Navigating Victoria’s 2026 land tax environment

As 2026 begins, Victorian property owners need to know several important state tax updates. This includes the new short-stay accommodation levy, expanded vacant residential land tax (VRLT) rules, notification requirements for absentee (foreign) owners, and a heightened compliance focus from the State Revenue Office (SRO).

With 2026 land tax assessments just around the corner, these changes bring key obligations and deadlines that warrant close attention. 

Absentee owner surcharge – notification by 15 January 

The absentee owner surcharge (AOS) is an additional land tax imposed on properties owned by absentee individuals or entities (essentially foreign owners of Victorian land). As of 2026, the AOS is a 4% surcharge on the taxable land value, levied on top of regular land tax. It applies broadly to both residential and commercial land holdings.  

15 January 2026 was the cut-off for absentee owners to notify the SRO of their status, if they were an absentee as of 31 December 2025. Every year, foreign owners must declare their absentee status by 15 January so that the SRO can apply the surcharge in the upcoming land tax assessment. If an owner fails to notify but is later identified as foreign, the SRO will back-charge the surcharge and may impose penalties for the late notification. 

It’s worth noting that exemptions from AOS are very limited. Generally, only developers undertaking substantial development projects (which provide economic benefits to Victoria) might obtain a temporary exemption from the surcharge. Passive foreign investors or landlords are unlikely to be eligible for the exemption. Therefore, affected owners should ensure they have notified the SRO on time and factor the surcharge into their investment returns. 

If you’re an absentee owner and did not yet notify for 2026, contact the SRO immediately. Although the 15 January deadline has passed, making a late notification voluntarily may help reduce penalties. 

Short stay levy – first annual returns due 30 January 2026  

The short stay levy applies to short stays in Victoria from 1 January 2025, on bookings that are less than 28 consecutive days (not including the checkout day). The levy of 7.5% of the total booking fee is to be collected and paid by either: 

The first annual short stay levy return is due on 30 January 2026, with owners, booking platforms, and tenants being required to register before lodging their first return if they have a liability. It should be noted that booking platforms do not need to register individual properties. 

Booking platforms and property owners or tenants who accepted short-stay bookings during 2025 must register for the short stay levy and submit their first annual return by 30 January 2026, provided their total booking income did not exceed $75,000. 

Providers whose short-stay accommodation bookings generated more than $75,000 in 2025 are required to lodge quarterly returns, with the next instalment due by 30 April 2026. 

Failure to register and comply with payment obligations may result in the SRO initiating recovery action for any outstanding levy amounts, along with applicable penalties. 

Vacant residential land tax – notification by 15 February & expanded scope  

VRLT is a state tax designed to discourage empty properties and increase housing supply. Since 2018 it has applied an annual tax (1% of a property’s value, increasing to 3% for long-term vacancies) on residential homes in Melbourne that were vacant for more than 6 months in the preceding year. From 1 January 2025, residential houses in regional Victoria are also subject to VRLT.   

Owners of such properties must notify the SRO each year and then pay VRLT on their land tax bill if liable. Owners of vacant residential land in 2025 are required to notify the SRO by 15 February 2026 of the property’s vacancy status. This notification is mandatory even if you believe an exemption applies (e.g. for newly built homes, holiday homes, or other exempt categories). The SRO uses these notifications to issue VRLT assessment notices for the 2026 tax year. Failure to notify the SRO by 15 February may result in penalties being applied. Owners who have already notified that they are exempt (such as under a holiday home exemption) do not need to notify the SRO again, provided their circumstances have not changed.

Perhaps the biggest change is the expansion in the scope of VRLT. From 1 January 2026, VRLT will apply to land in Metropolitan Melbourne that is capable of residential development but has remained undeveloped for at least 5 years. This will apply to land that is vacant and land with a residence that is partly built but has not been occupied. In other words, long-term ‘land banking' will now likely attract VRLT. 

The Commissioner of State Revenue (Commissioner) has a discretion to extend this 5-year period. Broadly, the Commissioner will consider residential land as ‘not vacant’ for a tax year if construction of a residence has not commenced after five years and the owner: 

In considering whether to exercise discretion, the Commissioner may take into account factors such as site access limitations, findings related to cultural heritage, environmental or ecological constraints, extreme weather events, delays in utility connections, and ongoing planning appeals. More information on the factors considered can be found in the Government Gazette. 

Heightened SRO compliance focus in FY2026 

The SRO has significantly ramped up its compliance efforts for the 2025–26 financial year, following a year in which more than 90% of its 13,300+ investigations uncovered non-compliance, resulting in $888 million in assessed liabilities. This year, the SRO is targeting high-risk areas across land tax, vacant residential land tax, and absentee owner declarations, with a particular focus on incorrect exemption claims, undeclared absentee ownership, and failure to notify vacant or undeveloped land. 

Property owners and investors should expect increased scrutiny, especially where land is incorrectly receiving principal place of residence or primary production exemptions, or where VRLT and absentee owner surcharge notifications have not been lodged. The SRO is also closely monitoring properties claiming the holiday home exemption and land held in a trust or by foreign owners. With advanced data-matching tools, the SRO is well-positioned to detect and penalise non-compliance. Early engagement, accurate reporting, and professional advice are essential to avoid reassessments and penalties. 

How SW can help 

Navigating Victoria’s 2026 land tax environment can be complex, with new levies, expanded obligations, and heightened SRO scrutiny. SW can assist you in navigating these obligations by assessing landholdings to determine potential liabilities under the rules, ensuring all relevant notifications are submitted on time, and implementing strategies to minimise exposure to penalties and reassessments. 

Contributor

Blake Trad

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