Homeowners – Victoria to implement Vacant Residential Land Tax sooner than expected

The Victorian government has introduced a new tax, its first initiative since Dan Andrews stepped down as premier.

Treasurer Tim Pallas announced the surprise move at an industry breakfast Tuesday, just a day after the state’s new leader, Jacinta Allan, was sworn in and her new cabinet was unveiled.

Victoria’s vacant residential property tax, a tax on homes left unoccupied for more than six months, will be extended across the state, including regional areas, from January 1, 2025.

Currently, only properties located in Melbourne’s inner and middle suburbs are affected by the tax, which is charged at 1 per cent of the total property value.

Mr Pallas said the move would encourage landowners to develop their land as Australia grapples with a housing crisis.

“We can’t really afford to have vacant land in metropolitan Melbourne go unused year after year,” Mr Pallas said.

“Our clear message to landowners is either develop the land or sell it to someone who will.

“Similarly, we do not impose a rule on landowners that we, as a state, would not apply to ourselves.

“We expect every government agency that holds land to justify exactly why they hold that land and not put it on the market.”

The tax is also expected to be extended again in 2026 to include land zoned residential that has not been improved for more than five years in suburban Melbourne.

The treasurer said the tax currently collects $6 million a year and that the tax would be used to “change behavior” rather than improve the budget.

Former Prime Minister Andrews announced a new 7.5 per cent levy on short-term rental providers, which aims to reduce the number of households renting homes to holidaymakers rather than long-term tenants in a context of housing crisis.

“We would much rather not take $1 out of taxes that are intended to change behavior. We would prefer that behaviors change so that we can get people to go home,” he said.

Victoria’s shadow treasurer Brad Rowswell has since hit out at the Labor government over the decision.

“Victoria is bankrupt and Labor’s only plan for ‘economic growth’ is to tax Victorians more,” Mr Rowswell said.

The change comes after the state government announced it would begin taxing people residing on Airbnb and other short-term rental accommodations.

Former Prime Minister Andrews announced a new 7.5 per cent levy on short-term rental providers, which aims to reduce the number of households renting homes to holidaymakers rather than long-term tenants in a context of housing crisis.

There are more than 36,000 short-term accommodation places in Victoria, of which 29,000 are entire households.