Changes to Victorian Land Tax 2025

Victorian Land Tax Changes in 2025: What You Need to Know

Key Changes

From 1 January 2025, Victoria is introducing significant changes to its land tax system. These changes are designed to encourage the development of vacant land and to generate additional revenue for the state government. Here's a breakdown of the key changes:

• Vacant Residential Land Tax (VRLT) Expansion:

  • VRLT will now apply to all vacant residential land across Victoria, not just specific metropolitan areas.

  • The definition of "vacant" is stricter, including properties that are unoccupied for more than six months in a calendar year.

  • This expansion means that holiday homes and other residential properties left unoccupied for extended periods could now be subject to VRLT.

• Progressive VRLT Rates:

  • VRLT rates will increase progressively based on the number of consecutive years a property remains vacant:

    • Year 1: 1% of the Capital Improved Value (CIV)

    • Year 2: 2% of the CIV

    • Year 3 or more: 3% of the CIV

• Extended Exemption for New Builds:

  • The exemption period for newly constructed residential properties has been extended to three years.

  • However, owners must make "genuine and reasonable efforts" to sell the property during this period.

  • After three years, VRLT will apply at a capped rate of 1% until the property is sold.

Impact on Property Owners

These changes will have a significant impact on property owners in Victoria, particularly those who own vacant land or residential properties that are unoccupied for extended periods.

• Landowners with Vacant Land:

  • Owners of vacant land in regional Victoria will now be subject to VRLT.

  • Developers holding land for future development may face increased costs and pressure to expedite projects.

• Owners of Holiday Homes and Investment Properties:

  • Owners of holiday homes and investment properties that are unoccupied for more than six months will be liable for VRLT.

  • This could lead to increased costs and potentially impact rental yields.

What You Need to Do

To ensure compliance with the new land tax rules, property owners should:

1. Review Property Holdings: Assess your property portfolio to identify any vacant land or unoccupied residential properties.

2. Check Exemption Eligibility: If you believe your property qualifies for an exemption (e.g., new construction, genuine efforts to sell), familiarize yourself with the specific criteria and prepare necessary documentation.

3. Monitor Property Usage: Keep track of occupancy periods for your properties to avoid unexpected VRLT liabilities.

4. Seek Professional Advice: Consult with a tax advisor or property professional to understand the implications of the changes and to develop a strategy to minimize tax burdens.

By staying informed and taking proactive steps, property owners can navigate the new land tax landscape and protect their investments.

Disclaimer: This information is intended as a general guide and does not constitute professional tax advice. It is essential to consult with a qualified tax advisor to discuss your specific circumstances.