Vacant residential land tax applies to homes in inner and middle Melbourne that were vacant for more than six months in the preceding calendar year. This tax is different to land tax, the absentee owner surcharge and the federal annual vacancy fee.
The vacant residential land tax is assessed by calendar year (1 January to 31 December) and the six months of occupancy do not need to be continuous.
The Victorian Government introduced this tax to help address the lack of housing supply in Victoria.
Where does the tax apply?
Vacant homes in the following council areas may be affected:
- Glen Eira
- Hobsons Bay
- Moonee Valley
- Port Phillip
How much is the tax?
This annual tax is set at 1% of the capital improved value (CIV) of taxable land. For example, if a vacant home has a CIV of $500,000, the tax will be $5000.
The CIV of a property is a value of the land, buildings and any other capital improvements made to the property as determined by the general valuation process. It is displayed on the council rates notice for the property.
What is residential property or residential land?
Residential property is land that is able to be used solely or primarily for residential purposes, such as a home or an apartment.
It also includes land on which a residence is being renovated or where a former residence has been demolished and a new residence is being constructed.
From the 2020 land tax year, residential land has been extended to include residential properties that have been uninhabitable for two years or more.
Residential property does not include vacant land, commercial residential premises, residential care facilities, supported residential services or retirement villages.
What does 'vacant' mean?
A property is considered vacant if, for more than six months in the preceding calendar year, it has not been lived in by:
- the owner, or the owner’s permitted occupier, as their principal place of residence (PPR), or
- a person under a lease or short-term letting arrangement made in good faith.
The occupation does not need to be by the same occupant or for a single continuous period
It is not enough that the property is available for occupation, such as by listing on a short term rental website. It must actually have been used and occupied for more than six months.
It is not enough for the property to be used intermittently or on a casual basis by friends or family of the owner. The use and occupation must be either as a PPR or subject to a bona fide lease or letting arrangement.
In addition, homes that are unoccupied for more than six months of the preceding calendar year may be exempt from the tax if:
- Ownership of the property changed during that year.
- The property became a 'residential' property during that year.
- The property was used as a holiday home and occupied by the owner for at least four weeks of that year and the owner has a PPR in Australia (homes owned by companies, associations or organisations are generally not eligible for this exemption).
- The property was occupied by the owner for at least 140 days of that year for the purpose of attending their workplace or business, and the owner has a PPR in Australia (homes owned by companies, associations or organisations are generally not eligible for this exemption).
From the 2020 land tax year, a vested beneficiary may benefit from the exemptions for holiday homes and properties used for attending a workplace or business. However a beneficiary of a discretionary trust or a unitholder of a unit trust is not eligible to benefit from these exemptions.
Construction and renovation
Homes undergoing significant renovations or reconstruction will not be considered vacant for up to two years from the date a building permit for the construction or renovation was issued. The Commissioner of State Revenue can extend this period under certain circumstances.
You do not need to notify us about such property.
If you own a property that was unoccupied for more than six months during a calendar year, you are required to notify us about the property by 15 January of the following year using our online portal.
Owners who miss the deadline are encouraged to notify us about vacant property as soon as possible. .
Failing to tell us that you own vacant residential property is a notification default under the Taxation Administration Act 1997. When this happens, you will be liable for penalty tax on the amount assessed in accordance with our revenue ruling on penalty tax and interest. This may be penalty tax of:
- 5% if you voluntarily tell us about your vacant residential properties before we start an investigation,
- 20% if you tell us about your vacant residential properties after we start an investigation, and
- up to 90% if we believe that you intentionally disregarded the law and hindered our investigation.
Late disclosures are treated more favourably than vacant properties identified through an investigation, if the State Revenue Office is to consider remission of penalty tax.
The portal allows owners or their representatives to claim an exemption from the tax, change their contact details, and nominate a representative to receive future correspondence about the tax.
Existing State Revenue Office customers can enter their customer information to have their property details pre-populated into the portal, making the notification process quicker.
Our priority is to help property owners pay the right amount of tax at the right time.
If you suspect that a property owner is not complying with their obligations, you are encouraged to contact us with a tip-off.