Did you know that thousands of Victorian property owners face unexpected tax bills for leaving their homes empty?
The Victorian Government’s vacant residential land tax (VRLT) is no longer limited to Melbourne’s inner and middle suburbs.
From 1 January 2025, VRLT applies across all of Victoria. If you own residential land that is unoccupied for more than six months in a year, you may face a significant tax liability.
Are you ready for what that means for your property?
This blog explains what vacant residential land tax is, when it applies, how it’s calculated, and what actions you must take to remain compliant.
What Is Vacant Residential Land Tax?
The vacant residential land tax is a state tax in Victoria applied to residential properties left unoccupied for more than six months in a calendar year.
Introduced in 2018 to boost housing availability in Melbourne’s inner and middle suburbs, it expanded to cover all of Victoria from 1 January 2025.
Unlike land tax, VRLT targets homes capable of residential use, such as houses, units, or flats, but not unimproved land or commercial properties.
Understanding VRLT ensures you avoid penalties and plan property transactions wisely.
Why Was Vacant Land Tax Introduced?
The Victorian Government launched VRLT to tackle housing affordability and rental shortages.
Vacant homes reduce available housing stock, driving up prices and rents.
By taxing these properties, the government encourages owners to make them available for sale or lease.
Property conveyancing experts can assist when selling or leasing vacant properties to comply with VRLT rules.
How VRLT Differs From Other Property Taxes?
| Tax Type | Applied To | Taxable Value Basis | Applies Statewide | Progressive Rate |
|---|---|---|---|---|
| Vacant Residential Land Tax (VRLT) | Unoccupied residential properties for over 6 months | Capital Improved Value (CIV) | From 2025 | Yes(1%–3%) |
| Land Tax | Land holdings above a value threshold | Site value only | Yes | Yes |
| Stamp Duty on Vacant Land | Paid at time of purchase | Purchase price or market value | Yes | No |
| GST on Vacant Land | Certain sales of vacant land | GST-inclusive price | Yes | No |
How VRLT Is Calculated?
Understanding the calculation method is essential for property owners. The tax is based on the capital improved value (CIV) of your property, which includes land, buildings, and capital improvements.
Rate Structure Changes
The most significant change occurred in 2025 when the flat rate system was replaced with progressive rates:
Progressive Rate System (2025 onwards):
- First year: 1% of CIV
- Second consecutive year: 2% of CIV
- Third consecutive year and beyond: 3% of CIV
This means properties that remain vacant for multiple years face increasingly higher tax burdens. The progressive system penalises long-term vacancy more severely than short-term vacancy.
No Minimum Threshold
Unlike land tax, vacant land tax has no minimum threshold.
This means any vacant residential property is liable for VRLT regardless of its value, making it particularly relevant for all property owners, not just those with high-value properties.
What Properties Are Subject To Vacant Land Tax?
Vacant residential land tax applies to various property types, but understanding what qualifies as “residential land” is crucial:
Included Properties:
- Houses with existing homes
- Properties undergoing renovation or construction
- Homes that have been uninhabitable for more than two years
- Individual apartments in serviced apartment buildings
- Holiday homes (unless exempt)
Excluded Properties:
- Unimproved land without homes
- Commercial residential premises
- Residential care facilities
- Retirement villages
- Properties in alpine resorts
- Display homes actively used for commercial purposes
Exemptions Available Under VRLT
Some properties are not subject to vacant land tax. Common exemptions include:
- Principal place of residence
- Holiday homes (if used for at least 4 weeks per year and not rented)
- Properties recently transferred to new ownership
- Properties occupied for business or employment reasons
- Residential properties under renovation or construction for up to two years
- Uninhabitable properties for up to two years
To access a vacant land tax exemption, owners must lodge the relevant application through the portal with supporting documentation.
Construction And Renovation Considerations
Properties undergoing significant construction or renovation receive special treatment. The two-year grace period begins when the building permit is issued, during which VRLT does not apply.
Important considerations:
- Construction must require a building permit
- Commissioner can extend the period for acceptable reasons
- Work must be substantial, not minor repairs
- Grace period applies to uninhabitable properties similarly
GST On Vacant Land And Stamp Duty On Vacant Land
Property owners should be aware of other tax implications:
GST on vacant land may apply in certain circumstances, particularly for commercial transactions or development activities.
Similarly, stamp duty on vacant land considerations vary depending on the transaction type and property use.
When considering capital gains, vacant land implications, owners should factor in VRLT costs as part of their holding costs, which may affect overall investment returns.
What If You Disagree With Your Assessment?
If your VRLT assessment is incorrect and cannot be fixed through a portal change, you may file a formal objection.
This must include your reasons and supporting evidence, and must be submitted within 60 days of the assessment issue date.
Note: You still need to pay your VRLT in full while the objection is processed. If your claim is successful, any overpayment will be refunded with interest.
Require Expert Assistance With Vacant Residential Land Tax?
If you’re unsure how vacant residential land tax applies to your property or need support in checking your assessment, Eagle Peak Conveyancing is here to guide you.
Our conveyancers in Melbourne understand the complexities around vacant land tax, exemptions, and property ownership rules. With clear advice, fixed pricing, and reliable support from contract to settlement, we help you meet your obligations without stress.
