If you own property in Victoria, it’s important that you’re aware of the upcoming changes to the vacant residential land tax (VRLT) starting from 1 January 2025. Even if the VRLT hasn’t applied to you before, you may now be affected. We explain what’s changing and how the changes will affect your property.  

What’s changing with the VRLT? 

Expanded coverage: From 1 January 2025, the VRLT will apply to all residential properties across Victoria, not just those in Melbourne’s inner and middle suburbs. 

Increased tax rates: The tax rate will increase by 1% each consecutive year a property remains vacant: 

  • 1% of the capital improved value (CIV) in the first year 
  • 2% in the second consecutive year 
  • 3% for any subsequent years. 

Tighter VRLT exemption rules: From 2025, some exemptions, such as for holiday homes, will have stricter eligibility criteria. We explain the tighter exemptions below.  

The new, tighter VRLT exemption rules explained  

Holiday homes: 

  • Current exemption: A holiday home might have been exempt if used only during holidays.  
  • From 1 Jan 2025: The exemption criteria for holiday homes will be tougher. Owners must provide substantial proof of using the property as a holiday home for at least 4 weeks per year (continuous or aggregate). 

Companies and trusts owning holiday homes: 
The holiday home exemption has been extended to properties owned by companies and trusts. However, strict eligibility criteria must be met for these entities to qualify for the exemption: 

  • The company or trust must have owned the property continuously since 28 November 2023, with no change in ownership allowed after that date except for transfers between relatives. 
  • At least 50% of ownership must be held by individuals who occupied another property as their principal place of residence in the preceding year. 
  • The owners must provide proof of using the property as a holiday home for a minimum of 4 weeks in the year prior to claiming the exemption.  

Homes under construction: 

  • Current exemption: Properties under construction were exempt for up to 2 years. 
  • New rules: The 2-year exemption will continue, but extensions require more rigorous evidence to justify delays. 

Other exemptions: 

Exemptions for display homes, retirement villages, properties owned by the armed forces, not-for-profits, government entities, and uninhabitable residences (homes unsafe to live in) will also be more strictly defined, requiring additional evidence.  

How should property owners prepare for the upcoming VRLT changes?  

  • Assess your property’s status: Determine if your property is considered ‘vacant’ under the VRLT rules (unoccupied for more than 6 months in a calendar year). Keep in mind that the 6-month period doesn’t have to be continuous.  
  • Check your exemption eligibility: Review the VRLT exemption criteria to see if your property qualifies for any exemptions. Exemptions include properties under construction, certain holiday homes, display homes, homes used for residential care, etc.  
  • Notify the State Revenue Office (SRO): You must notify the SRO of your vacant property by 15 January each year, even if you believe it’s exempt. Use their online portal to lodge your notification. 
  • Be prepared for potential tax liability: If your property is vacant and doesn’t qualify for an exemption, budget for the VRLT in your annual expenses. 

Failure to notify the SRO of your vacant property can result in significant penalty taxes, so staying on top of your obligations is important. 

Don’t wait until 2025 – start preparing for the VRLT changes now to avoid any surprises come tax time. 

Where can I find more information on the VRLT?  

For a detailed explanation of the VRLT, including current exemptions and how the tax is calculated, check out our article ‘Vacant residential land tax explained‘.  

You’ll also find a comprehensive VRLT guide on the SRO’s website.  

Need help understanding the new VRLT legislation?  

Chat with our experienced accounting team  

If you have any questions about how the VRLT changes may impact you, our experienced property tax accountants are here to help. 

You can reach out to us by:   

  • calling us on 03 5221 6399  

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This article was written by Tax and Business Services Manager Michael Rebula.   

Disclaimer: The information provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals.