Vacant Residential Land Tax (VRLT) update for 2026

With 2026 fast approaching, we would like to provide an update on what next year’s Vacant Residential Land Tax (VRLT) may mean for you. Recent changes will apply from 1 January 2026, specifically regarding undeveloped land in metropolitan Melbourne.

Background

The VRLT is an annual tax that applies to residential land considered “vacant” by the State Revenue Office (SRO).

• Land is considered vacant for the 2026 calendar year if it has a permanent fixture on it (generally a dwelling) that is unoccupied for more than six months during the 2025 calendar year.
• The tax is a flat rate of 1%, applied to the Capital Improved Value (CIV) of the land, with the rate increasing by 1% each year (capped at 3%) for as long as the land remains unoccupied.

VRLT assessments for the 2025 calendar year only applied to:

1. Residential land with an existing home that was vacant for more than six months in the 2025 calendar year.
2. Residential land with a home that had been uninhabitable or under construction/renovation for two years or more.

New Changes for the 2026 Calendar Year – VRLT and Undeveloped Land

From 1 January 2026, the VRLT will also apply to certain undeveloped land in metropolitan Melbourne only.

What is considered undeveloped land?

The main eligibility requirements include that the land:

1. Is zoned as residential
2. Has remained undeveloped for a consecutive period of five years or more; and
3. Is capable of residential development.

How much VRLT is payable on eligible undeveloped land?

For undeveloped residential land in metropolitan Melbourne, the rate is fixed at 1% of the Capital Improved Value (CIV).

To become liable for VRLT in 2026, the land must have been undeveloped and capable of residential development since midnight on 31 December 2020. 

What is considered metropolitan Melbourne?

Metropolitan Melbourne includes the council areas of Banyule, Bayside, Boroondara, Brimbank, Cardinia, Casey, Greater Dandenong, Darebin, Frankston, Glen Eira, Hobsons Bay, Hume, Kingston, Knox, Manningham, Maribyrnong, Maroondah, Melbourne, Melton, Merri-bek, Monash, Moonee Valley, Mornington Peninsula, Nillumbik, Port Phillip, Stonnington, Whitehorse, Whittlesea, Wyndham, Yarra, and Yarra Ranges. 

Why the changes?

These changes aim to encourage landowners and developers with significant undeveloped landholdings to build residential housing and make those properties available for purchase or rent, ensuring that Melbourne’s housing stock is used as efficiently as possible.

Further details regarding the VRLT changes effective from 1 January 2026 can be reviewed here. 

Exemptions from VRLT

A summary of common VRLT exemptions is provided below:

• Land that is exempt from land tax will also be exempt from VRLT.
• Land that changes ownership during the 2026 calendar year will be exempt from VRLT for the 2027 calendar year.
• Holiday home exemption.
• Work accommodation exemption.
• Land that became new residential land during the previous calendar year.
• Land that cannot be used or developed for residential purposes in Metropolitan Melbourne.
• Undeveloped land in Metropolitan Melbourne that is contiguous (adjoined) with land to which holiday home exemption may apply.

Making a VRLT Notification

If you have any land which is deemed vacant under SRO rules, you are required to submit a notification to the SRO by Thursday 15 January 2026 regardless of whether you are applying for an exemption or not.

However, if you have previously submitted a notification in 2025 and your circumstances have not changed, no further notification is required.

Some useful links include:

• VRLT – Owning a property
• VRLT – Metropolitan Melbourne
• VRLT – rates and example scenarios
• VRLT calculator
• VRLT – Frequently Asked Questions
• How to lodge a VRLT notification – process and timeline
• Paying your VRLT assessment

Please note:
West Carr & Harvey are registered tax agents with the Australian Taxation Office (ATO). We do not act as agents for the State Revenue Office (SRO).

If you have questions about the Vacant Residential Land Tax (VRLT) and how it may impact you, please feel free to contact us. We can discuss the requirements set by the SRO and assist you in understanding the information needed; however, we are unable to provide specific advice on the best course of action.

Publish date 11 November 2025.