Navigating Vacant Residential Land Tax changes: What’s different and needs action for 2026?
The Victorian Vacant Residential Land Tax (VRLT) for the 2026 year is determined by the 2025 calendar year, which is drawing to a close. With new unimproved land provisions commencing on 1 January 2026 and existing VRLT rules continuing to apply, this year is not simply a rollover of last year’s position. Stakeholders should review both the new requirements and any changes in circumstances under the existing rules.
Below, we summarise the scope of the different sets of rules, what’s new for 2026 and what actions may be required before the notification deadline.
Failure to comply can result in significant penalty tax and increased scrutiny by the Commissioner of State Revenue going forward.
For further background on these changes, see our earlier insights:
Which rules apply?
| Land type/situation | Applicable rules |
| Vacant residential land with no residence (unimproved) and other relevant conditions apply | New unimproved land provisions (commencing 1 Jan 2026 by reference to the 2025 and prior calendar years) |
| Land with an existing residence | Usual VRLT rules |
| Land where a residence is under construction or renovation | Usual VRLT rules |
| Land with an uninhabitable residence | Usual VRLT rules |
Key points you need to know
Unimproved land provisions
- Unimproved land provisions apply for the first time from 1 January 2026, based on land held during 2025 and earlier.
- Under these provisions, the five-year clock does not only start ticking now. Land held since December 2020 or earlier can be subject to VRLT.
- Land zoned as Urban Growth Zone (UGZ) is excluded from unimproved land provisions.
- The Commissioner may exercise a discretion not to treat land as vacant under the unimproved land provisions where construction has not commenced for acceptable reasons. In considering whether to exercise the discretion, the Commissioner must have regard to guidelines issued by the Treasurer under the relevant legislation. These guidelines have just been issued by the Treasurer on 17 November 2025 and broadly provide that the following factors will be considered in the determination as to whether a residence is to be constructed and whether there is an acceptable reason for construction not having commenced within five years:
- Unforeseen restrictions causing delays due to indigenous cultural heritage, archaeological, and/or ecological findings
- Extreme weather events damaging or adversely impacting land which require remediation before construction can commence
- Inadequate infrastructure or utility connections beyond the control of the owner or developer
- Prolonged or significant planning appeals, disputes or approvals processes
- Availability of specific key expertise or personnel
- Other unforeseen and exceptional circumstances beyond the control of the owner or developer
Disappointingly, the guidelines have only just been issued, mere weeks before the unimproved land provisions go live (despite the fact that the legislation was passed in late 2023, almost two years ago), which deprives various stakeholders of adequate opportunity to consider, plan and position themselves taking into account the Treasurer’s guidelines mandated by legislation.
More concerningly, the guidelines fall well short of providing meaningful utility to many landowners. In particular, the guidelines state that factors such as broader economic conditions, labour shortages, fluctuations in the economy, supply chain challenges, changes to the design of a project and access to finance will not generally support the exercise of the discretion. The guidelines appear to disregard the practical realities of large-scale land development, which often occur in multiple stages to ensure feasibility.
The guidelines also appear internally inconsistent. While they state that unimproved land will only be considered not vacant if the owner is “genuinely and actively working to commence construction on the land as soon as possible, and could not reasonably be expected to have commenced construction within five years,” in most cases construction cannot commence within five years due to a combination of factors, including those the guidelines generally exclude from supporting the exercise of discretion.
We understand that those affected by the unimproved land provisions and seeking the Commissioner’s discretion would need to notify the State Revenue Office and apply for the discretion by the 15 January deadline (or 15 February if draft legislation passes, as noted in our previous update). Until legislation is passed, the 15 January deadline remains in effect.
Land subject to usual VRLT rules
- For land with an existing residence, under construction or renovation, or uninhabitable, usual VRLT rules apply (not the unimproved land rules). However, if there has been any change in circumstances, action may still be required.
Statutory obligation to notify the Commissioner
- For usual VRLT notifications, the process has historically been through a simple portal. However, parties should be aware that the portal and fields may have changed since they last interacted with it. In addition, requests for the Commissioner’s discretion are expected to require written submissions, not via a simple checkbox on the form.
Notification scenarios at a glance
| Scenario | Action required |
| Vacant residential land with no residence subject to new unimproved land provisions (commencing 1 Jan 2026) | Notification by relevant deadline, accompanied by any written request for the exercise of discretion |
| Land disclosed as vacant last year (2025 assessment year based on 2024 calendar year) and either no longer vacant or seeking an exemption for the current year | Notification is still required by the relevant deadline to confirm status change or claim exemption |
| Land not disclosed as vacant last year (2025 assessment year based on 2024 calendar year) or disclosed as vacant with exemption claim and vacant or exemption no longer applies for the current year | Notification required by the relevant deadline |
| No change in circumstances | Action may not be required, but confirm position to avoid errors and ensure that there is sufficient evidence to support any exemption position adopted (for example, evidence of use and occupation of a holiday home for the minimum four-week period during the 2025 calendar year) |
Penalty tax may apply for notification defaults arising due to a failure to notify or update the Commissioner of State Revenue of relevant circumstances.
Action required
Landowners should urgently review their position if they have not done so already. Due to the severely limited nature of the scope of factors indicated by the relevant Treasurer guidelines just issued in respect of the unimproved land provisions, it is vital for landowners of land potentially caught by these provisions to consider their position and next steps. Even where landowners may be able to rely on the factors outlined in the guidelines, the relevant notification to the Commissioner and any application for discretion must be submitted correctly by the relevant deadline. Failure to properly address the VRLT position by the relevant deadline may result in significant penalty tax.
Please contact the authors or your usual Pitcher Partners representative to review your circumstances and determine what further action may be required.
