Vacant residential land tax 

The vacant residential land tax (also known as vacant residential property tax or vacancy tax) is the residential property tax in the inner and middle suburbs of Melbourne, which is vacant for more than six months a year. This is a Victorian tax, different from the land tax, absentee owners' surcharge and foreign resident owners federal 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. 

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 $800,000, the tax will be $8,000. 

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. 

Please note 2021 vacant residential land tax has been waived as part of the Victorian Government's coronavirus relief measures but you must still notify state revenue office (“SRO”) if your eligible Melbourne residential property was vacant for more than six months in 2020. 

Why does the government levy this tax? 

The owners of vacant properties have effectively withdrawn the supply of habitable properties from the market, thus increasing the pressure on prices and rents. The Vacant Residential Land Tax aims to encourage these owners to buy or rent their properties, so as to make effective use of the existing housing stock in Melbourne. The tax will apply to the inner city and central areas of Melbourne, where the problem of housing affordability is the most urgent. Considering that there are some legal reasons for the vacancy of real estate, some practical exemptions will apply. The tax framework will be negotiated with property groups and communities. 

Exemptions from vacant residential land tax 

Are there any exemptions? 

Homes that are exempt from land tax are also exempt from vacant residential land tax. 

Considering that there are some legal reasons for the vacancy of real estate, some practical exemptions will apply. These include: 

• Vacation homes (houses owned by businesses or trusts are usually not eligible for this exemption), 
• Urban apartments / residences / units for work purposes (residences owned by enterprises or trusts are usually not eligible for this exemption), 
• Property transfer in the previous year, 
• New residential property. 

When can holiday homes be tax-free? 

The holiday home exemption applies to properties occupied by owners for at least four weeks in a calendar year. This exemption is subject to the following conditions: 

• The owner must have different main residences in Australia during the calendar year. 
• The Commissioner of State Revenue must be convinced that the property is a real vacation house. 

Owners can only apply for exemption of one vacation house in a calendar year. Houses owned by companies, associations or organizations do not meet this exemption. 

When can residential properties used for work purposes be exempted? 

This exemption applies to properties owned and inhabited by persons who remain in Melbourne's inner and middle urban areas for work purposes but whose principal residence is elsewhere in Australia. This exemption applies to properties that stay for at least 140 days a year for access to the owner's workplace. This exemption is exempt from the following conditions: 

• The owner must have different main residences in Australia in that year. 
• The workplace must be in one of the 16 designated local council areas. 

Houses owned by companies, associations or organizations do not meet this exemption. 

How to apply for exemption? 

Owners of exempted houses must use online portal to apply for exemption. 

Step 1: Do you need make a notification 

You only need to notify the government about a property that was vacant for more than six months in a calendar year if it is in one of the following municipal council areas: Banyule, Bayside, Boroondara, Darebin, Glen Eira, Hobsons Bay, Manningham, Maribyrnong, Melbourne, Monash, Moonee Valley, Moreland, Port Phillip, Stonnington, Whitehorse, Yarra 

Houses under construction or renovation 

The house will not be considered vacant for two years from the date of issuance of the building or renovation building permit. In some cases, the director of the State Administration of taxation may extend this period. You are not required to notify the government of such property. 

If you have been notified before 

If you have been notified in the previous year and your situation has not changed, no follow-up notification is required. Subsequent notification is required only if: 

• The previously notified property is vacant. 
• The previously notified property is vacant and occupied. 
• Previously notified property is eligible for exemption. 
• The assets were acquired two years before the assessment year. 

 Step 2: Before you make a notification 

Identify whether you are eligible for exemption 

In some cases, houses vacant for more than six months in a calendar year can be exempted from tax. Owners of exempted houses must use online portal to apply for exemption. 

Identify whether you are an existing customer 

You can save your time by pre populating your details in the portal with existing customer information. To do this, you will need your state revenue department customer number and one of the following: 

• The appraisal number in the land tax appraisal notice. 
• The assessment number in the land tax assessment notice for vacant residential buildings. 
• Reference number of the previous vacant residential land tax notice. 
• The correspondence number in the letter about vacant residential land tax. 

If you have received letter about vacant residential land tax, but have not received the evaluation, you can use the communication number on the letter to fill in the property information in advance. 

Specify contact 

The portal allows you to decide who receives vacant residential land tax assessment notices and other tax related letters. You can choose to send the letter to the landowner or authorized representative, such as an accountant or lawyer. If you want to send a letter to an authorized representative, you need to provide their full name and contact information, including e-mail, mailing address and telephone number. 

Step3: Make a notification 

The portal allows you to inform SRO about multiple properties in one submission. However, if you own a property under multiple ownership structures, you need to submit it separately for each ownership structure. For example: 

• If you need to inform SRO of the three properties you share with your partner, you can let us know all three properties in one submission. 
• If you own a property with a partner and you own a property yourself, you need to log in to the portal twice and submit it separately for each item. 
• If you need to notify SRO about the property you own and the property owned by the company or trust, you need to log in to the portal twice and submit it separately. 

Step 4: Update your contact details 

After notification, you can use the online portal to update your contact information or change the way you receive assessment notifications (e-mail or mail). To do this, you need to verify your identity on the welcome page by providing your state revenue department customer number and one of the following: 

• The appraisal number in the land tax appraisal notice. 
• The assessment number in the land tax assessment notice for vacant residential buildings. 
• Reference number of the previous vacant residential land tax notice. 
• The correspondence number in the letter about vacant residential land tax. 

Chang Accounting Advisory Pty Ltd, we are CPA practice and registered tax agent, we could assist our clients about vacant residential land tax. If you or your families or friends need our services, please feel free to contact our team for any assistance. 

This article is for informational purposes only and does not form part of our advice. This article is based on SRO’s vacant residential land tax guidance. Please contact our team if you need any assistance. 

Claire Chang, 0497 131 419, claire.chang@changadvisory.com.au, wechat: clairechang26 

Michelle Cui, 0433 539 870, michelle.cui@changadvisory.com.au, wechat: michellejc