From 1 January 2018, a new vacant residential land tax (VRLT) applies to homes in inner and middle Melbourne that were vacant for more than six months in the previous calendar year. This is a new Victorian tax and is different to land tax.

The VRLT is assessed by calendar year (1st January to 31st December) and the six months do not need to be continuous. If you own a property that was unoccupied for more than six months during 2017, you must notify the State Revenue Office (SRO) through the SRO online portal.

Council areas that may be affected:

• Banyule
• Glen Eira
• Melbourne
• Port Phillip
• Bayside
• Hobsons Bay
• Monash
• Stonnington
• Boroondara
• Manningham
• Moonee Valley
• Whitehorse
• Darebin
• Maribyrnong
• Moreland
• Yarra

What is the tax?

The tax will be calculated at 1% of the capital improved value (CIV) of the residential land, and will apply in addition to any other applicable taxes or surcharges.

For example, if a vacant home has a CIV of $700,000, the VRLT will be $7,000. The CIV of a property is a value of the land, buildings and any other capital improvements made to the property, which is displayed on the council rates notice for the property.

Residential Property

Residential property is land that can be used solely or primarily for residential purposes, such as a home or an apartment. It also includes land on which a residence is being renovated or where a former residence has been demolished and a new residence is being constructed.

A property is considered vacant if, for more than six months in the previous calendar year, it has not been lived in by the owner, or the owner’s permitted occupier, as their principal place of residence (PPR), or a person under a lease or short-term leasing arrangement.

The occupation does not need to be by the same occupant or for a single continuous period. It is not enough that the property is available for occupation, such as by listing on a short-term rental website. It must have been used and occupied for more than six months. It is not enough for the property to be used intermittently or on a casual basis by friends or family of the owner.

Exclusions

It does not include vacant land, commercial residential premises, display homes, residential care facilities, supported residential services or a retirement village.

Homes that are exempt from land tax are also exempt from VRLT. In addition, homes that are unoccupied for more than six months of the previous calendar year may be exempt from the new VRLT if ownership of the property changes during the previous calendar year, the property becomes “residential” property during the previous calendar year, the property is used as a holiday home and occupied by the owner for at least four weeks of the previous calendar year, the property is occupied by the owner for at least 140 days of the previous calendar year for the purpose of attending their workplace, the property is under renovation or construction.

We recommend that residential land owners:

• Notify us if your residential property was unoccupied for more than six months in the 2017 calendar year. It is important to do this, as the SRO and city councils will likely be able to identify vacant land by monitoring the utility use of properties and other investigative methods. It is also advantageous to notify, as the notification process allows owners to apply for an exemption at an early stage.
• Expatriates, interstate workers, and long-term travelers should ideally lease or have another person occupy the property in their absence. It should be noted, technically leases or short term letting arrangements will need to be made in good faith, and not for avoiding the VRLT. Also note that if you lease your PPR for a period of more than 6 months, you may risk losing your PPR land tax exemption. This may result in a much larger tax burden than the new 1% VRLT surcharge.

If you would like additional information on this article, please contact Fred Pane at our office on (03) 9377 4400 or email info@accumulusadvisory.com.au