At DY Conveyancing Melbourne, we understand that purchasing a property is a significant decision. The new reforms to the Vacant Residential Land Tax (VRLT), effective January 1, 2025, are crucial for all property investors in Victoria.

This article provides a detailed breakdown of the new rules, helping you understand their impact and prepare accordingly.

What is the Vacant Residential Land Tax?

The Vacant Residential Land Tax is a government tax on residential properties that have been vacant for more than six months in a calendar year. Its purpose is to encourage homeowners to bring empty properties onto the market to help ease the housing shortage.

Previously, the tax was only levied in Melbourne’s inner city and specific local government areas, but the new regulations will fundamentally change this.

Key Changes for 2025

The core changes under the new regulations are a widened scope of application and an increase in the tax rate.

1. The Tax Now Applies Across All of Victoria

From 2025, the tax’s scope will expand from its previous 16 local government areas to the entire state of Victoria. This means that even if your property is located in a regional town or rural area, you may be subject to the tax if it meets the vacancy conditions.

2. A New Progressive Tax Rate

The new rules introduce a progressive tax rate, which increases based on the number of consecutive years a property remains vacant. The tax will be calculated as a percentage of the property’s Capital Improved Value (CIV):

• First year vacant: 1%

• Second consecutive year vacant: 2%

• Third consecutive year and beyond: 3%

Who Will Be Affected?

This new policy will primarily affect the following types of property owners:

• Regional Victorian homeowners: If you own a vacant investment property or holiday home in regional Victoria and it remains unoccupied for more than six months in a year, you may be affected.

• Owners of vacant off-the-plan or new properties: If a newly purchased home is not occupied or rented out for a long period after settlement, it may also face the tax.

• Homes vacant due to renovation or sale: Although there are exemptions, it is still crucial to monitor the vacancy period closely.

How to Comply with the New Rules

Property owners should take immediate action to ensure compliance and avoid unnecessary tax payments.

1. Understand the exemptions: The new rules retain some exemptions. For example, properties may be exempt under specific conditions if the owner is deceased or hospitalized, or if the property is undergoing new construction, is for sale, or is waiting to be rented. Be sure to understand and meet the relevant conditions.

2. Manage property usage: If you own a holiday home, ensure it is occupied or rented out for at least six months a year.

3. Seek professional legal advice: The rules regarding the vacant tax are complex, and the conditions for exemptions vary. DY Conveyancing Melbourne can provide proper legal guidance when dealing with property sales, purchases, or leases.

Your Next Step: Ensure Compliance and Mitigate Risk

The implementation of Victoria’s new VRLT rules places a higher compliance burden on all property investors. We offer professional legal advice and fixed-fee conveyancing services to help you fully understand your legal and tax responsibilities at every step of your property transaction.

To learn more about Victoria’s property laws or to get professional conveyancing services, contact DY Conveyancing Melbourne today to ensure your property investment journey is seamless and secure.