5 things you need to know about land tax in 2024

As you would likely be aware from the popular media, there are some significant changes to the Victorian land tax landscape in 2024. Unfortunately, the complexity of the legislation and the messaging coming from the Government and Opposition can mean it’s difficult to work out what those changes mean in a practical sense.

We cut through the confusion and explain (in simple terms) the things you need to have on your radar going into the new year.

1. Expansion of VRLT across Victoria

The vacant residential land tax (VRLT) regime is being expanded to apply throughout Victoria. 

Introduced at the start of 2018, the VRLT regime originally only applied to properties in inner and middle Melbourne (ie. properties in certain specified local government areas within a ring around the CBD). The tax is payable for a calendar year when the property was vacant for more than 6 months in the previous calendar year.  Owners have a positive obligation to notify the State Revenue Office if that is the case.

From 1 January 2025, the catchment area for VRLT has been expanded to the whole of Victoria. This means that the way the property is used throughout 2024 will determine whether VRLT is payable for the 2025 year. 

The exemptions from VRLT can be highly technical, and care should be taken in relying upon general advice or media summaries. The main exemptions are:

  • The holiday home exemption, which is now available for properties used and occupied by any of the following as their holiday home for at least four weeks in a calendar year:
    • the owner or a relative of the owner (if the owner is an individual); or
    • a vested beneficiary or a relative of the vested beneficiary (if the owner is a trust).
      It is important to note that this exemption is not currently available for properties owned by an organisation or association (or trusts without a vested beneficiary) – so if you hold your holiday home in a company or trust, be aware that VRLT could apply from next year. The Government has flagged that there may be some change forthcoming in this area later this year, but as there is no specific detail of what is planned or when, owners would be wise to make their plans on the basis of the current laws.
  • The work accommodation exemption, which is available for properties used and occupied by the owner (or if the owner is a trust, by a vested beneficiary) at least 140 days (whether continuous or aggregate) in a calendar year for the purpose of attending their workplace or conducting business. Note that this exemption is also not available for properties held in a company structure.
  • The change of ownership exemption, which applies to any property which changed ownership (ie. title was transferred) during the previous calendar year.
  • The new residential land exemption, which can now be available for a period of up to three years after the land first becomes residential in nature (subject to certain requirements).

Action to take: If you own a residential property which is currently vacant or used for less than six months cumulatively each year, consider whether it could qualify for any of the exemptions. If not, you may wish to look at the options to ensure that it is occupied for more than six months this year – for example, by leasing it to a residential tenant.

2. Increase in the VRLT rate

From 1 January 2025, a new, progressive, rate of VRLT will apply based on the number of consecutive tax years the land has been liable for VRLT. 

Previously, VRLT was fixed at 1% of the property’s capital improved value (CIV). Under the new rules, VRLT will be calculated on a progressive rate:

YearVRLT Rate
First year which the land is liable for VRLT1% of CIV
Second consecutive year which the land is liable for VRLT2% of CIV
Third and subsequent consecutive years which the land is liable for VRLT3% of CIV

By way of illustration, Tom inherited a home in Daylesford from his mother, who died 4 years ago. The CIV shown on the council rates notice is $850,000. Tom occasionally visits the property for a weekend to tend to the garden and do some maintenance on the home, but it is otherwise empty while he decides whether he wants to live there in his retirement.

If Tom continues this pattern of use, then in 2025 he will be liable for VRLT of $8,500 on the home. This will increase to $17,000 in 2026, and $25,500 from 2027 onwards.

Action to take: If you own any unoccupied residential property (whether in your own name, or through a company or trust), consider the possible financial implications of the changes.  Check the CIV on your current council rates assessment – use this figure to calculate your potential VRLT liability and help inform your decision-making about how you will deal with the property this year and future years.

3. Extension of VRLT to capture unimproved residential land

Previously, VRLT only applied to land with a residence constructed on it. From 1 January 2026, however, the tax will extend to some unimproved residential land, ie. residential land without any residence on it.

VRLT will apply to vacant land which:

  • is located in metropolitan Melbourne;
  • has remained undeveloped for at least five years; and
  • is capable of residential development.

The rationale given for this change is to encourage development (and discourage land banking), with a view to increasing housing supply in metropolitan Melbourne.

Action to take: If you own vacant land which is unlikely to be developed in the next two years, consider whether a sale is appropriate and if not, factor in the potential VRLT liability from 2026.

4. No more apportionment of land tax when purchasing real estate

Vendors are prohibited from apportioning land tax to a purchaser under contracts of sale entered into from 1 January 2024. This is a significant change to the standard practice of apportioning land tax along with other periodic statutory outgoings such as council rates and water rates – previously, the vendor would bear outgoings only up to the day of settlement. Now the vendor must pay the land tax for the whole year. 

There is no contracting out of this provision – it is now an offence for a vendor to enter into a contract of sale that purports to require the purchaser to pay an amount for, or towards, the vendor’s land tax. However, it is open to vendors to seek to recover the difference through a higher asking price.

The prohibition does not apply to contracts where the consideration is $10 million or more (noting that this amount is subject to indexation).

Action to take: If you’re entering into a contract for the sale or purchase of a property, ensure that it doesn’t include a provision apportioning land tax between vendor and purchaser.

5. New exemption – Trust for Nature conservation covenants

From 1 January 2024, land which is subject to “conservation covenant” is entitled to an exemption from land tax. To qualify for exemption, the landowner must have entered into a covenant with Trust for Nature (Victoria) for the conservation of the land under the Victorian Conservation Trust Act 1972 (known as a “Trust for Nature” covenant). The exemption is available only upon application and can apply to part of a land parcel if only part is subject to the covenant.  

Action to take: If you own land which is subject to a Trust for Nature covenant or are considering purchasing such land, submit a land tax exemption application.

How we can help

The property team at Moores has extensive experience in land tax matters and can provide strategic advice tailored to your specific property ownership situation, giving you a road map through the confusion.

If you would like to explore your options in this regard, please get in touch with us and we’ll help you work out a solid plan.

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Disclaimer: This article provides general information only and is not intended to constitute legal advice. You should seek legal advice regarding the application of the law to you or your organisation.