Vacant Residential Land Tax (VRLT) in Victoria: What’s Changing in 2025 and How It Affects You

By Ershad Ullah March 2, 2025 | Tags: land tax, Property Investment

It may feel like yet another tax from the Victorian Government, but the Vacant Residential Land Tax (VRLT) has been in place since 2018. This tax applies as an additional levy on properties that remain vacant for more than six months in a year. VRLT is separate from land tax and distinct from both the absentee owner surcharge* and the federal annual vacancy fee*. However, if a property is exempt from land tax, it is also exempt from VRLT.

Vacant Residential Land Tax (VRLT) Rate 2025

From 1 January 2025, a progressive rate of VRLT applies to non-exempt vacant residential land across all of Victoria. VRLT is calculated on the Capital Improved Value (CIV) of taxable land. This is the 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.

VRLT PROGRESSIVE RATES BASED ON CONSECUTIVE TAX YEARS

NUMBER OF YEARS RESIDENTIAL PROPERTY IS VACANT	VRLT RATES %
1 YEAR	1.0% OF CIV OF LAND
2ND CONSECUTIVE YEAR	2.0% OF CIV OF LAND
3RD CONSECUTIVE YEAR	3.0% OF CIV OF LAND

From 1 January 2026, Unimproved residential land in metropolitan Melbourne that has remained undeveloped for at least 5 years and is capable of residential development may attract VRLT from 1 January 2026 onwards.

Vacant Residential Land Tax (VRLT) Exemptions

Exemptions from the Vacant Residential Land Tax (VRLT) apply to:

Principal Place of Residence (PPR) – If the property is your main home, it is exempt.
Change of Ownership – Properties sold during a calendar year are exempt the following year.
New Residential Properties – Land that became residential during the year is exempt the following year.
Newly Converted Properties – Warehouses or other buildings converted into residential use get up to a three-year exemption if ownership remains unchanged and efforts are made to sell.
Holiday Homes – Used by the owner or a vested beneficiary for at least 4 weeks per year, provided they also have a PPR in Australia.
Deceased Estates – Exempt for up to three years after the owner’s death if used by a relative.
Work Accommodation – If the owner occupies the property for at least 140 days per year for work and has a PPR elsewhere in Australia.
Employee Use – If an employee occupies the property as their PPR for more than 6 months, it is exempt.

Holiday Home Exemption: Eligibility Criteria & 2025 Updates

If you own a holiday home in Victoria, you may be exempt from the vacant residential land tax (VRLT) if you stay there for at least 4 weeks each year. You must also have a main home (principal place of residence) in Australia, but you don’t need to own it—you can rent or live with family. If the holiday home has multiple owners, all owners must have a main home in Australia, and at least one of them must stay in the holiday home for 4 weeks each year.

From 1 January 2025, the rules are expanding. Relatives of the owner can now stay in the property for 4 weeks to meet the exemption requirements. Also, properties owned by companies or trusts may qualify under certain conditions. If the owner of the holiday home passes away, the exemption can continue for up to three years, as long as a relative stays in the property for at least 4 weeks each year and has a main home in Australia. If these conditions aren’t met, VRLT will apply.

Example

Ava lives in Singapore and owns a holiday home in Melbourne. In 2023, she stayed in her holiday home for 6 weeks, but since she did not have a principal place of residence (PPR) in Australia, her property was liable for VRLT in 2024.

In 2024, Ava moves to Brisbane, where she rents an apartment as her main home (PPR). She also stays in her Melbourne holiday home for 6 weeks. Because she now has a PPR in Australia and meets the 4-week stay requirement, her holiday home is exempt from VRLT in 2025.

Bonus Tips: Avoid Penalties & Stay Informed

🔹 Notify the State Revenue Office (SRO) to Avoid Fines – Even if you qualify for an exemption, you must notify the SRO if you own vacant residential land. Failing to do so may result in penalties.

🔹 New Concessionary Rate for Unsold Properties (2025 Update) – From 1 January 2025, if a property remains vacant and unsold for three consecutive years, and the owner has made genuine efforts to sell, a reduced 1% VRLT rate may apply instead of the standard VRLT rates.

🔹 Upcoming Changes for Unimproved Land (Effective 2026) – From 1 January 2026, VRLT will apply to unimproved residential land in metropolitan Melbourne if it has been undeveloped for at least 5 years and is capable of residential development.

🔹 Holiday Home Exemption – Expanded Rules (2025 Update) – From 2025 onwards, a relative of the owner or a vested beneficiary can meet the 4-week occupation requirement to qualify for the holiday home exemption. Also, certain corporations and trusts can now claim the exemption under specific conditions.

🔹 Work Accommodation Exemption – Tightened Rules from 2025 – the workplace must be in Victoria for a property to qualify for the work accommodation exemption. Previously, this applied only to specific council areas. Corporate-owned properties do not qualify.

Stay Compliant & Maximise Your Tax Strategy

With the Vacant Residential Land Tax (VRLT) expanding in 2025 and beyond, it’s crucial for property owners in Victoria to understand their obligations, exemptions, and potential liabilities. Whether you own a holiday home, an investment property, or vacant land, staying informed can help you avoid penalties and optimise your tax position.

At Investax, we specialise in property tax planning and compliance, ensuring our clients navigate these changes with confidence. If you’re unsure about how VRLT applies to your property or need expert guidance to minimise your tax burden, contact Investax today.

*Glossary

Federal Annual Vacancy Fee – It is a federal fee or tax (not a State Tax) applicable to foreign property owners. The vacancy fee is calculated based on the foreign investment application fee paid at the time of acquiring the property. The vacancy fee applies if the property is not residentially occupied for at least 183 days (six months) in a 12-month period. [ATO Link]

Learn more in our FAQ section

Absentee Owner Surcharge – If you own property in Victoria, you may be liable for land tax. From the 2024 land tax year, an absentee owner surcharge of 4% applies to Victorian land owned by an absentee owner. This surcharge has increased over time, rising from 0.5% in 2016 to 1.5% between 2017 and 2019, 2% from 2020 to 2023, and now 4% from 2024 onwards. [SRO Link]

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