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Leave your Melbourne home empty when moving overseas and get slugged with a new tax

vacant residential land tax melbourne victoria

The Victorian government has introduced a vacant residential land tax on homes that are left vacant for more than 6 months of the year, and its a lot!  Leave your Melbourne home empty when moving overseas and it could cost you a lot of money!

Under the guise of increasing the numbers of houses available for rent and improving housing affordability, From 1 January 2018, homes which are located in 16 specific council areas and are left unoccupied for more than six months (in total) of the previous calendar year, attract the Victorian Government’s vacant residential land tax.

What is the vacant residential land tax?

The vacant residential land tax is a tax on residential properties in Melbourne’s inner and middle suburbs which have been unoccupied for more than six months a year.

It is a tax levied by the Victorian government and is different to land tax (and the absentee owner surcharge), and the Federal Governments annual vacancy charge levied on foreign property owners.

In what suburbs does the vacant residential land tax apply?

The vacant residential land tax applies to properties in the local council areas listed below.  If your property is outside these council areas it is currently not impacted by the vacant residential land tax.

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

How is the vacant residential land tax determined?

The vacant residential land tax is an annual tax of 1 per cent of the capital improved value (CIV) of taxable land. For example, if the taxable land has a CIV of $500,000, the annual tax is $5,000.  Remember, this is in addition to any land tax, council rates, and other taxes you are liable for.

The CIV of a property is a value of the land, buildings and any other capital improvements made to the property as determined by the same government valuation process used to determine your council rates.  The CIV of your property appears on your council rates statement.

Unlike land tax, there is no tax free threshold and the 1% tax applies to the full value of the property.

When is your property considered vacant?

According to the Victorian government’s website, “a property is considered vacant unless it was occupied for more than six months in the preceding calendar year by:

  • The owner, or the owner’s permitted occupier, as their principal place of residence (where the owner primarily resides), or
  • A person under a lease or short-term letting arrangement.

The six months do not need to be continuous.”

How are holiday homes treated?

Holiday homes may be exempt from the vacant residential land tax if the owner occupies the house for more than four weeks in every calendar year, however it is unlikely that Australian expats with a principal place of residence overseas will be exempt.

The holiday home exemption is subject to the following conditions:

  • The owner must have had a different principal place of residence in Australia in the calendar year.
  • The Commissioner of State Revenue must be satisfied that the property is a genuine holiday home.

An owner will only be able to claim the exemption for one holiday home in a calendar year.

What if the house is used by family throughout the year?

If the property is used and occupied as the principal place of residence of a family member or friend for more than six months in a calendar year, the property will not considered vacant and will not subject to the tax.

If, however, the property is only used intermittently or on a casual basis throughout the year, the property will be considered vacant and liable for the tax unless a specific exemption applies or there is a genuine lease or letting arrangement in place.

A lease or letting arrangement made for the sole purpose of avoiding the tax is not considered a genuine arrangement.

For more information on the vacant residential land tax that applies to houses in Melbourne, Victoria, click here.

Source : Victorian Government

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Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way. 

About the author

Craig

Craig is an Australian Expat and the founder of The Australian Expat Investor. Craig is passionate about investing, and while Craig cannot give personal financial or tax advice, Craig enjoys sharing investing, tax, and other tips for Australian expats to help them to build their wealth while living abroad and get the most out of their time living overseas. Get his free ebook on 9 Financial Surprises That Could Cost Australian Expats Thousands of Dollars

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