Vacant residential land tax in Victoria, now statewide

For years, vacant residential land tax was something only owners of empty homes in a handful of inner and middle Melbourne suburbs had to think about. That changed on 1 January 2025, when the tax expanded to cover the entire state, including the exact places people buy holiday houses and weekenders. If you are buying anything other than a home you will live in full-time, this is now a tax worth understanding before you sign, not after your first assessment arrives.

What is vacant residential land tax?

Vacant residential land tax (VRLT) is an annual Victorian tax on residential land that sat empty for too much of the previous year. Its purpose is to discourage owners from leaving usable housing idle, by making vacancy expensive, and so nudge properties toward being lived in, leased, sold, or developed. It is separate from ordinary land tax and separate again from council rates; a property can attract VRLT on top of the land tax it already pays.

What counts as "vacant"?

This is the part people get wrong. Land is treated as vacant if, in the previous calendar year, it was not lived in for at least 6 months by the owner or a permitted occupant as their home, or by someone under a genuine lease or a short-term letting arrangement. Two details matter: the 6 months do not have to be continuous, and they do not have to be the same occupant. So a home occupied in scattered stretches that add up to less than half the year can still be caught, even though it never felt "empty" to the owner.

It is now a statewide tax

Before 2025, VRLT applied only to 16 specified council areas in Melbourne. From 1 January 2025 it applies to all residential land in Victoria, which is why holiday-home regions like the coast and the ranges are now squarely inside its reach.

There is a second expansion to know about. From 1 January 2026, VRLT also reaches certain undeveloped land: land in metropolitan Melbourne that has stayed undeveloped for a continuous period of 5 years or more and is capable of residential development. That extends the tax beyond existing houses to raw, developable residential land that has been left sitting.

How much is it?

The tax is calculated on the property's capital improved value (CIV), which is the value of the land plus the buildings and other improvements on it, the same value your council rates notice uses. There is no tax-free threshold. Since 2025 the rate escalates the longer a property stays liable:

• 1 per cent of the capital improved value in the first year the land is liable.
• 2 per cent in the second consecutive year.
• 3 per cent in the third consecutive year, and each consecutive year after that.

Before 2025 it was a flat 1 per cent, so the escalating structure is what makes a persistently vacant property increasingly costly to hold. On a home with a capital improved value of $1.2 million, a first year of liability is 1 per cent of $1.2 million, which is $12,000, rising to $24,000 and then $36,000 if the vacancy continues year after year.

Does it apply to a home I actually live in?

No. A property that is your principal place of residence is exempt, because you are living in it, which is the whole point of the tax. VRLT is aimed at homes left empty, so an owner-occupied house you buy and move into is not the target and is not caught while it remains your home. The tax bites on second homes, investment properties left untenanted, and holiday houses that are barely used.

What if I am buying a holiday home?

Then the holiday home exemption is the provision to understand. A holiday home can be exempt from VRLT if it is used and occupied for at least 4 weeks in the calendar year by the owner (or, since 2025, by eligible relatives such as a spouse, children, siblings, or parents), and those weeks do not have to be consecutive. The catch is that the exemption is not automatic and depends on genuine, documented use, so a weekender you intend to visit only a couple of times a year could fall short of the 4-week test and become liable. How your specific circumstances and usage records would be assessed is a question for the State Revenue Office and your conveyancer, not something to assume.

What if I buy a property that was vacant?

Here the timing of the tax works in a buyer's favour, at least at first. VRLT is assessed on the previous year's use, and there is an exemption for land in the year following a change of ownership, so buying a property generally does not saddle you with a liability for the previous owner's vacancy. But that reprieve is temporary: once the property is yours, its future use is what counts, and if you leave it vacant it can become liable in later years. If the property has been sitting empty, its status is the kind of thing that should be checked in the Section 32 and contract and confirmed with your conveyancer, alongside any adjustment for land tax at settlement.

One practical obligation comes with all of this: an owner of vacant residential land must notify the State Revenue Office each year, by 15 February, even where an exemption applies, and penalties can follow a failure to notify. That reporting duty falls on whoever owns the land, so it becomes yours once you are the owner. As with the rest of this tax, whether it applies to your specific plans is best confirmed with the SRO or your conveyancer rather than assumed.

Sources

• State Revenue Office Victoria, "Understanding vacant residential land tax": the definition of vacant land (not lived in for 6 months of the previous year by an owner, permitted occupant, or person under a genuine lease or short-term letting; the 6 months need not be continuous or the same occupant); the expansion to all Victorian residential land from 1 January 2025 (previously 16 Melbourne council areas); calculation on capital improved value; the notification deadline of 15 February; and the 1 January 2026 extension to metropolitan Melbourne land undeveloped for a continuous 5 years or more and capable of residential development. https://www.sro.vic.gov.au/owning-property/vacant-residential-land-tax/understanding-vacant-residential-land-tax
• State Revenue Office Victoria, "Vacant residential land tax (current rates)": the escalating rate from the 2025 tax year of 1 per cent of capital improved value in the first year, 2 per cent in the second consecutive year, and 3 per cent in the third and subsequent consecutive years (a flat 1 per cent applied before 2025). https://www.sro.vic.gov.au/about-us/rates-and-statistics/current-rates/vacant-residential-land-tax-current-rates
• State Revenue Office Victoria, "Exemptions from vacant residential land tax": the holiday home exemption (used and occupied for at least 4 weeks in the calendar year, not necessarily consecutive, by the owner or eligible relatives) and the exemption for the year following a change of ownership. https://www.sro.vic.gov.au/owning-property/vacant-residential-land-tax/exemptions-vacant-residential-land-tax

Sources verified 18 August 2026. Vacant residential land tax rates, exemptions, and notification dates are set by legislation and can change; whether the tax applies to a specific property and use must be confirmed with the State Revenue Office or your conveyancer before relying on anything here.