Tax Alert - Expanding the net for Vacant Residential Land Tax in Victoria

Lowe Lippmann Chartered Accountants

Background


For the year ending 31 December 2024, VRLT only impacts properties in 16 of Melbourne’s inner and middle suburbs, which is imposed in addition to any other land tax or surcharge land tax that may apply.


A property is taken to be “vacant” if it has not been lived in for more than six months out of a calendar year, and this does not need to be a consecutive period of occupancy. Determining whether a property is “vacant” is done by considering the use of the land in the year that immediately precedes the relevant land tax year (ie. the use in the 2024 calendar year will determine whether VRLT applies in 2025).



VRLT is an annual tax for vacant land (subject to some exemptions), and for the year ending 31 December 2024, the VRLT rate is 1.0% of the capital improved value (CIV) of taxable land. 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 are the new changes?


The State Taxation Acts and Other Acts Amendment Bill 2023 (Vic) (the Bill) has recently passed both houses of the Victorian Parliament to amend the Land Tax Act 2005 (Vic), and there will be four important changes to the VRLT rules from 1 January 2025 and 2026.


1) Applying VRLT to all vacant residential land in Victoria


For the year ending 31 December 2024, the VRLT only applies to vacant residential land within 16 of Melbourne’s inner and middle suburbs - click here to see current list.


Firstly, these changes will expand the current inner and middle suburbs geographic area to the whole state of Victoria from 1 January 2025.


2) Extending the VRLT to include certain “unimproved land” in Metropolitan Melbourne


For the year ending 31 December 2024, land is not considered vacant for up to two years from the date a building permit is issued for any significant renovation or reconstruction, and this two-year grace period will apply for the majority of Victoria.


Under these changes, land undergoing significant renovation or reconstruction within certain areas of metropolitan Melbourne will not be considered vacant for up to five years from 1 January 2026.


We must note that the “unimproved land” classification is simply vacant land, even without a dwelling of any kind on it.  The five-year period is considered to provide adequate time for an owner of residential land to commence construction of a residence before it is regarded as vacant residential land.


3) Applying VRLT to all vacant residential land in Victoria


For the year ending 31 December 2024, the VRLT rate is 1.0% of the CIV of taxable land (as explained above).


In the eleventh hour of the Bill passing through the Victorian Parliament, the Victorian Green Party members proposed a change to the rate of VRLT to increase each consecutive year the property remains vacant.


Under these changes, the single VRLT rate will be expanded as follows from 1 January 2025:

No. years residential property is vacant Proposed new VRLT rates %
1 year 1.0%
2nd consecutive year 2.0%
3rd consecutive year 3.0%

In other words, if land was liable for VRLT in the preceding tax year (ie. 1 January to 31 December 2024) but not the tax year preceding that tax year (ie. 1 January to 31 December 2023), a VRLT rate of 2.0% will be applied to the land from 1 January 2025.


Furthermore, if land was liable for VRLT in the last 2 preceding tax years (ie. 1 January to 31 December 2023 and 2024), a VRLT rate of 3.0% will be applied to the land from 1 January 2025.


4) Launching a trial to enforce VRLT, rather than rely on self-reporting


The Victoria Government will also launch a trial for a new enforcement system across metropolitan Melbourne, rather than relying on self-reporting and landowners.  The trial, to be led by the Victorian State Revenue Office (SRO), would use utility data (ie. electricity and water usage) to identify homes that are not being used.


This would mean landowners identified by the SRO with potentially vacant properties would be asked provide proof that people live at their residence during the relevant calendar year.


The trial is proposed to start in 2024 with apartment towers and expand in 2025 to include inner and middle suburbs of Melbourne.



Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation


August 6, 2025
Paid parental leave changes have now commenced As from 1 July 2025, the amount of Paid Parental Leave available to families increased to 24 weeks, and the amount of Paid Parental Leave that parents can take off at the same time has also increased from two weeks to four weeks. Superannuation will now also be paid on Government Paid Parental Leave from 1 July 2025, at the new super guarantee rate of 12%, paid as a contribution to their nominated superannuation fund. Parents will also benefit from an increase in the weekly payment rate of Paid Parental Leave, increasing from $915.80 to $948.10 (in line with the increase to the National Minimum wage). This means a total increase of $775.20 over the 24-week entitlement.
July 28, 2025
Contracts often include price variations relating to bonuses / penalties / rebates – why do we need to consider these early? Many revenue streams are covered by AASB 15 Revenue from Contracts with Customers. The core principle of this standard is ‘that an entity shall recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.’ [emphasis added]. To determine what we expect to receive, all elements of the contract that are not fixed need to be reviewed. We need to review contracts for: Volume discounts Rebates Refunds Performance bonuses Penalties Price concessions Once we have identified variable consideration then we need to estimate the amount expected to be received using either: the expected amount using a probability weighted average of the likely outcomes or the most likely outcome. The method chosen is the one deemed to be the best estimate of the expected consideration, and the amounts may be updated at each reporting date. Once the consideration has been determined, the entity recognises only the revenue that is highly probable will occur – this is known as the constraint on revenue recognition. Practically, the requirements discussed above for variable consideration are relevant only where an entity satisfies the requirements for revenue recognition over time and contract crosses a reporting date.  As the estimate of the variable consideration changes, there may need to be a catch-up adjustment on previous revenue recognition for that contract.
July 21, 2025
New Tax Agent Obligations from 1 July 2025 From 1 July 2025, “small” firms of tax practitioners (with 100 or less employees) must ensure they are complying with the eight new Code of Professional Conduct obligations from the Tax Practitioners Board ( TPB ). These new Code obligations were introduced by the Government under the Tax Agent Services (Code of Professional Conduct) Determination 2024. The new Code obligations have already commenced for large tax practitioners (with over 100 employees) from 1 January 2025. As tax agents, Lowe Lippmann Chartered Accountants are committed to upholding our professional and regulatory obligations, including with the Tax Agent Services Act 2009 which includes the Code of Professional Conduct as regulated by the TPB.
More Posts