The Victorian Parliament has passed a range of housing measures. These include the introduction of a tax on vacant residential properties.

Here are the answers to some frequently asked questions about the proposed vacant residential land tax.

  1. What is the vacant residential land tax?
  2. What is meant by "vacant"?
  3. When does the tax start?
  4. Does the tax apply to all residential properties in Victoria?
  5. How much is the tax and how is it calculated?
  6. Are there any exemptions?
  7. When is a holiday home exempt?
  8. When is a residential property used for work purposes exempt?
  9. What if a property changes ownership during a year?
  10. What if a property is converted to residential premises during a year?
  11. How will the SRO know if you have vacant property?
  12. Does the tax apply to properties leased through online platforms?
  13. Can you object to a tax assessment?
  14. Why does the tax only apply to properties in some local council areas?

1. What is the vacant residential land tax?

The vacant residential land tax (commonly referred to as the vacant residential property tax or vacancy tax) is a tax on residential properties in the inner and middle suburbs of Melbourne which are unoccupied for more than six months a year. 

2. What is meant by "vacant"?

A property will be considered vacant if it was unoccupied for more than six months in the preceding calendar year by:

  • The owner, or the owner’s permitted occupier, as their principal place of residence, or
  • A person under a lease or short-term letting arrangement

The six months does not need to be continuous.

3. When does the tax start?

The tax will apply from 1 January 2018 and is based on use and occupation in the preceding year. For example, tax liabilities for the 2018 tax year will based on vacancy in 2017.

4. Does the tax apply to all residential properties in Victoria?

No. The tax will only apply to vacant residential properties located in the following local council areas:

Banyule Melbourne
Bayside Monash
Boroondara Moonee Valley
Darebin Moreland
Glen Eira Port Phillip
Hobsons Bay Stonnington
Manningham Whitehorse
Maribyrnong Yarra

5. How much is the tax and how is it calculated?

This is an annual tax of 1 per cent of the capital improved value (CIV) of taxable land. For example, if the taxable land has a CIV of $500,000, the tax will be $5000. 

The CIV of a property is the value of land and buildings as determined by the general valuation process. The CIV of a property is displayed on the owner’s council rates notice.

6. Are there any exemptions?

Yes. In addition to existing exemptions for land tax purposes, there will be several new exemptions which will apply to the vacant residential land tax. These include exemptions for:

  • Holiday homes,
  • City apartments/homes/units used for work purposes,
  • Property transfers during the year, and
  • New residential properties

7. When is a holiday home exempt?

The holiday home exemption will apply to properties which are occupied as a second home by the owner for at least four weeks in the year.

This exemption will be subject to the following conditions:

  • The land owner must have had a principal place of residence in Australia in the preceding year, and 
  • The Commissioner of State Revenue must be satisfied that the property for which the exemption is being sought is a genuine holiday home

An owner will only be able to claim the exemption in respect of one holiday home in a calendar year.    

8. When is a residential property used for work purposes exempt?

This exemption is designed for properties owned and used by people who stay in the inner and middle suburbs of Melbourne for work purposes, but whose principal place of residence is elsewhere in Australia.

The exemption will apply to properties that are occupied for at least 140 days a year for the purpose of attending the owner’s workplace.

This exemption will be subject to the following conditions:

  • The land owner had a principal place of residence in Australia in the preceding tax year, and
  • The place of work must be in one of the specified local council areas

9. What if a property changes ownership during a year?

Land that changes ownership during the year will be exempt from the tax in the following calendar year. For example, if a property is sold and transferred during 2018, it will be exempt from the tax for the 2019 tax year.

10. What if a property is converted to residential premises during a year?

Land that becomes “residential land” during the year will not be subject to the vacant residential land tax in the following calendar year. For example, if a warehouse is converted into residential apartments during 2018, it will be exempt from the vacant residential land tax for the 2019 calendar year.

11. How will the SRO know if you have vacant property?

Owners of vacant residential properties located within the specified local council area will be required to notify the Commissioner of State Revenue by 15 January in each year, and provide any information that the Commissioner requests. If a property is eligible for an exemption, the land owner will be asked to notify the SRO and advise which exemption applies.

If an owner fails to make a notification by 15 January, it will be a notification default and may be subject to penalty tax under the Taxation Administration Act 1997.

We will conduct monitoring and compliance activities to ensure that vacant residences are being declared as required. Our compliance program includes comparing our data with other state and federal agencies, and conducting investigations into suspected avoidance.

12. Does the tax apply to properties leased through online platforms?

Yes. If a property in one of the specified local council areas is leased through an online platform, it will be subject to the tax if it is unoccupied for more than six months in a calendar year. The six months does not need to be continuous.

13. Can you object to a tax assessment?

After receiving a notice of assessment, an owner has 60 days to object. If the owner is dissatisfied with the objection decision, they have a further 60 days to request a review by the Victorian Civil and Administrative Tribunal (VCAT) or appeal the decision to the Supreme Court.

14. Why does the tax only apply to properties in some local council areas?

The tax is designed to address the number of properties being left vacant across inner and middle suburbs of Melbourne, as well as housing availability, by encouraging owners to make them available for either purchase or rent.