Victorian Property Tax Alert: What the Latest State Revenue Office Updates Mean for You in 2026

If you own property in Victoria – whether it’s your investment unit in Melbourne, a vacant block you’ve been “holding for later”, or a holiday home on the Mornington Peninsula – the latest updates from the State Revenue Office (SRO) matter to you.

There are new notification deadlines, expanded vacant residential land tax rules, changes to land tax and congestion levies, and a clear compliance focus from the SRO. All of this sits on top of the usual land tax, stamp duty and ongoing ownership costs. State Revenue Office+1

This blog breaks down the key points in plain English so you can talk to your accountant or adviser and avoid nasty surprises.

Quick disclaimer: This is general information only, not tax or legal advice. Always confirm your position with your accountant, tax adviser or solicitor.

1. Key Victorian property tax deadlines for early 2026

Two important notification dates are coming up:

• 15 January 2026 – notifications for the absentee owner surcharge (AOS)

• 15 February 2026 – notifications for vacant residential land tax (VRLT), including certain undeveloped land in metropolitan Melbourne State Revenue Office+2State Revenue Office+2

If you’ve lodged a notification in previous years, you generally only need to notify the SRO again if your circumstances have changed – but you must still review your position each year.

Missing these deadlines can result in penalty tax being added on top of any land tax or surcharge payable. State Revenue Office

2. Vacant Residential Land Tax (VRLT) – now applying across Victoria

2.1 What is vacant residential land tax?

Vacant residential land tax is an annual tax on residential land that is not used and occupied for more than 6 months in a calendar year. The vacancy in one year determines whether VRLT applies in the following year. State Revenue Office+1

From 1 January 2025, the VRLT regime has been expanded to cover residential land across all of Victoria, not just inner and middle Melbourne (with some limited exceptions such as alpine resorts). Morrows Advisory

In simple terms:

• If your residential property was effectively vacant in 2025, you may be liable for VRLT in 2026.

• “Vacant” is about actual use and occupation, not just whether you own the property.

Examples where VRLT might be triggered:

• An investment unit left empty for most of the year while you “wait for the right renter”.

• A holiday house barely used and not genuinely available for rent.

• A property that has been renovated but then left unoccupied.

2.2 VRLT on undeveloped land in metropolitan Melbourne from 1 January 2026

From 1 January 2026, the vacant residential land tax is being extended again – this time to capture certain undeveloped residential land in metropolitan Melbourne that has been sitting idle for too long. State Revenue Office+2State Revenue Office+2

VRLT may apply if:

• The land is in metropolitan Melbourne.

• It is residential land that is capable of residential development.

• It has remained undeveloped for a continuous period of 5 years or more (for example, from 31 December 2020 to 31 December 2025).

If this describes a block you own in Melbourne – for example land you’ve “land-banked” for years – you may have to pay VRLT in addition to ordinary land tax.

The SRO has confirmed that owners in this situation must notify them via the VRLT portal by 15 February 2026. State Revenue Office+1

2.3 Exemptions and why you must still notify

There are exemptions from VRLT, including:

• Principal place of residence (your own home)

• Certain holiday homes

• Land that cannot be used or developed for residential purposes, or is contiguous to your principal place of residence and used to enhance that home. State Revenue Office+1

However, in many cases you still need to lodge a notification in order to claim the exemption – it’s not always automatic. If you simply assume you’re exempt and don’t tell the SRO, you may later face an assessment plus penalties.

If you:

• Own a vacant house or unit anywhere in Victoria; or

• Hold an undeveloped block in metropolitan Melbourne that has been sitting idle for years

…it’s worth getting specific advice on whether VRLT may apply to you from 2026 onwards.

3. Absentee Owner Surcharge (AOS) – extra land tax for overseas owners

The absentee owner surcharge is an extra amount of land tax that may apply if Victorian land is owned by an absentee owner – this can be an individual, a company or a trust. State Revenue Office+1

You’re generally treated as an absentee owner if:

• You own Victorian land; and

• You’re living outside Australia, or you’re an overseas entity, and meet the SRO’s absentee criteria. State Revenue Office+2State Revenue Office+2

The key points:

• Your status is tested on 31 December each year.

• If you are an absentee owner at that date, you must tell the SRO by 15 January of the following year using the online portal.

• If you don’t notify on time, you can be charged penalty tax on top of the surcharge. State Revenue Office+1

This matters for:

• Australians who have moved overseas but kept their Victorian investment properties.

• Expats with a rental property on the Mornington Peninsula or in Melbourne.

• Overseas investors who own land via companies or trusts.

If you’re unsure whether you are an absentee owner, it’s important to clarify this with your accountant or the SRO and, if required, lodge or update your absentee owner registration before 15 January 2026.

