For owners of Victorian real estate, it is important to be aware of the Victorian Government’s Absentee Ownership Surcharge and Vacant Residential Land Tax as impacted owners are required to make voluntary disclosures by 15 January 2025 or otherwise risk significant penalties.

We summarise the key aspects below.

Absentee owner surcharge

The absentee owner surcharge (AOS) is a tax levied on foreign owners whom own real estate in Victoria but are not ordinarily residents in Australia.

From the 2025 land tax year, the AOS is 4 per cent and applies to Victorian land that is owned by an absentee owner (a natural person absentee, absentee corporation, or absentee trust).

If you are a new absentee owner at 31 December, you must notify the Government before 15 January 2025.

Vacant residential land tax

The vacant residential land tax (VRLT) was introduced to impose an additional rate of tax for residential properties that are left vacant for more than 6 months. Historically, this tax was only levied on properties in certain inner and middle ring suburbs of Victoria.

In the 2025 land tax year, the VRLT is expanding to apply to all Victorian homes that have remained unoccupied for more than six months of the calendar year (1 January to 31 December), unless an exemption applies.

VRLT will now be calculated using a progressive tax rate that will apply to non-exempt vacant residential land based on the number of consecutive tax years the land has been liable for VRLT. For example:

  • First year: The tax rate will be 1 per cent tax on the capital improved value (CIV) of the property. Meaning, if the taxable property has a CIV of $500,000, the applicable tax will be $5,000.
  • Second year: The tax rate will increase to 2 per cent of the CIV.
  • Third year: The rate will increase to 3 per cent of the CIV.

For VRLT to not apply, the property must be a primary place of residence (PPR) or be subject to a bona fide lease arrangement. Mere availability for occupation, such as being listed on a short-term rental website is insufficient. There are other limited exemptions including for holiday homes.

See here for further details of the application and exemptions for the VRLT.

Penalties for non-voluntary disclosure

You must voluntarily disclose to the Victorian Government that AOS and VRLT apply to your circumstances. Failure to do so when investing into the Victorian residential property market may result in the following penalty taxes:

  • 5% of the total assessed amount if you voluntarily let the State Revenue Office (SRO) know you are an absentee owner before they start an investigation; or
  • 20% of the total assessed amount if you tell the SRO after they start an investigation; or
  • Up to 90% of the total assessed amount if the SRO believe you intentionally disregarded the law and hindered their investigation.

Property owners that will have AOS or VRLT applying to their circumstances must notify the SRO voluntarily before 15 January 2025.

This article was co-written by Timm Gavenlock, Senior Tax Consultant at HLB Mann Judd Melbourne.