Unimproved land subject to Vacant Residential Land Tax from 1 January 2026
16/12/2025
Effective 1 January 2026, Vacant Residential Land Tax (VRLT) will apply to unimproved land in metropolitan Melbourne that has remained undeveloped for five consecutive years or more (as of 31 December of the preceding year).
The Victorian Government has released Treasurer’s guidelines outlining limited circumstances where the Commissioner may exercise discretion to exempt landowners from VRLT if construction has not commenced due to acceptable reasons.
What is VRLT and how has it evolved?
Vacant Residential Land Tax is an annual tax which was introduced by the Victorian Government from 1 January 2018 to address the lack of housing supply by encouraging landowners to make their vacant residential properties available for purchase or rent.
From 1 January 2018 to 31 December 2024, VRLT only applied to vacant residential land in Melbourne’s inner and middle suburbs. The residential land was vacant where the land was not used or occupied for more than 6 months in the year. VRLT was calculated as an annual tax of 1% of the capital improved value (CIV) of the land.
Effective 1 January 2025, the State Taxation Acts and Other Acts Amendment Bill 2023 introduced:
- VRLT as applying to land with a vacant residential property on it anywhere in Victoria
- a progressive rate of VRLT based on consecutive years of vacancy. The progressive rates per consecutive years of vacancy are 1%, 2%, and 3% of the CIV.
There are also a number of exemptions from VRLT available to taxpayers. Where the property is exempt from land tax, it is also exempt from VRLT. Several specific exemptions are also available, namely for holiday homes, work accommodations and new residential land.
Upcoming changes effective 1 January 2026
From 1 January 2026, the Victorian Government has further expanded the scope of VRLT, now applying to unimproved land in metropolitan Melbourne if it is:
- in a zone other than a non-residential zone
- has remained undeveloped for a continuous period of 5 years or more
- is capable of residential development.
The 5-year undeveloped period applies retrospectively, so land owned since 31 December 2020 or earlier may be liable to VRLT.
Landowners may apply to the Commissioner to exercise his discretion to extend the 5-year period where construction has not commenced for acceptable reasons. The Guidelines released by the Treasurer outline the acceptable reasons.
Recent guidelines – construction delays
On 17 November 2025, the Victorian Government released guidelines outlining the acceptable circumstances where construction of a residence on the land has not yet commenced.
Residential land on which construction of a residence has not commenced after five years is considered not vacant at the Commissioner’s discretion, if a landowner:
- is genuinely and actively working to commence construction on the land as soon as possible
- could not reasonably be expected to have commenced construction within five years in the circumstances.
The guidelines set out circumstances where land is not considered vacant, including:
- unforeseen restrictions to access land or requirements to undertake indigenous cultural heritage archaeological and/or ecological findings
- extreme weather events
- inadequate infrastructure or utility connections
- prolonged or significant planning appeals, disputes or approvals processes
- availability of specific expertise or personnel
- unforeseen and exceptional circumstances that were beyond the control of the owner or developer, such as pandemics, death of key personnel, or unexpected regulatory changes.
The Guidelines state that the following factors would not generally support a favourable decision by the Commissioner:
- broader economic conditions
- labour shortages
- fluctuations in the economy
- supply chain challenges
- changes to the design of the project
- access to financer.
This is unhelpful for many developers, as these challenges present barriers to progressing the development of the land.
How SW can help
If you own land which comes under the scope of VRLT, you must notify the State Revenue Office (SRO) by 15 February 2026.
Our experts at SW can assist with reviewing your circumstances, advising on VRLT implications, supporting VRLT reviews, and managing applications for exemptions and the Commissioner’s discretion. For support, please reach out to your SW advisor. Our team is ready to help you navigate these changes with confidence.
