As a general rule, individuals who own both a principal residence and a holiday home in the State of Victoria typically enjoy a land tax exemption for their primary residence while being required to pay land tax to the State Revenue Office for their holiday home.
An additional consideration for owners of holiday homes is the Vacant Residential Land Tax (VRLT). This tax is an extra 1% on the capital improved value of the property when applicable. Like land tax, the VRLT is assessed annually, running from 1 January to 31 December.
The VRLT targets homes in inner and middle Melbourne that were ‘vacant’ for more than six months in the preceding year. A ‘vacant’ home, in this context, is one that hasn’t been inhabited for over six months by either the owner or a tenant under a lease or short-term letting arrangement.
Pro tip: VRLT is an extra surcharge applied in addition to baseline Land Tax
If you own a second home that is not your primary residence, and it is valued above $50,000, this property will attract the baseline land tax, regardless of occupancy.
If this property is deemed “vacant” per the definition above, the VRLT surcharge will apply on top of the baseline land tax.
Navigating the Exemption Criteria for VRLT on Holiday Homes
For those seeking relief from the VRLT, there’s an exemption for properties used as holiday homes by the owner for at least four weeks in the previous year, provided the owner also has a principal residence elsewhere in Australia.
To qualify for this exemption, owners must convincingly demonstrate to the Commissioner of State Revenue that the property served as a holiday home, considering factors such as proximity to the owner’s primary residence and usage patterns. It is advisable to maintain thorough records, such as a logbook or diary entries, to substantiate the home’s use as a holiday retreat.
Significantly, from the 2024 assessment period (reflecting usage in the year 2023), the four-week exemption specifically pertains to the owner’s use of the holiday home. Following legislative amendments, from the 2025 assessment period, starting 1 January 2025, this exemption will extend to usage by the owner’s relatives, provided they use the property as a holiday home for a minimum of four weeks based on occupancy in the 2024 calendar year.
For expert assistance with your Victorian Land Tax and VRLT obligations, including navigating exemptions and compliance strategies, reach out to the tax specialists at LDB by phone on 03 9875 2900.
