Victorian Vacant Residential Land Tax: What Property Owners Need to Know

Future Accounting
2 minutes ago
4 min read

Victorian Vacant Residential Land Tax is a Victorian state-based tax that can have a significant financial impact on property owners if it is not properly managed. The tax is separate from normal land tax and can apply even when a property generates no income. Understanding how Victorian Vacant Residential Land Tax works, when it applies and what needs to be reported is essential for anyone who owns residential property in Victoria.

What is Victorian Vacant Residential Land Tax

Victorian Vacant Residential Land Tax is designed to encourage residential properties to be lived in rather than left unused. The tax applies when a residential property is vacant for more than six months in a calendar year. Where this occurs, the State Revenue Office may impose Victorian Vacant Residential Land Tax in addition to any normal land tax obligations.

What properties does Victorian Vacant Residential Land Tax apply to

Victorian Vacant Residential Land Tax applies to residential land that is capable of being used as a residence and is vacant for more than six months in a calendar year.

This includes houses, apartments, units and townhouses. A property is generally considered vacant if it is not occupied as a principal place of residence, rented under a genuine lease or used in a way that qualifies for a specific exemption.

How Victorian Vacant Residential Land Tax differs from normal land tax

Normal land tax is based on the total value of a person’s landholdings and is subject to thresholds and progressive rates. Victorian Vacant Residential Land Tax is different.

Victorian Vacant Residential Land Tax applies to individual properties, has no tax-free threshold and is charged at a flat rate. Importantly, it can apply even where no normal land tax is payable, meaning some owners who have never paid land tax before may still be caught.

How Victorian Vacant Residential Land Tax is calculated

Victorian Vacant Residential Land Tax is calculated at a rate of two per cent of the property’s Capital Improved Value. The Capital Improved Value is generally the same value used for council rates and reflects both the land and improvements.

For example, a property with a Capital Improved Value of nine hundred thousand dollars may attract Victorian Vacant Residential Land Tax of eighteen thousand dollars for the year.

Why the cost of Victorian Vacant Residential Land Tax can be significant

Victorian Vacant Residential Land Tax is not a one-off cost. If a property remains vacant, the tax applies every year. Because it is calculated as a percentage of value, the amount payable can increase over time as property values rise.

An eight hundred thousand dollar property may attract sixteen thousand dollars per year. A one million dollar property may attract twenty thousand dollars per year. Over several years, this can result in tens of thousands of dollars in additional holding costs, on top of council rates, insurance, maintenance and normal land tax.

What happens if a property remains vacant year on year

Each calendar year is assessed separately. If a property continues to be vacant for more than six months, Victorian Vacant Residential Land Tax will continue to apply. There is no cap on the tax and no automatic relief simply because it has already been paid in a prior year.

In addition, some exemptions are temporary. New build exemptions, renovation exemptions and deceased estate exemptions can expire. Once an exemption ends, a property that remains vacant may immediately become subject to the tax.

If a property owner fails to notify the State Revenue Office and the vacant status is later identified, the tax can be backdated and penalty tax and interest may apply. At that point, the issue becomes a compliance risk as well as a financial one.

Key exemptions from Victorian Vacant Residential Land Tax

There are a number of exemptions available, including where the property is used as a principal place of residence, qualifies as a genuine holiday home, is newly constructed and held for sale or rent, is uninhabitable due to substantial renovations, or forms part of a deceased estate.

Exemptions are not automatic and must be actively claimed. Owners must still notify the State Revenue Office even where an exemption applies.

What property owners need to do

Property owners should review how each residential property is used every year. If a property has been vacant for more than six months, or if an exemption applies, the State Revenue Office must be notified.

This applies even where no tax is ultimately payable. Proactive review and reporting can prevent unexpected assessments, penalties and interest.

When you must notify the State Revenue Office

Property owners must notify the State Revenue Office by fifteen January following the relevant calendar year.

For example, if a property was vacant at any point during 2025, the notification deadline is 15th January 2026. This deadline applies whether Victorian Vacant Residential Land Tax is payable or an exemption is being claimed.

How we can help

Victorian Vacant Residential Land Tax is an area where many property owners are exposed without realising it. The cost of getting it wrong can be significant, particularly where a property remains vacant over multiple years.

We work closely with property owners, investors and families to assess exposure to Victorian Vacant Residential Land Tax, identify available exemptions and manage State Revenue Office reporting obligations. If you would like clarity and confidence around your property tax position, we encourage you to make an appointment with our team so we can help you stay compliant and avoid unnecessary costs.

Disclaimer  

This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.  

Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder 

Liability limited by a scheme approved under professional standards legislation.