What do schools need to know about land tax and VRLT?

Most schools will be aware that land used for school purposes generally qualifies for an exemption from land tax in Victoria.

However, there are a number of nuances which can impact on this general position. In this article we highlight some of the potential traps which schools and other education providers should be aware of.

Overview of the land tax framework in Victoria

Land tax

• Land tax is payable annually on all Victorian properties, unless the property can be shown to satisfy one of the grounds for exemption prescribed by the Land Tax Act 2005 (Vic) (Act).
  
• The rate of land tax payable depends on a number of factors, including the site (unimproved) value of the property, and whether the property is held by the taxpayer in a personal capacity or as trustee of a trust.
  
• The most common ground of exemption is the principal place of residence (PPR) exemption, which provides an exemption from land tax for homes which are occupied by the registered owner as their PPR.
  
• Section 74 of the Act provides an exemption from land tax for land which is exclusively used and occupied by a charitable institution – this is the exemption which will most often apply to school-owned properties.

Vacant residential land tax (VRLT)

• VRLT is an annual tax applied to Victorian residential properties which are vacant for more than 6 months (combined) in any calendar year. 
  
• It is separate and additional to standard land tax, although both are administered by the State Revenue Office (SRO).
  
• VRLT is calculated on the capital improved value (CIV) of the vacant property.  The current rate of VRLT is 1% of CIV for the first year of vacancy, increasing to 3% by the third year of vacancy.  It is important to note that this is different to standard land tax, which is calculated on ‘site value’ (unimproved value). If a property is vacant for more than 6 months in any calendar year, then it must be reported to the SRO via the SRO’s online VRLT notification portal. Notifications must be lodged by 15 February of the following year.
  
• Properties which are exempt from land tax are also exempt from VRLT.

Common land tax and VRLT traps for schools

There are three specific areas where we have noticed some of our education clients getting caught out with regard to land tax and VRLT.

Trap 1 – Not applying for an exemption

The charitable land tax exemption is only available upon application to the SRO. Certain evidence must be presented in support of the application, including evidence of specific non-profit provisions in the school’s constitution and evidence demonstrating the use of the land in question. 

Once an exemption is granted, it is ongoing so long as the use of the land continues to satisfy the criteria for exemption.

If the use of the land changes so that it no longer qualifies for exemption, the SRO must be notified. If not, then penalty tax may be applied on top of normal land tax once the issue is detected.

Trap 2 – Sharing use of school facilities

Sharing use of school facilities can impact on your exemption status. In brief:

• hiring to other charitable institutions is fine
• occasional hiring to third parties for a nominal fee is generally safe
• regular hires at commercial rates can potentially be problematic

A more detailed exploration of the issue of shared use can be found in our previous article ‘Hiring out the hall in 2025 – Land tax and facility hire for charities‘.

If you are unsure about whether your particular shared use arrangements could impact on your land tax exemption, guidance can be sought from the SRO in the form of a private ruling application.

Trap 3 – Overlooking VRLT reporting

It is common for schools to have residential landholdings – these properties may be used as a principal’s or caretaker’s residence, be rented out to third parties, or held for future school development.

These properties will be subject to land tax, but they may also be subject to VRLT if they are not occupied by a person as their PPR for more than 6 months of the year.  If such a vacancy does occur, then a VRLT notification needs to be made to the SRO by 15 February of the following year, otherwise penalty tax may be imposed on top of VRLT.

How we can help

The Commercial Real Estate team at Moores has extensive experience assisting schools and other education providers in navigating the land tax and VRLT rules, and we would be glad to help you with any questions, exemption applications, private ruling applications or reporting in this space.

Contact us

Please contact us for more detailed and tailored help.

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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.}