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From 1 January 2018, homes located in 16 specific council areas that are left unoccupied for more than 6 months in the previous calendar year, attract the Victorian Government’s vacant residential land tax.

General information

Definitions

Vacancy

Construction and renovation

Capable of being used for residential purposes

Unhabitable residences

Exemptions

Notifying the State Revenue Office 

Paying the tax

Objections

Joint owners

Property clearance certificates (previously known as a land tax clearance certificate)

Transitional arrangements

General information

What is the vacant residential land tax?

The vacant residential land tax (also referred to as the vacant residential property tax or vacancy tax) is a tax on residential properties in Melbourne's inner and middle suburbs which are unoccupied for more than 6 months a year. 

It is a Victorian tax, and is different to land tax, the absentee owner surcharge and the federal vacancy fee for foreign owners of residential dwellings.

Why did the Government introduce this tax?

The Government was concerned about the number of properties being left vacant across Melbourne's inner and middle suburbs and the tax is intended to encourage land owners to make residential properties available for purchase or rent so that Melbourne’s current housing stock is used as efficiently as possible. 

Only vacant residential properties in Melbourne's inner and middle suburbs, where the issue of housing affordability is most pressing, are subject to the tax. 

Do the 6 months have to be continuous? 

No. Provided a property was occupied for an aggregate of 6 months in the preceding calendar year, the vacant residential land tax does not apply for that tax year. 

When did this tax start?

The tax applies from 1 January 2018. It is based on use and occupation in the preceding year. For example, tax liabilities for the 2019 tax year are based on use and occupation in 2018.

Does the tax apply to all residential properties in Victoria?

No. The tax only applies to vacant residential properties located in Melbourne's inner and middle suburbs. Vacant residential properties outside these suburbs are not subject to the tax. 

The vacant residential land tax applies to properties in these local council areas:

Banyule Melbourne
Bayside Monash
Boroondara Moonee Valley
Darebin Merri-bek (formerly Moreland)
Glen Eira Port Phillip
Hobsons Bay Stonnington
Manningham Whitehorse
Maribyrnong Yarra

How much is the tax and how is it calculated?

It 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 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.

Vacant residential land tax calculator

Is there a taxable value threshold?

No. Unlike land tax, there is no taxable value threshold for the vacant residential land tax. This means that a vacant residential property which is in any of the specified council areas may be liable for the tax regardless of its CIV. 

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. 

Definitions

What is meant by 'vacant'?

A property 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 6 months does not need to be continuous.

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. 

For the 2018 tax year, the first year of this tax, homes were considered to have been occupied between 1 January and 30 April 2017. This means for that tax year, homes only needed to be occupied for a further 2 months between 1 May and 31 December to be considered to have been occupied for more than 6 months. 

What is residential property/residential land? 

Residential property is land capable of being used solely or primarily for residential purposes, such as a home or apartment. 

It also includes land on which a residence is being constructed or renovated, where: 

  • the land was capable of being used solely or primarily for residential purposes before the start of construction or renovation
  • on completion of the construction or renovation, the land will be capable of being used solely or primarily for residential purposes
  • from the 2020 tax year, the definition of residential land was extended to include land which has a residence that uninhabitable, and the land is not land on which residence is being constructed or renovated.

Residential land does not include unimproved land (sometimes called vacant land), commercial residential premises, residential care facilities, supported residential services or a retirement village.

What is capital improved value?

The capital improved value of a property is the value of land and buildings which is determined as part of the valuation process. You can find the capital improved value of your property on your council rates notice.

What do the codes on my assessment mean?

The following is a list of codes used on vacant residential land tax 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.

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 the tax. 

If, however, the property is only used intermittently or on a casual basis throughout the year, the property is considered vacant and liable for the tax unless a specific 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.

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.

If, however, 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.

What if I am away on holidays for more than 6 months in a year and leave my home vacant? Am I subject to the vacant residential land tax?

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 the vacant residential land tax. 

Is vacant property forming part of a deceased estate subject to the vacant residential land tax? 

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 vacant residential land tax for up to 3 years. However, non-principal place of residence properties of a deceased estate are subject to the vacant residential land tax if they are vacant for more than 6 months in a calendar year. 

What if a person has moved into a retirement home or residential care facility? Is their home subject to the vacant residential land tax? 

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 the vacant residential land tax. 

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.

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

Generally, if a property is vacant for more than 6 months in a calendar year it is subject to the vacant residential land tax irrespective of whether it is advertised for rent or sale during that time. 

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

However, the change of ownership must actually occur during the calendar year and it is not enough that the property is available for sale or awaiting settlement as at 31 December. 

