Land tax has been a hot topic among many of our land-owning clients lately
The Victorian Government announced significant changes to state property taxes in December 2023 including broadening the Vacant Residential Land Tax (VRLT).
Changes to Vacant Residential Land Tax Starting January 2025
From 1 January 2025, owners of residential properties in Victoria that have been vacant for more than six months in the previous calendar year are liable for the VRLT unless an exemption applies. VRLT is payable in addition to land tax.
In its original incarnation, the VRLT legislation provided an exemption for holiday homes owned in personal names but did not provide an exemption for holiday homes owned in a company or trust structure.
Exemptions for Holiday Homes
The Victorian Government has recently introduced the State Tax Amendment Bill 2024 which broadens the holiday home exemption to include holidays homes owned in company and trust structures if certain conditions are met.
The holiday home exemption applies to a property occupied by the owner or a beneficiary of a trust that occupies the property as their holiday home for at least four (4) weeks (whether continuous or cumulative) in a calendar year. From 1 January 2025, a relative of the owner or relative of a beneficiary can satisfy this use and occupation requirement. For example, a child or spouse of the beneficiary.
Residency Requirements for Exemption
To qualify for this exemption, the owner or beneficiary must also have a home in Australia in addition to their holiday home. They do not have to own their home. For example, Rachelle lives in Indonesia. She owns a holiday home in Lorne. In 2023 she used her holiday home for 6 weeks. In 2024, her holiday home will be subject to VRLT because she did not live in Australia in 2023. Rachelle returns to live in Melbourne in 2024 and rents a house. She uses her Lorne holiday home for 6 weeks. In 2025, her holiday home will not be subject to VRLT because she lived in Australia in 2024.
We advise that all holiday home owners or occupiers should keep a diary and record the days each year that they or a relative occupies their holiday home. A diary would be useful in any audit carried out by the State Revenue Office.
Applying for an Exemption
You must apply for an exemption from VRLT through the State Revenue Office portal. We can assist you in applying for an exemption if required. The application process if you are applying for an exemption for a trust or company property can be complex.
If you have any property related queries, please get in touch with our Chris Henderson.
