Beware of the expanded Vacant residential land tax from 1 January 2025

The Land Tax net is widening in Victoria for Vacant residential properties

From January 1, 2025, the Victorian Government’s Vacant Residential Land Tax (VRLT) will cover all of Victoria. So if you own a holiday home or any residential property in Victoria that’s left unoccupied for more than six months in a year, you might be facing some unexpected tax bills.  Here’s what you need to know to stay compliant and avoid those surprises.

What Properties Are Affected? 

The VRLT applies to:

• Homes left vacant for over six months.
• Land with a home, even if it’s under renovation or construction (though some construction exemptions apply).
• Properties with a home that’s been uninhabitable for more than two years.

Note: Land without a dwelling, commercial properties, retirement villages, and other non-residential lands are exempt.

What Counts as “Vacant”? 

A property is considered vacant if, for more than six months in the previous year, it wasn’t occupied by:

• The owner (or their permitted occupant) as a principal place of residence.
• A tenant under a lease or short-term rental where the tenant physically stayed.

Even if you list your property on short-term rental sites like Airbnb, it might still be considered vacant if it wasn’t rented out for at least six months. Simply listing it isn’t enough; it needs to be physically occupied.

Who Needs to Declare? 

If your property was vacant for more than six months in 2024, you need to notify the State Revenue Office (SRO) by January 15, 2025. Only one notification is needed per property, even if there are joint owners.

Key Exemptions 

Certain properties are exempt from VRLT, including:

1. Principal Place of Residence: If the property is your main home.
2. Holiday Home: If used for at least four weeks per year and you have another principal residence in Australia.
3. Work Accommodation: Properties used by the owner for at least 140 days per year due to work purposes.
4. Long-Term or Short-Term Rentals: If leased for over six months annually.
5. Change of Ownership: Properties sold in the same year.
6. Development or New Residential Use: Land under active construction is exempt for up to two years.

How Much is the VRLT? 

From January 2025, VRLT rates are progressive, based on how many consecutive years the land is taxed:

• 1% of the property’s Capital Improved Value (CIV) in the first year.  NB This is not the Site or Land value but a higher estimated of value of the total property.  
• 2% in the second consecutive year.
• 3% in the third consecutive year.

Holiday Home Owners: The 4-Week Rule 

If your property is a holiday home, it may be exempt if it’s occupied by you or a permitted occupant for at least four weeks each year. For this exemption:

• Keep detailed records of the dates you or an eligible occupant stayed at the property, such as booking logs or personal calendar entries.
• Retain utility bills or other evidence of use during these periods.

Example: If you use your holiday home for four weeks annually and rent it out on Airbnb for the rest of the year, the property still qualifies for the exemption. This means no VRLT applies as long as you meet the four-week usage requirement.

Short-Term Rental (e.g., Airbnb) Requirements 

For properties rented out short-term, occupancy days are only counted if the property is physically occupied, not just listed. If the property is vacant for more than six months annually, it may incur VRLT. To track and prove occupancy:

• Keep rental records showing each booking, dates occupied, and records of payment.
• Document stays carefully to ensure you meet the occupancy requirement, especially if using Airbnb or similar services.

Record-Keeping Requirements for VRLT Compliance 

To qualify for exemptions, holiday home and short-term rental owners need to keep specific records showing usage. Proper documentation can help you prove that your property meets the VRLT requirements and avoid unintended tax liabilities.

How to Make Your Notification 

You can declare your property’s status through the SRO online portal by 15 January 2025. Make sure you have your SRO customer number or assessment number handy for a quick submission.