For example:

John sells his residential property in Glen Eira during 2017 and the title is transferred in the same year. John owns no other property. The property was not John’s principal place of residence. Since John didn't own the property as at 31 December 2017, the vacant residential land tax does not apply to him for 2018. Mary, who purchased the property from John, is also not liable for the 2018 vacant residential land tax. Mary’s liability for the tax in future years will depend on whether the property is vacant. 

Does the tax apply to properties leased through online platforms?

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

For example:

Sunnydaze is a residential property in the Port Phillip council area. It is available for rent all year via an online short term rentals platform. In 2018, it was only let for a cumulative total of 5 months. Sunnydaze is therefore subject to the vacant residential land tax in 2019 because it was vacant for more than 6 months of the preceding year. It does not matter that Sunnydaze was available for rent the whole year.

Construction and renovation

How does the tax apply to properties being constructed or renovated?

Properties being constructed or renovated will not be considered vacant for up to 2 years from when construction or renovation starts. There will, therefore, generally be 2 years where the tax 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, which legislatively is the date construction or renovation starts.

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 the tax 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 start or finish of the work necessary for the home to be occupied.

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 includes premises that:

  • can be occupied,
  • are occupied, or
  • are 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, for example, 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 premises in a minor state of disrepair or in need of minor reinstatement are still considered capable of being occupied as a residence.

It does not include unimproved land with no buildings, which is sometimes called vacant land.

Is an apartment in a serviced apartment building, which is generally leased out, considered ‘capable of being a residence’ 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 the vacant residential land tax legislation. It will be subject to the vacant residential land tax if it is vacant for more than 6 months in a year and meets all the other tests.

Uninhabitable residences

How does the tax apply to land with an uninhabitable residence?

Properties with an uninhabitable residence will not be considered vacant for up to 2 years. There will, therefore, 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.

What is an uninhabitable residence?

Whether a residence is uninhabitable will depend on the particular 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 vacant if it has not been used and occupied for a period of at least 6 months in a calendar year. 

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.

Exemptions from vacant residential land tax

Are there any exemptions?

Yes. In addition to existing exemptions for land tax purposes, there are several new exemptions which apply to the vacant residential land tax. These include exemptions for:

  • holiday homes (homes owned by businesses or trusts are generally not eligible for this exemption)
  • city apartments/homes/units used for work purposes (homes owned by businesses or trusts are generally not eligible for this exemption)
  • property transfers during the preceding year
  • new residential properties
  • newly developed properties where ownership is unchanged.

When is a holiday home exempt?

The holiday home exemption applies to properties used and occupied by the owner or a vested beneficiary of a trust for at least 4 weeks (whether continuous or aggregate) in the 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.

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

From 1 January 2025, if a relative of the owner or the vested beneficiary satisfies the above conditions and uses and occupies the property as a holiday home for at least 4 weeks, the holiday home exemption will apply. For the exemption to apply in 2025, it is the use and occupancy in the 2024 calendar year that is relevant.

Homes owned by companies, associations or organisations are not eligible for this exemption.

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.

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

The holiday home exemption only applies to a property used and occupied by the owner as their holiday home for at least 4 weeks (whether continuous or aggregate) in a calendar year. 

From 1 January 2025, the holiday home exemption will also apply if a relative of the owner or vested beneficiary uses and occupies the holiday home for at least 4 weeks (whether continuous or aggregate) in a calendar year. For the exemption to apply in 2025, it is the use and occupancy in 2024 that is relevant.

When is a residential property used for work purposes exempt?

The exemption applies to properties owned and occupied by the owner or a vested beneficiary of a trust who stay in Melbourne's inner and middle suburbs for work purposes, but whose principal place of residence is elsewhere in Australia.

The exemption applies to properties occupied for at least 140 days a year for the purpose of attending the owner’s workplace.

This exemption is subject to the following conditions:

  • The owner or a vested beneficiary must have had a different principal place of residence in Australia in that year.
  • The place of work must be in one of the 16 specified local council areas.

Homes owned by companies, associations or organisations are not eligible for this exemption.

What if a property changes ownership during a year?

Land that changes ownership during the year is exempt from the tax in the following calendar year. For example, if a property is purchased and transferred during 2018, it is exempt from the tax for the 2019 tax year.

What if a property is converted to residential premises during a year?

Land that becomes 'residential land' during the year is not subject to the vacant residential land tax in the following calendar year. For example, if a warehouse is converted into residential apartments during 2018, it is exempt from the vacant residential land tax for the 2019 land tax year.

What if a property becomes residential property during a year and ownership is unchanged?

Land that becomes residential land during the year is not subject to the vacant residential land tax for up to 2 following calendar years if ownership remains unchanged since becoming residential land. For example, if a warehouse is converted into residential apartments during 2020 and the residential apartments were not sold and transferred until 2022, they are exempt from vacant residential land tax for the 2021 and 2022 land tax years.

How do I claim an exemption?

