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By: Kristina Popova
26 Sep 2025 5 min read
This follows the significant reforms introduced in 2025, and forms part of the Government’s broader strategy to boost housing supply and ease pressure on property prices and rents.
The VRLT is a state-based tax unique to Victoria, designed to encourage the development of underutilised land and increase housing supply. Introduced in 2018, the VRLT originally applied only to vacant residential land in inner and middle Melbourne, calculated on the capital improved value of the land at a rate of 1%.
Over time, the policy has evolved in response to growing concerns around housing affordability and land banking. The tax forms part of the Victorian Government’s broader strategy to address housing shortages by incentivising landowners to develop or sell idle land.
The State Taxation Acts and Other Acts Amendment Bill 2023 introduced several key changes to the VRLT regime, effective from 1 January 2025:
These reforms laid the groundwork for the more targeted measures coming into effect in 2026.
From 1 January 2026, VRLT will apply to unimproved land in metropolitan Melbourne that has remained undeveloped for at least five years (i.e. since 31 December 2020) and is capable of residential development. In previous VRLT assessment years, land was capable of being subject to VRLT where:
The expansion of the tax to undeveloped land marks a significant departure from the current definition of ‘vacant residential land’, which focuses on land that is already zoned and ready for residential use. The new rules are squarely aimed at developers and investors holding land without progressing development.
Whether VRLT applies will be determined by zoning under the relevant local planning scheme. Land currently used or under development for a non‑residential use (e.g. commercial or industrial use) should be excluded
Land that is intended to be solely or primarily used or developed for a non-residential use and there is an acceptable reason for the land not yet being used or developed in that way is excluded.
It is important to note that the Commissioner also has the power to determine that a change in ownership of land does not ‘restart’ the five-year period where a transfer of land occurred in order to reset the five-year period.
The expanded VRLT will not apply to:
Importantly, landowners may apply for an extension to the five-year threshold if there is an ‘acceptable reason’ for the delay – such as planning delays, infrastructure constraints, or financial hardship.
A new exemption under section 88A(3A) of the Land Tax Act ensures that unimproved land contiguous to exempt holiday home land will also be exempt from VRLT. This protects landowners from unintended tax consequences where holiday homes are located on larger or subdivided parcels.
With the 2026 changes targeting long-term undeveloped land, landowners in metropolitan Melbourne should:
The NSW Budget 2026 focuses on health and education spending, with slower growth forecasts, rising debt and targeted foreign investor duty relief measures.
On Tuesday 23 June 2026, Treasurer David Janetzki handed down his second state budget alongside Premier David Crisafulli. Deficits are forecast throughout the forward estimates, with a surplus of $619m projected for 2029-30.
For wine producers and vineyard owners, the recent New South Wales Civil and Administrative Tribunal decision in Zonadi Holdings Pty Ltd ATF Wombat Investment Trust v Chief Commissioner of State Revenue [2025] NSWCATAD 84 may spell trouble for their current primary production land tax exemptions.
