Maximising Your Property's Potential: Navigating Victoria's Vacant Land Tax

Is your property in one of Melbourne's key suburbs? As your trusted accounting partner, RJSanderson recognises the potential impact of Victoria's Vacant Residential Land Tax on your property portfolio. This new regulation aims to boost housing supply by taxing homes left unoccupied for more than six months in a calendar year. With its implications on your finances and compliance obligations, understanding the tax and taking proactive steps is crucial.

Does your property fall under the scope of the tax?

Affected Suburbs: The tax applies to houses in 16 specific Melbourne suburbs that remain unoccupied for over six months. Here's the list:

• Banyule
• Bayside
• Boroondara
• Darebin
• Glen Eira
• Hobsons Bay
• Manningham
• Maribyrnong
• Melbourne
• Monash
• Moonee Valley
• Merri-bek (formerly Moreland)
• Port Phillip
• Stonnington
• Whitehorse
• Yarra

Tax Implications: The tax rate is set at 1% of the property's capital improved value (CIV). For example, a vacant home valued at $500,000 in one of these suburbs would incur a $5,000 annual tax.

Compliance Requirements: If your property falls under the eligibility criteria, you must notify the Victorian Government by January 15th of the following year. Failing to do so can result in hefty penalties.

Tax Impact Over Three Years

To provide a clearer picture of the tax's implications, here is a comparative table showing the tax amount over three years for properties valued at $500,000 and $1,000,000 respectively:

This table underscores the escalating cost of leaving a property vacant and the importance of taking proactive steps to avoid these charges.

Exemptions and Strategic Considerations

Exemptions are available for properties used as holiday homes for at least four weeks a year, among other conditions. Property owners must consider the implications of these exemptions and evaluate the best course of action—whether it's renting the property out, selling it, or utilizing it personally.

Homes that are unoccupied for more than six months of the preceding calendar year may be exempt from the tax if:

• Ownership of the property changed during that year.
• The property became a 'residential' property during that year.
• The property became a ‘residential property’ during the previous two calendar years and ownership is unchanged.
• The property was used as a holiday home and occupied by the owner for at least four weeks of that year and the owner has a PPR in Australia (homes owned by companies, associations or organisations are generally not eligible for this exemption).
• The property was occupied by the owner for at least 140 days of that year for the purpose of attending their workplace or business, and the owner has a PPR in Australia (homes owned by companies, associations or organisations are generally not eligible for this exemption).

From the 2020 land tax year, a vested beneficiary may benefit from the exemptions for holiday homes and properties used for attending a workplace or business. However a beneficiary of a discretionary trust or a unitholder of a unit trust is not eligible to benefit from these exemptions.

Talk to an Expert

In navigating the complexities of this tax,  RJSanderson & Associates is here to help with tailored advice to provide outcomes that ensure choice, confidence, and security, aligning perfectly with the needs of property owners facing the new tax regulations.

Want to learn more?

For property owners within the affected suburbs of Melbourne, understanding and responding to the Vacant Residential Land Tax is critical. Engaging with experienced advisors will provide the clarity and direction needed to make informed decisions.

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