Do you own a residential investment property or holiday home? The SRO’s Vacant Residential Land Tax rules may affect you.

Investment Property & holiday home owners need to be aware of tough new rules that may impose an additional tax on the value of their property. Many remain unaware of rules introduced by the Victorian SRO that impose a Vacant Residential Land Tax (VRLT) on residential properties that have been vacant for six months or more during a calendar year. Note this is in addition to Land Tax.

The rules were initially introduced to address the lack of housing supply in Victoria, and were to focus on non-resident buyers who left properties vacant rather than make them available in the rental market. However, the rules have a broader effect and capture holiday homes & some properties under construction, renovation, or vacant for sale.

Expanded new rules are coming into effect for property use from 1^st January 2025 and will mean more holiday homes & second residences are going to be captured. The property location zone expands from just inner & middle Melbourne to all of Victoria, and the rate applied increases from a fixed 1% to increases over consecutive years vacant as 1%, 2% or 3% of the capital improved value.

Where a residential property is vacant for periods of time it is important owners are aware of the rules,  documentation and notifications required to be submitted to the SRO to meet their obligations and to effectively apply any exemptions.

Exemptions available:

• Where there was a change of ownership during the year
• Newly constructed or substantially renovated properties are exempt for up to 2 years

When the owner/s or a vested beneficiary of a trust have a Principal Place of Residence in Australia the following exemptions are also potentially available, Note companies are not eligible:

• Holiday homes used at least 28 days in the calendar year by the owner/vested beneficiary. From 1^st January 2025 this is expanded to include use by relatives.
• Work accommodation used for attending the owner/vested beneficiary’s workplace or conducting business for at least 140 days in the calendar year. From 1^st January 2025 this is limited to workplaces located in Victoria.

Common scenarios where VRLT will apply:

• A holiday home held in a company, or trust (with no vested beneficiary), as the exemption isn’t available to them.
• A property listed for short term rental or holiday letting on an online platform such as Airbnb or Stayz that wasn’t physically occupied for more than 6 months (183 days), regardless that it was advertised as available for the whole year.
• When a tenant or a family member who resides at the property as their Principal Place of Residence vacates within 6 months & the property changes its use to a holiday home but doesn’t meet the exemption requirements.
• When a tenant or a family member who resides at the property as their Principal Place of residence vacates within 6 months & the property is then prepared for sale but doesn’t settle by 31^st.  Note if building works are being carried out first that require a building permit then an exemption for up to 2 years is available.

If these rules potentially affect you & you need assistance please contact our office to discuss. More information can be found on the SRO’s website at www.sro.vic.gov.au/vacant-residential-land-tax 

Contributed by Kyra Gonsal.