Tax Alert - Reminder of changes to Vacant Residential Land Tax rules in Victoria from 1 January 2025

Lowe Lippmann Chartered Accountants

Reminder of changes to Vacant Residential Land Tax rules in Victoria from 1 January 2025


Background


Vacant residential land tax (VRLT) may apply to residential land that is vacant for more than 6 months in the preceding calendar year (ie. from 1 January 2024 to 31 December 2024). Residential land can include:

  • land with a home on it;
  • land with a home which is being renovated or where a former home has been demolished and a new home is being constructed; or
  • land with a home on it that has been uninhabitable for 2 years or more.


Residential land does not include land without a home on it (sometimes called unimproved land), commercial residential premises, residential care facilities, supported residential services or retirement villages.


The scope of what types of residential property will be exposed to the VRLT rules is being expanded over time, as follows:

The State Revenue Office (SRO) will release more information about unimproved land and VRLT in the short term.


The 6 month period of vacancy does not need to be continuous to trigger the VRLT rules.


VRLT rates & timing


For the year ending 31 December 2024, the VRLT rate is 1.0% of the capital improved value (CIV) of taxable land, which is the value of the land, buildings and any other capital improvements made to the property. The CIV is displayed on the council rates notice for the property.


Unlike land tax, there is no taxable value threshold for VRLT, which means land with a vacant residential property may be liable for VRLT regardless of its CIV.


From 1 January 2025, a progressive rate of VRLT will apply to non-exempt land with a vacant residential property and the rate is based on the number of consecutive calendar years the land has been liable for VRLT, as follows:

The use of the residential land in the calendar year ending 31 December 2024 will determine whether VRLT applies in 2025. For example, if land owned was vacant for more than 6 months during the calendar year ending 31 December 2024, the land owner must make a VRLT notification by 15 January 2025, and if any assessment is required it will be sent by the SRO during February 2025.


VRLT notifications


A land owner must lodge a VRLT notification via the SRO online portal (click here) by 15 January each year if:

  • residential land is vacant for more than 6 months during the calendar year;
  • the land is no longer vacant for more than 6 months during the calendar year;
  • an exemption applies (discussed below); or
  • an exemption ceases to apply/exemption changes.


If a land owner has made a VRLT notification in a previous year and circumstances have not changed, subsequent notification do not need to be made.


VRLT exemptions


If a property is exempt from land tax, it is also exempt from VRLT. In addition, there are four specific VRLT exemptions which apply to:

  1. holiday homes;
  2. apartments/homes/units used for work accommodation purposes;
  3. property transfers during the preceding year; and
  4. new residential land & newly developed properties where ownership is unchanged.


We will consider each exemption here and note any changes to the requirements from 1 January 2025.


VRLT exemption 1: Holiday homes

*A close relative of the owner includes a spouse or domestic partner, (grand) parents, (grand) children of owner/vested beneficiary or partner; brother, sister, niece or nephew of owner/vested beneficiary and their respective partners.


We note that use of the holiday home by friends (and not close relatives) does not count towards the 4-week occupation requirement from 1 January 2025.


VRLT exemption 2: Work accommodation


The work accommodation exemption applies to circumstances where someone may live in regional Victoria or another state or territory and maintain an apartment/townhouse to stay in while they work away from their usual home.


VRLT exemption 3: Property transfers during the preceding year


Properties that change ownership during a calendar year are exempt from VRLT in the following year.


The change of ownership must occur during the calendar year.  It is not sufficient that the property is available for sale or awaiting settlement as at 31 December of the year preceding the tax year. Importantly settlement must take place no later than 31 December.


This exemption remains unchanged after 1 January 2025.


VRLT exemptions 4: New residential land & newly developed properties where ownership is unchanged



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


October 19, 2025
Further guidance on proposed changes to Division 296 from 1 July 2026 Earlier this week, we released a Tax Alert ( click here ) after the Government announced some significant changes to the proposed superannuation rules to increase the concessional tax rate from 15% to an effective 30% rate on earnings on total superannuation balances ( TSB ) over $3 million – known as Division 296. These proposed superannuation rules were set to commence on 1 July 2025, but the Government has now announced significant changes that will delay the start date until 1 July 2026 and apply to the 2026-27 financial year onwards.
October 13, 2025
In response to continuing criticism and significant industry feedback, Treasurer Jim Chalmers has announced substantial revisions to the proposed Division 296 tax. The government has decided not to apply the tax to unrealised capital gains on members superannuation balances above $3 million. The removal of the proposed unrealised capital gains tax is undoubtedly a welcome change. Division 296 was initially set to take effect from 1 July 2025. The revised proposal, effective from 1 July 2026, still imposes an additional tax but now only on realised investment earnings on the portion of a super balance above $3 million at a 30 percent tax rate To recover some of the lost tax revenue, the Treasurer announced a new 40 percent tax rate on earnings for balances exceeding $10 million. It is also anticipated that both tax thresholds will be indexed in line with the Transfer Balance Cap. We will provide more details and guidance on the new proposal as they become available.
October 3, 2025
ATO interest charges are no longer tax deductible – What you can do As we explained in our Practice Update for September, general interest charge ( GIC ) and shortfall interest charge ( SIC ) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years. With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy. Refinancing ATO debt Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities. While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as: GST; PAYG instalments; PAYG withholding for employees; and FBT. However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not. Individuals If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity: Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible. Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction.
More Posts