It’s no surprise Vacant Residential Land Tax (VRLT) is not generating as much tax revenue as the Victorian Government thought.
As The Age reported this week – “Thousands of empty homes are dodging the tax”. The article said the Parliamentary Budget Office estimated 5,000 properties would be hit by the tax. But only 1,779 owners dobbed themselves in and paid up. No surprise really.
VRLT is very hard to police. There is no register of occupied or vacant homes. Only data like power or water use would tip authorities off as to what property sits empty. This is explained in this recent article. But investigating them all would be tedious and expensive.
There are also endless reasons why an apartment or house is vacant for a year or so. If someone is happy (read wealthy) enough to leave a second or third home empty for a year or two, they may also have a legitimate exemption from the tax or be prepared to pay it. Either way the goal is being missed.
The VRLT objective is to get as much housing as possible on the market for sale or rent rather than it sitting idle. It does not seem to be about revenue so much, but it all helps. Last year VRLT only raised $20m. Up from $11.3 million in 2023. Is it really worth the time and cost of creating it? Unless they plan on increasing it of course.
Getting empty homes into the market and occupied is good in theory, but what is the knock-on effect?
The primary source of new homes is via developers. A booming property development market is the unlock for delivering lots of new housing. It is obvious to most, that the government should do everything possible to clear the runway for new projects to take off.
The dizzy labyrinth of process, regulation, cost, risk and government regulation required to complete a property development is frightening. The frustration being experienced by developers, in addition to the cost of construction, is the reason we have a housing shortage.
VRLT is just one more block in the road for property development. Especially with the way it keeps expanding its reach. For every home VRLT has dragged back onto the market, there must be dozens of potential new homes mothballed or stalled.
In Victoria, and in this market, property development is about as hard as it gets right now. The time, cost, risk and skill to take a property through every step required to deliver new housing, is a mine field. It is not unusual for a development to take 5 years to commence construction and then some years after completion to sell the remaining apartments or houses.
It seems odd therefore that the state government would add additional risk and cost to developments. From 2026, VRLT will be expanded even further to catch residential land that has been vacant for over 5 years.
All these added risks and costs get passed on to the home buyers or renters whcih eliminates the original intention of VRLT.
Here are some VRLT fast facts.
To get more details go to the State Government’s FAQ page here.
- It is a tax on Vacant Residential Property defined as:
- Unoccupied for 6 months
- Under construction or renovation for over 2 years
- Uninhabitable for 2 years
- There are exemptions that include:
- Your Principal Place of Residence (PPR)
- Holiday Homes if used for 4 weeks
- Has been sold in the last 12 months
- Newly created Residential land (rezoned)
- Alpine resort land
- It was first introduced in 2018 on just 16 Local Govt Areas in inner Melbourne
- In 2025 it was expanded to all of Victoria
- The tax amount is calculated at 1% of the Capital Improved Value (CIV) increasing by an additional 1% for each year it’s vacant up to 3% of CIV.
- VRLT on a $1 million home would be $10,000 in the first year plus the normal land tax.
