Victoria's vacant residential land tax clocks to 3% from 1 January 2027. A $1m vacant home now draws a $30,000 state bill

This article is general information only. It does not consider your personal circumstances and is not tax, credit or investment advice. Speak to a registered tax agent or licensed property adviser before acting on any of the figures below.

3% on CIV is the number to anchor on#

Victoria's vacant residential land tax is best understood as a progressive stair step, not a flat surcharge. The State Revenue Office applies 1% of the capital improved value in the first liable year, 2% in a second consecutive liable year, and 3% from a third consecutive liable year onwards (SRO VRLT rates). The 2027 land tax year is the first year the full 3% can land on properties outside the original 16-council inner Melbourne footprint, because the statewide expansion only commenced in the 2025 land tax year.

The arithmetic matters because capital improved value is not site value. For most Melbourne residential property, CIV sits well above site value, which is the base used for general land tax. On a Melbourne apartment with a CIV of $800,000, 3% is $24,000 a year. On a $1.2 million house in a middle Melbourne council, 3% is $36,000. On a $2.5 million trophy home vacant for three years, 3% is $75,000. These are per-property amounts and they stack on top of general land tax, which runs on a marginal scale up to 2.65% at the top bracket (SRO land tax current rates).

The structural read for a landlord is that the SRO's rate ladder effectively punishes vacancy for longer than a single year. One year of vacancy is a 1% line that most portfolios will absorb inside their general land tax provision. A second year is 2%, and a third year moves the dollar impact into the same order of magnitude as a leveraged mortgage payment on the property itself. The policy design is deliberate: the rate step is the lever, not the headline existence of the tax.

State-wide scope since 1 January 2025 is the second structural shift#

Before 1 January 2025, the VRLT applied only to 16 inner and middle Melbourne councils and ran at a flat 1% (ABL property tax summary). The State Taxation Acts Amendment Act 2023 took the scope to all residential land in Victoria from the 2025 land tax year, which is why the 2027 round is the first chance for a regional holiday house or a Mornington Peninsula second home to tip into the 3% bracket.

The test is unchanged: residential land is vacant if it was not used and occupied by the owner, a tenant on a lease of at least 28 days, or a permitted occupant for more than six months in the preceding calendar year. The six months do not have to be continuous. A property leased for six months and empty for the other six is still liable. A short-stay apartment let through a platform for fewer than 28-day periods is not treated as occupied for VRLT purposes unless a specific exemption applies.

For a landlord running a traditional long-term rental, VRLT is not usually in play. The exposure sits in three profiles. The first is holiday homes and second residences held in a trust or company. The second is properties stuck between tenancies for a long period inside a soft rental market. The third is longer-term vacant stock held by investors waiting for the market to turn or by estates in the middle of a probate process.

The 15 February 2027 notification deadline is the first operational trap#

The notification deadline shifted in the State Taxation Further Amendment Act 2024. From the 2026 land tax year it moved from 15 January to 15 February each year (DBA Lawyers VRLT changes 2026). The deadline for notifying the SRO that your residential land was vacant across 2026 is 15 February 2027.

Three operational points matter.

First, the obligation sits on the owner, not the agent and not the SRO. The SRO does not generally issue a prompt or a pre-filled form. The owner is expected to self-identify, log into the SRO portal, lodge the notification and apply for any exemption at the same time (SRO VRLT notification page).

Second, a notification is still required where the owner believes an exemption applies. The SRO treats non-notification as a default event in its own right, separate from the question of whether tax is ultimately payable. Where no VRLT is payable the default penalty is nil, but the SRO can require evidence in an audit years later and the burden of proof on exemption claims sits with the owner.

Third, the default penalty where tax is payable runs at 25% of the VRLT amount under Part 5 of the Taxation Administration Act 1997 (Vic), with scope to rise to 90% where the SRO finds intentional disregard (DBA Lawyers on TAA-008v2). Interest accrues from the original due date. The practical consequence is that a $30,000 VRLT line on a $1 million vacant home can carry a $7,500 to $27,000 penalty on top for an owner who misses the February deadline.

The absentee owner surcharge is the second deadline, a month earlier#

The absentee owner surcharge is a separate line of Victorian land tax, assessed against the same owner on the same assessment (SRO absentee owner surcharge). The rate has been 4% since the 2024 land tax year, up from 2% for the 2020 to 2023 years. The scope is wider than VRLT because the AOS applies across all classes of taxable land, including commercial, primary production and vacant blocks, not just residential.

The definition of an absentee individual turns on where the person ordinarily lives, not citizenship status. An Australian citizen or permanent resident who has been living and working overseas for the relevant tax year is caught, subject to specific exemption rules. This is a point many Australian expats miss, because the foreign-person test used for the Victorian stamp duty surcharge is different and does exclude citizens.