Owners of exempt homes must use our online portal to claim an exemption. 

Notifying the State Revenue Office

Are land owners required to notify the State Revenue Office or does it identify taxable properties?

Owners of vacant residential properties are required to notify the State Revenue Office by 15 January each year via an online portal. If a property is eligible for an exemption, the land owner is required to notify the State Revenue Office and advise which exemption applies.

If an owner fails to notify the State Revenue Office by 15 January, it is a notification default under the Taxation Administration Act 1997. For details on notification default, please refer to Revenue Ruling TAA-008.

When a notification default occurs, you may be liable for penalty tax on the amount assessed in accordance with Revenue Ruling TAA-007v5

Owners who miss the deadline are encouraged to notify the State Revenue Office about vacant property as soon as possible. Late disclosures are treated more favourably than if vacant properties are identified as the result of an investigation.

Make a notification via our online portal

The State Revenue Office also undertakes monitoring and compliance activities. 

How do I notify the State Revenue Office of a vacant property?

An online portal enables land owners to notify the State Revenue Office of their vacant residential properties, claim exemptions and update their contact details. 

Make a notification via our online portal

How does the State Revenue Office know if I have vacant property?

The State Revenue Office conducts monitoring and compliance activities to make sure that vacant residences are being declared. Our compliance program includes comparing our data with that of other state and federal agencies, and conducting investigations.

Paying the tax 

Who has to pay the tax?

The owner of the property as at midnight on 31 December of the preceding year is liable to pay the vacant residential land tax. 

While the owner of the property is the same as that for land tax purposes, mortgagees in possession and trust beneficiaries are not liable for the vacant residential land tax.

When do I have to pay the tax? 

Land owners who have notified the State Revenue Office and are liable for the vacant residential land tax receive assessment notices early in the year for properties vacant in the preceding year. This assessment notice is separate to land tax assessment notices. Land owners have 60 days to pay their assessment in full. 

How can I pay the assessment?

There are a number of payment options available, including BPAY and credit card. You can also sign up with your financial institution to receive your assessments through BPAY View.

Objections

Can I object to a tax assessment?

After receiving a notice of assessment, an owner has 60 days to object. An objection is a formal process of dispute resolution and must be in writing, with full and detailed grounds of objection, including supporting documents. We give a written decision on the objection. If the owner is dissatisfied with this decision, they have 60 days from the date of service of the decision to request a review by the Victorian Civil and Administrative Tribunal (VCAT) or to appeal the decision to the Supreme Court.

This does not apply to a valuation objection (see below).

What if I disagree with the capital improved value for my property?

You can object to the capital improved value of your land online. You need to object within 2 months of receiving the assessment. If the capital improved value of the property is based on a valuation determined by a Valuation Authority, the objection is forwarded by the State Revenue Office to the relevant valuation authority for determination.

Joint owners

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. 

Property clearance certificates

Does the property clearance certificate include outstanding vacant residential land tax?

Yes. From 2018, the property clearance certificate includes any outstanding vacant residential land tax owing on the property.

Transitional arrangements

How did the tax work in its first year (2018)? 

The tax started on 1 January 2018 and was based on occupation in 2017. To give property owners an opportunity to adjust their residential property vacancy status before they were impacted by the tax, all properties were deemed to be ‘occupied’ for the period 1 January to 30 April 2017 inclusive. This meant a property only attracted the tax in 2018 if it was unoccupied for more than 6 months from 1 May 2017 to 31 December 2017.

For example:

Jane leased out her residential investment property in Hobsons Bay from 1 October 2017. As the property was occupied for at least 2 months during the period 1 May 2017 and 31 December 2017, the property was not liable for the tax in 2018. 

Did a landowner satisfy the 6-month occupancy test if they lived in the property for more than 2 months from 1 May 2017 to 31 Dec 2017? 

Yes, provided the land owner, or their permitted occupier, used and occupied the property as their principal place of residence for at least 2 months during the period 1 May 2017 and 31 Dec 2017. 

The occupancy test is also satisfied if the property was occupied by a natural person pursuant to a lease or short term letting arrangement for more than 2 months in that period.

For example:

Happydaze is a residential property in the Bayside council area. It was available for rent all year via an online short term rentals platform. In 2017, the property was let for one month in January and for a cumulative period of 4 months between July and December 2017. As the property was taken to be occupied for the entire 4 months of January to April and was also occupied for a further period of 4 months between July and December 2017, the property was not vacant and was therefore not liable for the tax. 

Is it correct that if the landowner lived in the property for less than 2 months from 1 May to 31 December 2017, the property was considered vacant and the tax applied? 

If the land owner occupied the property for less than 2 months, the property was considered vacant. This assumed that the property was not let out, under a lease or short term letting arrangement, during the period for more than 2 months.

Last modified: 4 March 2024
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