For foreign purchasers of real estate in the state of Victoria, it’s crucial to stay informed about relevant tax obligations to ensure compliance with Australian regulations.

In this article, we’ll be discussing the voluntary notifications required for the Victorian Government’s Absentee Ownership Surcharge and Vacant Residential Land Tax, with a deadline of January 15, 2024.

Absentee owner surcharge

The absentee owner surcharge (AOS) is a tax levied on foreign individuals who own residential properties in Victoria but are not ordinarily residents in Australia. This surcharge is in addition to the standard land tax and aims to address the impact of absentee ownership on the local property market.

From the 2024 land tax year, the AOS has been increased to 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 an absentee owner at 31 December, you must notify the Government before 15 January 2024.

Vacant residential land tax

The vacant residential land tax (VLRT) was introduced to encourage the efficient use of residential properties. This tax targets vacant land that is not being used for residential purposes.

VLRT affects property owners who own a home in middle and inner Melbourne that has remained unoccupied for more than six months of the calendar year (1 January to 31 December).

VLRT is equal to 1 per cent tax on the capital improved value (CIV) of the property. For example, if the taxable property has a CIV of $500,000, the applicable tax will be $5,000.

For VLRT 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.

Penalties for non-voluntary disclosure

You must voluntarily disclose to the Victorian Government that AOS and VLRT 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 VLRT applying to their circumstances must notify the SRO voluntarily before 15 January 2024.

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