Natalie Diener – Associate Solicitor, Property and Development
The Victorian Government’s 2021 expansion of Vacant Residential Land Tax (VRLT) from metropolitan Melbourne to Victoria wide comes into effect from 1 January 2025. The VRLT applies to residential properties vacant for more than 6 months in the preceding calendar year and is in addition to any other land taxes incurred on the property.
What is residential land for VRLT
Residential property for the purpose of VRLT is land which is used solely or primarily for residential purposes, noting that this includes land with a residence on it, land which had a residence which has been demolished for a new or renovated residence is being constructed and even land which has a residence which has been uninhabitable for the past two years.
When is residential land considered vacant?
To determine whether a residential property is vacant for the purpose of VLRT, the property will not have been occupied for a period of at least six months in the previous calendar year by either the owner as their principal place of residence, a permitted occupant as their principal place of residence or a tenant.
The VRLT will also apply where in the preceding two years a residential property has not been occupied when construction of a dwelling on residential land has not been completed even where work has been progressing or the residence was uninhabitable.
How much is VRLT
The VRLT is applied at progressive rates depending on the length of time a property has been vacant. The tax is calculated at 1%, 2% and 3% of the capital improved value for the first, second, third and subsequent years respectively that the tax is applied to a property.
Self reporting to the State Revenue Office
The legislation contains an obligation of all landowners of vacant residential land to self report before 15 January each year. The self-reporting portal can be found on the State Revenue Office website. If a property owner does not self report vacant residential property to the Commissioner by 15 January in the first year the tax should apply, the Commissioner may apply a penalty when issuing as assessment which can range from 5% up to 90% of the assessed tax amount payable depending on the circumstances.
The portal also contains a tip-off link for anyone who thinks a property should be incurring the VRLT but has not received a notice.
Exemptions to the VRLT
There are exemptions to the VRLT including any land which is exempt from land tax is also exempt from VRLT, however the reverse does not apply.
Change of ownership
The VRLT will not apply where the property has changed ownership or only became residential land in the preceding year and where the property became residential in the preceding three years and the owner has made genuine and reasonable efforts to sell the land.
Holiday homes
Residential land which is used as a holiday home and occupied by the owner for at least four weeks of the preceding year where the owner of the holiday home has a primary residence located in Australia. The four weeks of occupation for a holiday home can also be satisfied by a relative of the owner, a vested beneficiary or eligible shareholders or beneficiaries of a company or trust which owns the residential land.
Homes for work or business
For residential land owned and occupied for at least 140 days of the preceding year for the purpose of attending work or business and the owner or vested beneficiary of the registered owner has a primary residence in Australia. This exemption does not apply to properties owned by companies, associations or organisations.
What to do now
If you own a residential property in addition to your primary place of residence which is located in Victoria and does not currently have anyone occupying the property, please contact one of our property lawyers on (03) 5445 3333 to determine if you are required to self-report the property for VRLT.