With Vacant Residential Land Tax now operating across Victoria, investors, holiday-home owners and developers must understand their obligations—not simply assume the rules do not apply.
Victoria’s vacant-home tax enforcement has intensified, with hundreds of property owners assessed for unpaid tax and penalties. This article explains the latest enforcement figures, how Vacant Residential Land Tax works in 2026, the exemptions owners should investigate and the important notification steps that could prevent a costly mistake.
By Ravindra Sri Panditharathne (Rav Sri)
Founder | OIEC | Director — Ravs Realtors
27 July 2026
Victoria’s campaign against vacant residential property has entered a more serious enforcement phase.
Newly reported State Revenue Office data shows that 956 potential Vacant Residential Land Tax cases were investigated during the 2024–25 financial year. Of those, 789 resulted in assessments, with authorities seeking approximately AU$38.46 million in unpaid tax and penalties.
That represented a 73% rise in investigations, a 72% increase in assessed cases and an 86% increase in the value assessed compared with the previous financial year. The 789 assessed cases were also equivalent to approximately 17% of the 4,631 properties on which VRLT was paid during the year.
The figures send a straightforward message: leaving a Victorian residential property empty without first understanding the tax rules can now become an extremely expensive oversight.
What changed in one financial year?
2024–25 financial-year figures reported from State Revenue Office data. View the source report.
How Vacant Residential Land Tax Works in 2026
Vacant Residential Land Tax, commonly called VRLT, is a Victorian state tax calculated using a property’s capital improved value—the value of the land, buildings and other improvements.
Since 1 January 2025, the tax has applied to residential properties located anywhere in Victoria when they have been vacant for more than six months during the preceding calendar year, unless an exemption applies.
For most taxable properties, the rate increases according to the number of consecutive years the land has been liable:
- First liable year: 1% of capital improved value
- Second consecutive year: 2%
- Third consecutive year and beyond: 3%
Before 2025, the general VRLT rate was 1%. The progressive rates now make prolonged vacancy considerably more expensive.
A $1 Million Vacant Property
Illustrative annual VRLT based on a capital improved value of $1,000,000.
Who Needs to Notify the State Revenue Office?
An owner generally needs to notify the State Revenue Office when residential land was vacant for more than six months during the previous calendar year.
The current notification deadline is 15 February each year. This deadline was previously 15 January, so owners should ensure they are relying on updated information.
Importantly, the SRO states that owners must make a notification even when they believe the property qualifies for an exemption. Where a previous notification remains accurate, another notification may not be required unless the circumstances have changed. Missing the deadline can lead to penalty tax, and late notifications should be made as soon as possible.
Exemptions Exist—but They Should Never Be Assumed
Potential exemptions include:
- A principal place of residence already exempt from ordinary land tax.
- A qualifying holiday home.
- A property that changed ownership during the previous year.
- Land that recently became residential land.
- Qualifying work accommodation.
- Land incapable of residential development.
- Certain residences under construction, renovation or repair, or which were uninhabitable.
The conditions differ between exemptions. A property being listed for sale, occasionally used by relatives or advertised only for short-term accommodation does not automatically remove the potential liability.
Owners should retain evidence such as tenancy agreements, rental advertising, utility information, travel records, renovation documents, occupancy records and correspondence supporting any exemption application.
More Empty Homes—or Simply Better Detection?
Prosper Australia’s water-use analysis identified 31,890 Melbourne dwellings with no recorded water consumption during 2024, together with a further 69,055 dwellings using less than one-quarter of the amount expected for an average single-person household.
These figures suggest a potentially significant level of empty or underused housing, but water consumption is only a proxy. It does not prove that every identified property is legally vacant or liable for VRLT. Some properties may be exempt, undergoing legitimate works, awaiting occupation or affected by other circumstances.
That distinction matters. Effective enforcement should identify genuine non-compliance without treating every unusual property-use pattern as deliberate tax avoidance.
Foreign Owners May Face a Separate Federal Obligation
Victoria’s VRLT should not be confused with the Australian Government’s separate vacancy fee regime for foreign owners.
Certain foreign owners must lodge an annual vacancy fee return with the Australian Taxation Office within 30 days after the end of the individual property’s vacancy year. The federal fee may apply when a dwelling is not occupied or genuinely available for qualifying residential rental for at least 183 days.
For vacancy years beginning from 9 April 2024, the federal vacancy fee is generally double the relevant foreign-investment application fee. A foreign owner could therefore need to examine both the Victorian and federal regimes.
Reduce Your VRLT Compliance Risk
A Property Should Have a Clear Purpose
For owners, the practical lesson is not that every property must immediately be sold. It is that every investment property should have a documented and commercially sensible purpose.
A completed property sitting empty may produce no rent while still accumulating council rates, insurance, maintenance, land tax and potentially VRLT. In many cases, preparing the home for long-term rental, reviewing the asking rent, improving its presentation or selling the property could be financially stronger than leaving it unused.
Owners should also ensure that their accountant, solicitor, property manager and real estate adviser each understand the property’s actual use. Assuming another adviser has handled the notification can create unnecessary risk.
Rav Sri’s Final View
Victoria’s housing shortage has made vacant properties a major political and regulatory focus. The latest enforcement figures demonstrate that VRLT is no longer a minor tax applying only to a small group of inner-Melbourne investors.
It is now a statewide property consideration requiring annual attention, accurate records and early professional advice.
Property owners should not panic—but they should act before receiving an unexpected assessment. A timely review of the property’s occupancy, exemption eligibility, rental strategy and long-term purpose may protect both the investment and its cash flow.
For a confidential discussion about selling, leasing or repositioning a Victorian property, contact:
Ravindra Sri Panditharathne — Rav Sri
Founder | OIEC | Director — Ravs Realtors
Licensed Victorian real estate professional
REIV Marketer of the Year — 2022 and 2025
Phone: +61 428 192 899
Email: Rav@Ravs.com.au
Website: Ravs.com.au
Book a consultation: Schedule a 30-minute discussion
WhatsApp: Message Rav Sri
