Vacant Residential Land Tax in Victoria: essential information and new rules for unimproved land

Key points

• Expanded Vacant Residential Land Tax (VRLT) rules will apply in the upcoming 2026 VRLT year.
• The criteria for when land will be considered vacant and attract the VRLT differ depending on the nature of the land in question.
• New rules for unimproved land will apply for the first time based on circumstances from the 2025 calendar year.

Landowners should consider their VRLT position for the fast-approaching 2026 VRLT year. Unimproved land may be subject to VRLT for the first time under new rules. This article provides essential information and reminders, including some key watch-outs and suggested next steps for landowners.

Expanded VRLT rules will apply in the upcoming 2026 VRLT year. The criteria for when land will be considered vacant and attract the VRLT differ depending on the nature of the land in question.

Below is a summary of the criteria for:

• “improved” land based on existing rules that were only rolled out to the whole of Victoria last year, which our team has written extensively about here, here and here – these include land on which a residence is being constructed or renovated or land with an uninhabitable residence; and
• unimproved land based on new rules that will apply for the first time based on circumstances from the 2025 calendar year.

Land with an existing residence

Residential land with an existing residence anywhere in Victoria will attract the VRLT where the land is not used and occupied for more than 6 months during the 2025 calendar year by any one or more of the following:

• The owner of land as a principal place of residence of the owner;
• The owner’s permitted occupant as the principal place of residence of the occupant;
• A natural person under a lease or short-term letting arrangement made in good faith and not for the purpose of avoiding the VRLT.

Land on which a residence is being constructed or renovated

Where a residence is being constructed or renovated on land anywhere in Victoria, the land will attract the VRLT if as at 31 December 2025:

• the construction or renovation has not completed, and
• more than 2 years have passed since the date of issue of the building permit for the construction or renovation, unless the Commissioner of State Revenue is satisfied there is an acceptable reason for the works not being completed yet.

Land with a residence that is uninhabitable

Where there is a residence on land anywhere in Victoria where the residence is uninhabitable, the land will attract the VRLT if as at 31 December 2025, the residence has been uninhabitable for 2 years or more, unless the Commissioner is satisfied there is an acceptable reason for the residence not having been made habitable.

Unimproved land

For unimproved Victorian land not within one of the above categories, the land will be regarded as vacant residential land that is liable for the VRLT if the land meets all the descriptions below:

1. The land is within a municipal district of the following Councils:

2. The land is not within the following zones:

3. The land is not solely or primarily used for or ‘under development’ (within the meaning prescribed in the legislation) for a ‘non-residential use’ (by reference to the land use described an Australian Valuation Property Classification in the ranges of 210-299, 310-399, 410-499, 510-599, 610-699, 710-799, 810-899, 910-999).

4. As at 31 December 2025, the land has met the above descriptions for a continuous period 5 years or more. Importantly, even though the rules for unimproved land are new and will apply for the first time in the upcoming assessment period, the counting of the 5-year period can be retrospective. If land owned since December 2020 or earlier has continued to meet the above descriptions, then unless an exemption or discretion applies in favour of the owner, the owner is expected to be liable for the VRLT for the unimproved land in the 2026 VRLT year.

There are various legislative provisions that enable the Commissioner to make a determination or exercise a discretion in respect of various matters to particular land that are either in favour of the owner (i.e. determining unimproved land as not being subject to the VRLT) or adverse to the owner (i.e. determining unimproved land to be subject to the VRLT).

For example, there is an integrity provision that allows the Commissioner to determine that a change in ownership of land does not break the minimum 5-year period if the Commissioner considers that the land was transferred to circumvent the VRLT.

There is also a provision that allows the Commissioner to determine that unimproved residential land is not vacant on the basis that a residence is to be constructed on the land and there is an acceptable reason for the construction not having commenced. In relation to this provision, the legislation stipulates that the Treasurer of Victoria must issue guidelines for the exercise of the Commissioner’s discretion however at the time of writing, the guidelines are not yet publicly available.

We note that currently, there is very little information in relation to the unimproved land provisions available from the SRO’s website and at the time of writing, the SRO’s VRLT webpage (last updated 12 June 2025) provides that “More information about unimproved land and VRLT is coming soon”.

VRLT rate and escalation

Unlike land tax which is imposed on the site value of the land, the VRLT is imposed on the higher Capital Improved Value (CIV) and for properties that remain vacant over consecutive years, the VRLT rate will progressively increase.

For example, if an owner was liable for the VRLT for the first time in the 2025 VRLT year (based on the 2024 calendar year), if the owner is liable for the VRLT again in the 2026 VRLT year, the applicable VRLT rate will be 2%.

The VRLT rate for unimproved land while it meets the relevant descriptions remains at 1% and is not subject to the above escalation.

Exemptions

There are limited exemptions from the VRLT.

A VRLT exemption may be available for a property for the 2026 VRLT year if:

• The property was genuinely used and occupied as a holiday home for at least 4 weeks during the 2025 calendar year and other requirements are satisfied (note: this exemption is not available for trusts and companies for properties acquired after 28 November 2023).
• The property was occupied by the owner for at least 140 days during the 2025 calendar year for the purpose of attending their workplace or business, and the owner has a principal place of residence in Australia.
• Ownership of the property changed during the previous year.
• The property became residential land during the previous year.

The above is not a full list of exemptions available under the legislation. It also does not set out all the requirements for the identified exemptions. If an owner has any doubt about whether an exemption is applicable, advice should be sought. The exemption provisions can be complex and exemption claims will be reviewed by the State Revenue Office (“SRO”). Unsubstantiated claims are likely to be denied.

Notification obligations and SRO investigations

An owner of residential land that is vacant during the 2025 calendar year must notify the SRO by 15 January 2026 using the SRO’s VRLT portal.

The notification is required even if a specific exemption can apply. When completing the notification, the landowner can notify the SRO which exemption the landowner considers is applicable to their circumstances. As noted above, exemption claims will be reviewed by the SRO.

If the landowner would like to rely on the Commissioner’s discretion, for example, in relation to land on which construction or renovation of a residence has taken more than 2 years, the landowner must also engage with the SRO in writing.

The SRO conducts investigations to check compliance with the VRLT rules based on data from various sources, including utility providers and tip-offs from neighbours and other members of the public. Where a VRLT liability is found, unless an exemption applies, the SRO will issue an assessment for the VRLT that should have been paid, plus penalties. Note that there is a new provision that allows the SRO to impose penalty tax at a rate of 50% where a tax default is found to have been caused by recklessness.

What property owners should do

If not already done, property owners should consider their circumstances for the 2026 VRLT year.

Affected owners should act swiftly as the window of opportunity for some options to manage the VRLT position for the 2026 VRLT year is closing fast. Options include:

• Ensuring the property is occupied for more than six months this calendar year by the owner or their permitted occupant as their principal place of residence, or through a genuine lease to an individual. As there currently are just over 6 months left in the current calendar year, owners need to act now if the property has been vacant since 1 January 2025.
• If the property is a holiday home, ensuring it is used by the owner or a relative for at least four weeks this calendar year and that other requirements are satisfied.
• Managing timeliness of construction or renovation of a residence, including in relation to the issue of the relevant permit.

Our experts at Pitcher Partners are able to assist with reviewing circumstances and advising on VRLT implications, preparing and lodging VRLT notifications and applications for exemptions or the Commissioner’s discretion, as well as managing any VRLT reviews commenced by the SRO. Please contact us or your usual Pitcher Partners representative for assistance.