In an effort to address Melbourne’s ongoing housing supply and affordability challenges, the Vacant Residential Land Tax (VRLT) has become an increasingly important policy tool. Originally introduced in 2018, the VRLT was aimed at discouraging landowners from leaving residential properties vacant in high-demand areas. However, with its expanded scope from 1 January 2025, the VRLT now has broader implications for developers, builders, and property owners — particularly those with active or delayed construction sites.
So, what does this mean for your construction project?
What is the Vacant Residential Land Tax (VRLT)?
The VRLT is an annual tax levied by the Victorian Government on residential land that is vacant for more than six months in a calendar year. The tax applies to properties located in Melbourne’s inner and middle suburbs — though from 2025, it will expand statewide, and include all vacant residential land, even if a dwelling has never been constructed on it.
The current rate of the VRLT is 1% of the land’s capital improved value (CIV) — a potentially significant cost for landowners and developers.
How Does It Affect Construction Sites?
For developers and builders, the key issue lies in how “vacancy” is defined and whether construction delays or inactive sites may trigger the tax.
Exemptions for Genuine Construction Activity
If a building permit has been issued and “genuine construction” is underway, the land may be exempt from the tax. However, if construction is stalled, delayed, or not progressing due to financial, planning, or resourcing issues, the land may be considered vacant — even if a permit is in place.
Permit Point Tip: Ensure there’s evidence of continuous progress on-site (e.g., site inspections, contractor activity, documented milestones), as this can support exemption claims.
Time Limits and Government Scrutiny
The Victorian State Revenue Office (SRO) has signalled a stronger intent to crack down on underutilised land. From 2025, vacant land held for speculation or passive investment, including land awaiting development but with no meaningful progress, will likely attract VRLT.
Practical Implications for Builders and Developers
- Increased Holding Costs
Delays in construction can now result in a significant tax penalty, on top of existing holding costs like council rates and loan interest. - Pressure to Expedite Planning and Building Permits
Developers may feel the need to fast-track design, approvals, and construction to avoid falling foul of the VRLT. Early engagement with building surveyors can help identify timelines and compliance checkpoints. - Impacts on Land Banking Strategies
Traditional “land banking” — holding onto vacant blocks for future development — is becoming less viable under the new VRLT rules. Those holding land without immediate intent to build will face increasing financial pressure.
How Permit Point Can Help
As Registered Building Surveyors in Melbourne, Permit Point offers end-to-end services to ensure your construction site maintains compliance, progresses efficiently, and meets government expectations.
Our services include:
- Fast-tracked building permit approvals
- Clear advice on documentation and progress tracking
- Professional construction site inspections
- Assistance in dealing with councils and regulatory authorities
Final Thoughts
The Vacant Residential Land Tax is reshaping how developers and builders approach construction timelines, planning processes, and land acquisition strategies. By understanding the implications and working with trusted building professionals like Permit Point, landowners can stay ahead of the curve — avoiding penalties and ensuring their projects move forward with confidence.
Need help with building permits or compliance? Contact Permit Point today to speak with our expert team.