The notification deadline for AOS stayed at 15 January. For the 2027 land tax year the deadline is 15 January 2027, four weeks before the VRLT deadline on 15 February. Non-resident Victorian landlords now have two notification dates to track in the first six weeks of the year, each with its own default penalty regime.

The stack is the point. A Melbourne apartment with a CIV of $900,000 held by an Australian expat through a non-resident family trust, vacant for the full 2026 calendar year and in its third consecutive year of vacancy, faces three Victorian land-tax lines on the one 2027 assessment:

• General land tax at trust surcharge rates on the site value.
• Absentee owner surcharge of 4% on the taxable value.
• VRLT of 3% on the capital improved value, so $27,000 on a $900,000 CIV.

The AOS and VRLT alone are 7% of taxable base against a Cotality gross rental yield of about 3.85% nationally (Cotality September Quarterly Rental Review). The property cannot generate the tax from its own rent, by construction, because it is vacant.

The holiday home exemption only works for personal ownership#

The SRO's main escape hatch for genuine holiday homes is the holiday home exemption. It requires the owner, or a specified relative of the owner, to use the land as a holiday home for at least four weeks in the calendar year, continuous or in aggregate (SRO exemption rules).

The exemption is restricted to ownership in a personal name. Property held through a discretionary family trust, a unit trust, a company, or a self-managed super fund generally cannot access it (Pitcher Partners, Victorian property tax 2026). A limited extension exists for certain companies and trusts where the beneficial owner meets the holiday home test on a connected property, but the scope is narrow and the SRO has signalled an audit focus on structured ownership during 2026 and 2027.

Investors with holiday homes held in trusts face a direct ownership-structure question before the 2027 assessment lands. The three choices are to restructure the ownership before the SRO's assessment date, to meet the vacancy test by letting the property out, or to accept the 3% VRLT line and provision for it.

The change-of-ownership and renovation exemption is a secondary pathway. The SRO can grant a VRLT exemption for up to two consecutive tax years where genuine renovation or new construction is underway, but the owner has to apply and the SRO can require evidence of lodged plans, permits and material spend. The exemption cannot be rolled over indefinitely.

Undeveloped land in metropolitan Melbourne became liable from 1 January 2026#

The 2024 amending legislation also brought unimproved residential-zoned land in metropolitan Melbourne into VRLT scope from the 2026 land tax year. The test is five years of being capable of residential development and remaining undeveloped (Point on Partners VRLT expansion).

The 1%, 2% and 3% rate ladder applies in the same way to undeveloped land, measured on CIV. For a vacant block with a $1.5 million CIV, the first year is $15,000, the second is $30,000, the third is $45,000. The implication for small-to-mid landbanking investors is a direct hit to the carry cost of holding undeveloped sites in Melbourne's outer growth corridors, where sitting on a block for five to seven years waiting for a council decision was previously a common pattern.

The policy intent is explicit: the state wants undeveloped residential land in metropolitan Melbourne to move. The rate ladder is set to make the carry cost unattractive for anything beyond a short-term hold.

The three practical calls before 15 February 2027#

For a Victorian landlord with any vacancy, expatriate or structured-ownership exposure, three concrete calls set up the 2027 round.

First, run a vacancy audit across the portfolio for the 2026 calendar year. Record lease dates, utility reads, inspection reports and any personal use diary. The six-month test is binary once it lands at the SRO, and evidence of actual occupation is the only thing that moves the dial in a dispute.

Second, decide the ownership-structure question before the first 3% assessment lands. A holiday home held in a trust or company that will not meet the vacancy test is a different problem to one held personally. The restructuring options are narrow and the stamp duty consequences of moving a title are significant, which is why this call needs to be run with a registered tax agent and a conveyancer in the same conversation.

Third, prepare a parallel AOS review for the 15 January 2027 deadline where any owner on the title has been overseas for a material part of 2026. The 4% AOS line is the single most-missed Victorian land tax line in Propkt's conversations with expat landlords, and the citizenship-based intuition it is easy to carry from the stamp duty regime does not hold.

The 2027 round is the first time the full stack hits properties outside the original 16-council footprint, with the 3% rate biting on the first wave of statewide-liable properties. The documentation lift is modest; the dollar exposure for a landlord who misses the deadlines is not.

Where Propkt fits in#

Running a vacancy audit, tracking lease periods against the six-month test and keeping evidence of occupation across a multi-property portfolio sits inside the day-to-day admin that most landlords squeeze into tax time. Propkt's expense and lease tracking is built to keep that record live, with lease start and end dates against each property, utility and rates documentation attached to the correct year, and a running view of which properties have been let, vacant or owner-occupied across the year. For an investor with Victorian exposure heading into 2027, that single evidence file is the difference between a clean VRLT notification and a 25% default penalty.

The mortgage calculator and rent management tools alongside it keep the full carry cost in one view. A 3% VRLT on CIV is a line that has to live in the carry model, not in the end-of-year surprise column.