Vacant land and holiday homes in Victoria may soon face up to a 3% annual tax. With recent legislative changes expanding the scope of the Vacant Residential Land Tax (VRLT), it’s crucial for landowners to stay informed and plan strategically to mitigate potential financial implications.


The Vacant Residential Land Tax (VRLT) was previously introduced from 1 January 2018 by the Victorian Government to impose a 1% annual capital improved land tax in 16 inner and middle Melbourne councils for residential properties that remained vacant for more than 6 months of the year.

However, as previously foreshadowed (Major Victorian property tax reforms – HLB Mann Judd), recent amendments have broadened the reach of the VRLT, affecting all residential properties in Victoria and introducing new considerations for landowners.

As the legislation has now passed as law, and the exposure to the broadened rules depends on land use for the period 1 January 2024 to 31 December 2024, we have prepared this article to summarise the key changes and tax planning considerations.

Key impacts

Here’s a breakdown of the key impacts of the expanded VRLT:

  • Expansion of VRLT Coverage: As of 1 January 2025, the VRLT will apply to all residential properties left vacant for more than six months, regardless of geographic location within Victoria.
  • Increased Tax Rates: The tax rate under VRLT is set to escalate over consecutive years of vacancy as follows:
    • 1 January 2025: 1%
    • 1 January 2026: 2%
    • 1 January 2027: 3%
  • Impact on Holiday Homes: Holiday homes, particularly those owned through entities like family trusts or companies will be impacted as the exemption for holiday homes (broadly where occupied for at least 4 weeks) is limited to ownership in a personal name.
  • Expansion to Undeveloped Residential Land: From 1 January 2026, the VRLT will be expanded to include vacant land in “metropolitan Melbourne” that remains undeveloped for 5 years that is zoned to be capable for development for residential purposes. The extra 1 year deferred start date is intended to assist impacted land owners plan for these changes.

There are however exemptions including for land that is being developed for non-residential purposes, land in a non-residential zone (e.g. commercial, industrial, rural living) and seeking discretionary exemption if there are reasons for the delay in development (e.g. circumstances outside the control of the owner).

What to do now

The VLRT is based on voluntary self reporting to the State Revenue Office. Significant penalties starting at 25% applies once the SRO starts a review and voluntary reporting has not occurred.

In light of these changes, proactive measures are essential and such considerations includes:

  1. Occupancy Planning: Stay mindful of the six-month occupancy requirement and plan accordingly.
  2. Ownership Review for Holiday Homes: Assess ownership structures for holiday homes and explore whether CGT and duty relief may apply to mitigate VRLT exposure.
  3. Development Considerations: Evaluate the viability of developing vacant residential land for either residential or commercial purposes.
  4. Quantify Potential Exposures: Assess potential tax liabilities and prepare for voluntary disclosures to the State Revenue Office.
  5. Strategic Property Portfolio Review: Consider whether retaining impacted properties aligns with overall wealth, investment, and estate planning goals, or if divestment and reinvestment strategies are warranted.

Contact your HLB Mann Judd adviser should you wish to learn more.