From 1 January 2025 VRLT will apply to the whole of Victoria and the application of VRLT will depend on an owner’s use and occupation of residential land for the previous calendar year. So, on 1 January 2025, an owner’s use and occupation of residential land for 2024 will determine if the VRLT will apply.
The VRLT is payable when a residential property is vacant for more than 6 months in the previous calendar year, unless an exemption applies. If the property is rented out for at least 6 months of the year, the tax won’t apply (conditions apply).
In summary, the exemptions are:
- Holiday home exemption. Where a property is used and occupied by the owner (natural person) or their relative for at least 4 weeks in the previous calendar year (continuous or aggregated). The owner must own a residential property that they use as their principal place of residence, and the exemption only applies to one holiday home. The Government has indicated that this exemption may be extended to holiday homes not owned by natural persons (company or trust).
- Work accommodation exemption. Where a property is used and occupied by the owner for at least 140 days in the previous calendar year (continuous or aggregated) for the purpose of attending their workplace or conducting business.
- Change of ownership exemption. Where ownership changes during the previous calendar year (eg sale).
- New residential land exemption. Where land first becomes residential in nature.
Whether these exemptions apply depends on the facts in each case, such as whether a property can be characterised as a holiday home where factors to be considered include the property’s location and its distance from the owner’s principal place of residence.
VRLT rates
The VRLT applies in addition to land tax. It applies to the capital improved value (CIV) (not just the site value). The CIV is found on the council rate notice. The rate increases each consecutive tax year where tax applies to the land – capped at 3 years.
Rates:
Year 1 = 1% of the CIV (for a property with CIV of $1,000,000 the VRLT is $10,000)
Year 2 = 2% of the CIV (for a property with CIV of $1,000,000 the VRLT is $20,000)
Year 3 onwards= 3% of the CIV (for a property with CIV of $1,000,000 the VRLT is $30,000)
Vacant Land 2025
From 1 January 2026, the VRLT will apply to vacant undeveloped residential land (ie land that doesn’t have a residence on it, but is capable of residential development) and has been owned by the same owner and remained undeveloped for at least 5 years. At this stage only undeveloped residential land in metropolitan Melbourne is captured. The same rates apply (1% year 1 up to 3% for year 3 on).
Exemptions will apply where the land is currently being developed (for 2 years after a building permit has been granted), or the land is contiguous to a principal place of residence.
For assistance with the VRLT and other property and conveyancing issues, contact Fleur Craig of Armour-Craig Legal on (03) 5636 4986 or fleur@armourcraiglegal.com.au.