From 1 January 2025, Vacant Residential Land Tax (VRLT) applies to every vacant residential property across Victoria, not just inner-Melbourne suburbs as in the original 2018 scheme. The tax is 1% of capital improved value (CIV) in year one, escalating to 2% in year two and 3% in year three of continuous vacancy. For a $1.2 million property, that’s $12,000 in year one rising to $36,000 in year three.
This guide covers what counts as vacant, the exemptions, the notification requirements, and the buyer-side consequences when purchasing a property that has been or may become vacant.
What is “vacant” under VRLT?
Under section 34A of the Land Tax Act 2005(Vic), a residential property is vacant if it was unoccupied for more than six months in the preceding calendar year. “Unoccupied” means:
- Not used as the principal place of residence by any person
- Not occupied by a tenant under a residential tenancy
- Not occupied by an authorised occupier
Six months can be aggregated — non-continuous vacancy that totals 180+ days triggers VRLT. A property that’s vacant from January to March, occupied from April to August, then vacant September to December would total around 7 months vacant — VRLT applies.
The escalation rates
| Year of vacancy | VRLT rate | Cost on $1.2m CIV |
|---|---|---|
| Year 1 vacant | 1% CIV | $12,000 |
| Year 2 (continuously vacant) | 2% CIV | $24,000 |
| Year 3+ (continuously vacant) | 3% CIV | $36,000 |
| Cumulative 3-year cost | — | $72,000 |
VRLT is in addition to standard land tax, council rates, water charges, and the absentee owner surcharge (where applicable).
The exemptions
- Holiday home exemption. The property must be occupied by the owner for at least 4 weeks (not necessarily consecutive) per calendar year. Documentary evidence required — utility usage, photos, receipts.
- Genuine renovation. If the property is undergoing renovation that prevents occupation, vacancy is exempt for up to two years (subject to documentary proof).
- Death of owner. Exempt for the calendar year in which the owner dies.
- Genuine sale. Reasonable vacancy during a genuine listed sale period is exempt.
- Care and rehabilitation. Where the owner is temporarily unable to occupy due to medical care.
- New developments. Newly completed dwellings have a defined exemption period (typically 2 years post-completion).
Compliance — notification and assessment
The owner must notify the State Revenue Office (SRO) by 15 January each year if their property was vacant in the preceding calendar year. Failure to notify:
- Penalty interest accrues at 8% pa
- Penalty tax up to 75% of the unpaid VRLT
- SRO can audit retrospectively up to 5 years back
Buyer-side implications
When buying a property that has been vacant or is at risk of becoming vacant:
- Vendor disclosure.Get written confirmation of the property’s vacancy history and any VRLT notifications made.
- Outstanding VRLT. If the vendor has unpaid VRLT, it must be settled at settlement. Adjustments at settlement should reflect any VRLT pro rata.
- Future plans. If you plan to leave the property vacant for an extended period (e.g. holiday home, future renovation), check whether you qualify for an exemption.
- SRO clearance certificate. Order a land tax clearance certificate from the SRO before settlement. It shows any outstanding land tax, VRLT, or absentee owner surcharge.
- Settlement adjustment. VRLT for the year of settlement is apportioned. Special conditions should clarify who pays for which period.
The 2025 expansion — what changed
Originally, VRLT applied only to inner-Melbourne LGAs (16 council areas). From 1 January 2025, VRLT applies to every residential property across Victoria. The expansion adds:
- All outer-Melbourne LGAs
- Regional cities (Geelong, Ballarat, Bendigo, Shepparton, etc.)
- Coastal towns (popular for holiday homes)
- Rural lifestyle properties used as second homes
Holiday homes in coastal and regional areas are particularly affected. A Phillip Island holiday home owned by a Melbourne family and used 4–6 weekends a year was historically not subject to VRLT. From 2025, it is — unless the family meets the 4-week holiday home exemption with documentary evidence.
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