Leaving a residential property empty in Victoria can trigger a specific state tax that’s separate from the land tax most investors already budget for. This guide covers what Victoria’s Vacant Residential Land Tax (VRLT) actually applies to, how the rate changes the longer a property stays vacant, and the exemptions that mean it doesn’t apply to every empty home.

What is Victoria’s Vacant Residential Land Tax (VRLT)?

VRLT is an annual Victorian state tax, additional to Victoria’s ordinary land tax, on taxable residential land that wasn’t genuinely used or occupied as someone’s home — or leased under a genuine tenancy — for more than six months of the preceding calendar year. It’s assessed on the property’s Capital Improved Value (CIV): broadly, the value the State Revenue Office (SRO) Victoria places on the land plus any buildings and improvements on it, as used for council rating purposes.

Unlike Victoria’s ordinary land tax, VRLT has no tax-free threshold. A liable property is taxed on its full CIV from the first dollar, regardless of value.

How much is VRLT, and does the rate change over time?

VRLT is charged as a percentage of the property’s CIV, and the percentage is higher the more consecutive years a property has been liable. Under the current rates (SRO Vic):

Year liable	VRLT rate (of CIV)
1st year	1%
2nd consecutive year	2%
3rd and subsequent consecutive years	3%

The rate itself doesn’t rise past the 3rd-year tier, but because VRLT has no tax-free threshold, the dollar amount payable still scales with the property’s CIV for as long as it stays liable — climbing to, then sitting at, the 3% tier as the vacant years add up.

What counts as “vacant” for VRLT purposes?

A property is treated as vacant for VRLT if, across the preceding calendar year, it wasn’t genuinely used or occupied as a home — by the owner, a family member, or a tenant — or wasn’t rented out under a genuine lease, for more than six months in total (whether that’s one continuous stretch or several shorter ones added together). The assessment always looks back at the calendar year before the tax year, not the current year, and asks about genuine occupation or a genuine lease specifically, rather than, say, a registered address alone.

Does VRLT reach beyond established, previously-lived-in homes?

From 1 January 2026, VRLT was extended to a further category: undeveloped land in metropolitan Melbourne that’s capable of residential development and has sat undeveloped for five or more continuous years is assessed at 1% of CIV. Separately — and not a 2026 change — new residential land that stays unused, unoccupied and unsold becomes liable at 1% of CIV once it’s been in that state for more than three years; that three-year window is itself an earlier extension, from a two-year window in place since 2022, that took effect 1 January 2025. Both sit alongside — not instead of — the general vacancy rule described above.

How can Vacant Residential Land Tax be avoided?

VRLT doesn’t apply where a property meets one of three exemptions set out by SRO Vic. Which, if any, applies to a specific property depends on how that property was actually used during the relevant calendar year and on the individual owner’s circumstances.

Exemption	What it requires
Holiday home	Genuine use as a holiday home for at least four weeks — continuous or added up across the year — in the preceding calendar year, by an owner (or a qualifying relative) who has their own principal residence in Australia
Significant renovation or repair	Work that made the residence incapable of being lived in, where that work both started and finished within the same preceding calendar year
Recently sold or purchased	An actual change of ownership — settlement, not just signing a contract — during the preceding calendar year, which exempts the following tax year

Tax outcomes depend on your circumstances — speak with a registered tax agent before acting. Whether a particular property’s use, renovation timing, or settlement date meets one of these tests is a question for SRO Vic and a registered tax agent, not something this article can confirm for an individual case.

How is VRLT different from Victoria’s ordinary land tax?

Ordinary Victorian land tax works on a threshold: individuals owe nothing on taxable land value below $50,000, with rates applying progressively above that (plus a separate, lower $25,000 threshold that triggers the trust surcharge). VRLT works differently — it has no threshold at all, applies only where the vacancy test above is met, and is layered on top of whatever ordinary land tax is already payable. A property can be liable for both at once: ordinary land tax on its value, and VRLT on top for the year it sat vacant.

Where to check the current VRLT rates and rules

VRLT’s scope has been extended more than once in recent years — it went statewide from 1 January 2025 and was extended again from 1 January 2026 — so the settings above reflect the rules as at July 2026, not a fixed, permanent design. Before relying on any of these figures for a specific property, check SRO Vic’s own current pages: current VRLT rates, understanding VRLT, and VRLT exemptions. Ordinary land tax rates are published separately on SRO Vic’s land tax current-rates page.

Where VRLT fits into the cost of holding an investment property

For an investor weighing up whether to leave a Victorian property empty between tenants, list it, or use it occasionally, VRLT is one more cost that can sit alongside ordinary land tax, insurance and other holding costs — on top of whatever rental income is or isn’t coming in during that time. Our guide to cash flow positive property vs negatively geared property covers how ongoing costs like this weigh against rental income more broadly, and our guide to property investment in Australia covers where a tax like this sits in the wider cost picture of holding a rental property.

Because VRLT liability depends on the specific property, its actual use during the year, and which exemption (if any) applies, a registered tax agent is the right person to confirm what applies to a given property.

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