The cost of owning property in Victoria: Vacant Residential Land Tax

In this informative article, we look at Vacant Residential Land Tax in Victoria.

 

Vacant Residential Land Tax

The first tax to be aware of is the ‘Vacant Residential Land Tax’. This tax was introduced earlier this year, on 1 January 2018. The tax applies to purchases made after 1 January 2018.

 

Why is this tax payable?

This tax was designed to help address the lack of housing supply in Victoria.

 

When is this tax payable?

The Vacant Residential Land Tax is payable in certain circumstances, and is payable in addition to Victorian land tax, the absentee owner surcharge and the federal annual vacancy fee.

The tax applies to homes in inner and middle Melbourne that have been vacant for more than 6 months in the previous calendar year.  The affected municipal council areas are listed in the table below:

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

 

So, when is a property considered ‘vacant’? A property is considered to be vacant, is a property that has not been lived in for more than 6 months in the previous calendar year by:

  • The owner, or a person living in the home permitted by the owner;
  • A person living in the property or home under a lease or short-term leasing agreement – the person living in or ‘occupying’ the home does not need to be the same person, or be living in the home for a single continuous period of time

It is not enough for the property to be just available to live in or to be occupied by someone. The property must be used and occupied or lived in for more than 6 months. It is also not enough for the property to be used on a casual basis by friends or family of the owner e.g. For hosting a party or for staying over on weekends.

 

Vacant vs Not Vacant

Vacant – you will need to pay this tax Not Vacant – you will not need to pay this tax
If you use the property for less than 6 months

i.e. from 1 January 2018 – 1 March 2018

 

When you or someone that you give permission to live in the property for more than 6 months i.e from 1 January 2018 – 1 December 2018

 

 What is the rate payable?

The rate is an annual or yearly tax and is set at 1 per cent of the Capital Improved Value (CIV) of taxable land.  The CIV is the value of ‘land, buildings and any other capital improvements’ made to the property.

 

Example

If the CIV is $400,000.00 and if the property is considered to be ‘vacant’ then the Vacant Residential Land Tax payable is $4,000.00 annually.

If the CIV is $4,000,000.00 then the amount payable is $40,000.00.

If the CIV is $400,000.00 and the property is not ‘vacant’ then you will not need to pay this tax.

 

Please see our COMPARISON-TABLE summary.

We invite you to contact us if you require further information and/or assistance with identifying, and managing your obligations in relation to the cost of owning your property in Victoria.

 

Disclaimer: The information contained in this briefing is general in nature, not intended to be definitive, and does not take into account specific circumstances.

It is recommended that you seek appropriate legal advice as to the application of the taxes discussed in this briefing to your specific circumstances.