By Jeremy Quah

3 January 2018

One of the new housing measures which were introduced with the Victorian Government's housing package in June 2017 was the introduction of the “Vacant Residential Land Tax” which has come into force as of 1 January 2018.

The purpose behind this tax was to address the Government’s concern about the number of properties being left vacant across Melbourne’s inner and middle suburbs. The tax applies to properties located in a select number of Melbourne’s inner and middle suburbs (Details of suburbs affected can be obtained from the State Revenue Office’s website).

The tax will be charged at a rate of 1 per cent of the capital improved value of taxable land and will be charged on any property which is unoccupied for more than six months a year. Whilst the tax applies from 1 January 2018, it will be based on use and occupation in the preceding year (ie. an owner’s tax liability for 2018 will be based on use and occupation in 2017).

A property will be considered vacant unless it was occupied for more than six months in the preceding year. Occupation needs to be by either:
(a) The owners, or the owner’s permitted occupier as their principal place of residence, or
(b) A person under a lease or short-term letting agreement.

Along with the usual exemptions which apply to standard land tax, exemptions to the vacant residential land tax also apply under certain conditions. This is where the properties are holiday homes, city apartments, homes or units used for work purposes, property transfers during the preceding year and new residential properties.

Significantly, it will be the owner’s responsibility to notify the State Revenue Office (SRO) of unoccupied houses through their online portal and or whether any exemptions apply to them. This must be done no later than 15 January each year. Penalties will apply if owners fail to notify the SRO.

The SRO will carry out monitoring and compliance activities to check whether owners are reporting appropriately. Third parties can also notify the SRO of any suspected non-compliance, via a “tip off” portal where third parties can notify the SRO if they suspect that properties are unoccupied.

Therefore if you are an owner of residential property, it is essential that you that you urgently consider whether the residential property is vacant land for the purposes of this new tax and notify the SRO accordingly. Should you have any queries, please do not hesitate to contact a member of our Property Team.

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