The vacant residential land tax is assessed by calendar year (1 January to 31 December) and the six months of occupancy do not need to be continuous.
The Victorian Government introduced this tax to help address the lack of housing supply in Victoria.
Where does the tax apply?
Vacant homes in the following council areas may be affected:
Merri-bek (formerly Moreland)
How much is the tax?
This annual tax is set at 1% of the capital improved value (CIV) of taxable land. For example, if a vacant home has a CIV of $500,000, the tax will be $5000.
The CIV of a property is a 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.
Residential property is land that is able to be used solely or primarily for residential purposes, such as a home or an apartment.
It also includes land on which a residence is being renovated or where a former residence has been demolished and a new residence is being constructed.
From the 2020 land tax year, residential land has been extended to include residential properties that have been uninhabitable for two years or more.
Residential property does not include vacant land, commercial residential premises, residential care facilities, supported residential services or retirement villages.
What does 'vacant' mean?
A property is considered vacant if, for more than six months in the preceding calendar year, it has not been lived in by:
the owner, or the owner’s permitted occupant, as their principal place of residence (PPR), or
a person under a lease or short-term letting arrangement made in good faith.
The occupation does not need to be by the same occupant or for a single continuous period, and a beneficiary of a discretionary trust can be a permitted occupant.
It is not enough that the property is available for occupation, such as by listing on a short-term rental website. It must actually have been used and occupied for more than six months.
It is not enough for the property to be used intermittently or on a casual basis by friends or family of the owner. The use and occupation must be either as a PPR or subject to a bona fide lease or letting arrangement.
In addition, homes that are unoccupied for more than six months of the preceding calendar year may be exempt from the tax if:
Ownership of the property changed during that year.
The property became a 'residential' property during that year.
The property became a ‘residential property’ during the previous two calendar years and ownership is unchanged.
The property was used as a holiday home and occupied by the owner for at least four weeks of that year and the owner has a PPR in Australia (homes owned by companies, associations or organisations are generally not eligible for this exemption).
The property was occupied by the owner for at least 140 days of that year for the purpose of attending their workplace or business, and the owner has a PPR in Australia (homes owned by companies, associations or organisations are generally not eligible for this exemption).
From the 2020 land tax year, a vested beneficiary may benefit from the exemptions for holiday homes and properties used for attending a workplace or business. However a beneficiary of a discretionary trust or a unitholder of a unit trust is not eligible to benefit from these exemptions.
Homes undergoing significant renovations or reconstruction will not be considered vacant for up to two years from the date a building permit for the construction or renovation was issued. The Commissioner of State Revenue can extend this period under certain circumstances.
You do not need to notify us about such property.
If you own a property that was unoccupied for more than six months during a calendar year, you are required to notify us about the property by 15 January of the following year using our online portal.
Owners who miss the deadline are encouraged to notify us about vacant property as soon as possible. .
Failing to tell us that you own vacant residential property is a notification default under theTaxation Administration Act 1997. When this happens, you will be liable for penalty tax on the amount assessed in accordance with our revenue ruling on penalty tax and interest. This may be penalty tax of:
5% if you voluntarily tell us about your vacant residential properties before we start an investigation,
20% if you tell us about your vacant residential properties after we start an investigation, and
up to 90% if we believe that you intentionally disregarded the law and hindered our investigation.
Late disclosures are treated more favourably than vacant properties identified through an investigation, if the State Revenue Office is to consider remission of penalty tax.