Vacant residential land tax (VRLT) is a tax that is currently imposed on residential properties in specified councils within Greater Melbourne that remain vacant for 6 months or more. From 2025, it will be extending to all of Victoria. Read on to discover more.

What is considered a vacant property?

Under the VRLT rules, a residential property is considered vacant where the owner of the property or a tenant has not lived in the property for more than 6 months in the preceding calendar year.

Certain exemptions from VRLT exist, including where there was a change in ownership of the property during the particular year or the property is being renovated and is unable to be occupied.

How much is the VRLT tax?

The VRLT commenced on 1 January 2018 and is imposed at 1% of the capital improved value of the property and can be incurred in addition to ordinary land tax liabilities imposed on the landowner. If the property remains vacant for more than 1 year, the rate of VRLT increases up to 3%.

    Extension of VRLT to all of Victoria from 1 January 2025

    From 1 January 2025, the VRLT regime is extending to all of Victoria (including properties outside of Greater Melbourne). The extension of VRLT to all of Victoria will potentially result in holiday homes being caught under the VRLT regime.

    For holiday homes, there is a specific concession within the VRLT rules. The concession is that VRLT will not apply to a holiday home if the owner of the property separately owns a principal place of residence and occupies the holiday home for at least 4 weeks in the preceding year. 

    As originally drafted, the VRLT concession for holiday homes was not available for holiday homes owned in a trust structure (say a discretionary trust).This is because the discretionary trust would no doubt not own a principal place of residence.

    Therefore, for holiday homes owned in a discretionary trust (or other structures such as companies or unit trusts), the Victorian Government has recently introduced amending legislation that will result in a VRLT concession for holiday homes being available to a discretionary trust if a specified beneficiary, or relative of a specified beneficiary of the discretionary trust owns a principal place of residence and occupies the holiday home for at least 4 weeks in the preceding year. 

    This amending legislation will only apply however in relation to holiday homes already owned in a discretionary trust as at 28 November 2023.  Thus, for holiday homes purchased after this date, the holiday home concession from VRLT will not apply when the land is held in a discretionary trust. 

    Contact us

    Wondering how VRLT might affect you? Contact your BG Private advisor or contact our Tax Advisory Partner, Tim Olynyk, on +61 3 9810 0700 or t.olynyk@bgprivate.com.au