Changes to the Vacant Residential Land Tax – What Holiday Homeowners Need to Know

Written by Kathleen Jess and John Ginnane

The Vacant Residential Land Tax (VRLT) has been in force since 2018 but a recent amendment to the Land Tax Act 2005 (Vic) has broadened its application with important consequences for holiday home owners.

These changes will take effect from 1 January 2025 to 1 January 2026, but assessments will be based on property usage between 1 January 2024 to 31 December 2025, so it is imperative that landowners who are impacted by these changes act quickly to limit their tax liability.

Whereas the VRLT previously only impacted a limited number of metropolitan postcodes, it has now been expanded to apply across Victoria.

Importantly, while the tax exemption for holiday homes has been retained under the new amendment, the exemption only applies where the landowner owns another Australian property that is their principal place of residence.

This means that the holiday home exemption will not apply when the holiday home is owned by a company or (or in most cases) a trust.

Previously, the holiday home exemption required the landowner to spend at least four weeks of the year at their holiday home, but the four-week residency requirement can now be satisfied by either the landowner or a relative of the landowner.

The rate of the VLRT will be 1% of the holiday home’s capital improved value in the first year for non-exempt properties, 2% in the second year and 3% for the third and any subsequent years. Landowners are required to self-report vacant residential properties, with penalties applying for failure to self-report and the State Revenue Office conducting regular monitoring of properties for non-compliance.

Considering that holiday homeowners who hold their holiday homes through a company or trust may face a significantly increased tax burden, they may benefit from seeking advice about transferring their property out of trust or company ownership (although the capital gains tax consequences of doing so should also be considered).

Kathleen Jess specialises in taxation law and would be glad to assist holiday home owners to ensure they are prepared for the expansion of the VLRT regime.