to VRLT irrespective of whether it is advertised for sale during that time.

If a property changes ownership during the year preceding the tax year, it is not subject to VRLT for that tax year. This means that if a property is sold during the year, it is exempt from VRLT in the following tax year.

However, the change of ownership must occur during the calendar year. It is not enough that the property is available for sale or awaiting settlement as at 31 December. Settlement must take place no later than 31 December.

You need to apply for this exemption through the VRLT portal.

What if I have advertised my property for rent but have not been able to secure a tenant?

VRLT will apply if you are unable to secure a tenant and the property was vacant for more than 6 months in a calendar year. You will need to make a notification via the VRLT portal advising that the property was vacant.

Does the tax apply to residential properties leased through online platforms?

Yes. If a property is leased through any online platform, such as Airbnb or Stayz, it is subject to VRLT if it is unoccupied for more than 6 months in a calendar year. The 6 months does not need to be continuous.

The owner must notify us through the VRLT portal by 15 January in the following year that the property was vacant for more than 6 months. Failure to notify us may result in an assessment being issued with penalty.

Exemptions

Are there any exemptions?

Yes. If your property is exempt from land tax, it is also exempt from VRLT. In addition, there are other exemptions which apply to VRLT. These include exemptions for:

• holiday homes
• apartments/homes/units used for work purposes
• property transfers during the preceding year
• new residential properties
• newly developed properties where ownership is unchanged.

Do I need to apply for an exemption?

Yes. If you want an exemption from VRLT, you must apply via the VRLT portal when you make your vacant residential land notification.

Holiday home exemption

When is a holiday home exempt?

An exemption applies to a property used and occupied by the owner or a vested beneficiary of the trust to which the land is subject as their holiday home for at least 4 weeks (whether continuous or aggregate) in a calendar year.

This exemption is subject to the following conditions:

• The owner or vested beneficiary must have had a different principal place of residence in Australia in the calendar year.
• The Commissioner of State Revenue must be satisfied that the property is a genuine holiday home, having regard to its location and distance between the owner or vested beneficiary’s actual home and the holiday home, as well as the frequency and nature of its use.

An owner or vested beneficiary will only be able to claim the exemption for one holiday home in a calendar year.

Where a holiday home is jointly owned:

• one owner, or the joint owners between them, can satisfy the 4-week occupation requirement
• all joint owners must have a principal place of residence (home) in Australia in addition to their holiday home, but they do not have to own their home.

Additionally, from 1 January 2025, the sole shareholder of a landowning company or trustee of a trust is eligible for this exemption in certain circumstances.

Read more about the holiday home exemption.

Owners, including companies and trustees of trusts, must apply for the holiday home exemption through the VRLT portal at the same time they lodge a vacant residential land notification.

What if family and friends use the property as a holiday home?

From 1 January 2025, if a relative of the owner or the vested beneficiary uses and occupies the property as a holiday home for at least 4 weeks (whether continuous or aggregate) in a calendar year, and all other requirements are satisfied, the holiday home exemption may apply.

Use of the holiday home by friends does not count towards the 4-week occupation requirement.

Which relatives can use the holiday home to fulfil the 4-week requirement?

A relative of the owner or vested beneficiary includes a spouse or domestic partner, (grand) parents, (grand) children of owner/vested beneficiary or partner; brother, sister, niece or nephew of owner/vested beneficiary and their respective partners.

Can periods of use by relatives and owners be aggregated to meet the 4-week requirement?

Yes, the use of the property by different relatives and owners can be aggregated to meet the 4-week occupancy requirement. However, the use cannot be concurrent.

Who is a vested beneficiary?

A 'vested beneficiary' in relation to land held on trust, means a beneficiary of the trust who is a natural person and has a vested beneficial interest in possession in the land or is the principal beneficiary of a special disability trust.

Who is a specified beneficiary?

A ‘specified beneficiary’ of a discretionary trust is defined in the Land Tax Act 2005 to mean a beneficiary who is specifically named in the trust deed or specifically declared in writing pursuant to the trust deed as a beneficiary to or in whom, by the terms of the trust, the whole or any part of the trust income or property may be distributed or vested:

• in the event of the exercise of a power or discretion in favour of the beneficiary (whether or not that power is presently exercisable); or
• in the event that a discretion conferred under the trust is not exercised.

Holiday homes as part of a deceased estate: is the holiday home exemption available if the owner passes away?

From 1 January 2025, the holiday home exemption may continue to apply for a specified period (usually 3 years) after the owner, or sole shareholder of a corporation that owns the home, passes away. The exemption will continue provided a relative of the owner, or in the case of a corporation, a relative of the sole shareholder, owns a PPR in Australia and uses and occupies the holiday home for 4 weeks or more in the calendar year preceding the tax year.

Is the unimproved land contiguous with (adjoins) my holiday home liable for VRLT?