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: 

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: 

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: 

The guidelines set out circumstances where land is not considered vacant, including: 

The Guidelines state that the following factors would not generally support a favourable decision by the Commissioner: 

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. 

Contributor

Dylan Kelly

The post Unimproved land subject to Vacant Residential Land Tax from 1 January 2026 appeared first on SW Accountants & Advisors.

Usual Land Tax Assessment process

Each Council/Shire engages a Licensed Valuer for the purpose of valuing each property in their municipality in respect of:

1. The Capital Improved Value (CIV) – Land plus any improvements
2. Site Value/Unimproved Land Value – Land Only

If you conduct any building activity including obtaining certain permits, the council/shire can issue an Amended Rates Notice at any time.

The Council/Shire will declare a range of rates during their annual budgeting process that will then been multiplied usually by the CIV to determine the annual council/shire rates payable by the land owner.

The rates will vary depending upon the use and the relevant planning scheme that applies to the land. For instance there will generally be different rates per dollar for:

1. Residential Land containing a dwelling
2. Vacant Residential Land
3. Industrial Land
4. Vacant Industrial Land
5. Farm Land
6. Native Vegetation etc.

Objecting a Council/Shire Rates Notice

You usually have 60 days to object to a Council/Shire Rates Notice from the issue date, with most objections being:

• Inappropriate valuation
• Assessed area being incorrect
• Incorrect classification/rate applied
• Property no longer owned etc.

The Council/Shire then provides the following two values to the SRO:

1. Site Value – used to produce the Land Tax Assessments
2. CIV – used to calculate Vacant Residential Land Tax

The 2025 Land Tax Assessments take into account land held at midnight on 31 December 2024 and use the value as prepared by councils in 2024.

Is your Land Tax assessment correct?

You also have 60 days to object to a Land Tax Assessment from the issue date.

In addition, as Land Tax is a self-assessment system you need to consider whether:

1. all the land you or the entity owns is included and the apportionment is correct
2. dimensions and description of the land being valued are correct
3. is any land which you have bought/sold disclosed?
4. if you receive multiple assessments for the same own – for instance individuals name may be spelt wrong etc
5. any exemptions are correctly applied – for instance primary production land, principal place of residence, exempt status etc
6. whether Absentee Owner Surcharge should be or should not be charged
7. whether any Vacancy Residential Land Tax has been correctly assessed
8. land subject to the Trust surcharge has been correctly assessed
9. correct ownership is disclosed – trust as opposed to company etc.

It is often easier to object against the Council Rates Notice  as in essence this information is then fed through to the SRO.

Where the valuation is not appropriate, it is prudent to obtain supporting evidence which in many cases will  include a formal Valuation from a Property Valuer to support a lower and correct valuation.

There is a cost/benefit assessment to be done when lodging an objection.

How SW can help

To assist you we can:

• review the Land Tax Assessments to ensure that you are correct – remembering that it is a self-assessment system
• consider whether the Site Value is appropriate and if not consider lodging an objection.

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