4. Changes to state taxes – State Taxation Further Amendment Act 2025

On 25 November 2025, the State Taxation Further Amendment Act 2025 received Royal Assent. This Act makes a number of changes across Victoria’s taxation system. State Revenue Office+2Capital Monitor+2

Key changes include:

4.1 Congestion levy

• Adjustments to congestion levy rates; and

• An expansion of the Category 2 area, which affects which properties attract the levy.

If you own parking spaces or certain commercial properties in affected parts of Melbourne, you should have your accountant review how these changes might impact your holding costs. State Revenue Office

4.2 New land tax and VRLT exemptions

The Act also introduces new exemptions for land tax and vacant residential land tax, including some specific categories of land such as certain contiguous lots and land that genuinely cannot be used for residential purposes. State Revenue Office+2Macpherson Kelley+2

These exemptions may help:

• Owners of adjoining lots next to their principal place of residence;

• Owners of land facing genuine planning, environmental or legal barriers to development.

Again, whether an exemption applies will depend on your exact circumstances and often requires an application or evidence.

4.3 New Zealand citizens – duty, surcharge and First Home Owner Grant

The Act also changes how certain rules apply to New Zealand citizens in relation to: State Revenue Office+1

• Foreign purchaser additional duty

• Absentee owner surcharge

• First Home Owner Grant (FHOG)

If you (or your buyers) are New Zealand citizens purchasing or owning Victorian property, these changes can affect transaction costs and eligibility for concessions or grants. This is particularly relevant if you’re planning to sell to, or buy with, New Zealand citizens in 2026 and beyond.

5. SRO compliance focus 2025–26 – why getting it “roughly right” is not enough

The State Revenue Office runs ongoing compliance programs across all its revenue lines – including land tax, payroll tax, duties, VRLT and the absentee owner surcharge. State Revenue Office+1

Recent SRO publications show:

• Compliance is a core strategic goal under its Compliance Strategy 2023–27. State Revenue Office

• For 2025–26, the SRO has released specific compliance areas of focus, including areas like landholder duty and certain corporate transactions involving Victorian land. State Revenue Office+1

In practice, this means:

• More data-matching, cross-checking and audits.

• A strong focus on people who don’t lodge notifications, misclassify land, or incorrectly claim exemptions.

• Significant amounts being raised from compliance activities each year.

If your land tax assessments, VRLT position or absentee owner status are not accurate, the SRO is increasingly likely to spot it – sometimes years later, with interest and penalty tax attached.

6. Land transfer duty rulings – economic entitlements and who is really “paying” the tax

The SRO is also refining its guidance on land transfer duty (stamp duty), particularly around:

1. Economic entitlements in land

2. When a purchaser pays a vendor’s tax liability

6.1 Economic entitlements

A new public ruling on economic entitlements explains how the SRO interprets the economic entitlement provisions in the Duties Act.

In simple terms, these rules can impose duty where a person acquires a right to share in the income, rent or capital growth of land, even if they don’t obtain the legal title straight away.

This can affect complex development agreements, profit-sharing arrangements and service fee structures. If you’re involved in property development or joint ventures, your lawyer or adviser will be looking closely at these rulings.

6.2 When the purchaser pays the vendor’s tax

A draft public ruling has also been released dealing with situations where a purchaser agrees to pay a vendor’s tax liabilities as part of the overall deal – for example:

• Land tax

• Windfall gains tax

• Congestion levy

The SRO’s draft view is that, in many cases, the purchaser’s payment of those amounts will be treated as part of the consideration for the transfer and therefore subject to duty.

Importantly:

• This does not change the SRO’s position on ordinary adjustments for council rates, water or utilities at settlement.

• It also doesn’t change the approach to late settlement interest.

The draft ruling is open for consultation, and interested parties can make submissions to the SRO by 5 pm Wednesday 24 December 2025.

If you’re negotiating a contract that involves the purchaser picking up any of the vendor’s tax bills, your solicitor will need to consider the duty implications under this new approach.

7. What this means for Mornington Peninsula and Victorian property owners

For local homeowners, downsizers and investors across Mornington, Mount Martha, Mount Eliza, Frankston South, Somerville and the wider Mornington Peninsula, these changes mean:

• Holding land idle – whether it’s a vacant investment property or an undeveloped block in metropolitan Melbourne – is becoming more expensive and more closely monitored. Best Hooper Lawyers+1

• Overseas and expatriate owners must stay on top of absentee owner surcharge notifications to avoid penalty tax. State Revenue Office+1

• If you’re thinking about selling, subdividing or developing, the duty and tax treatment around economic entitlements and “who pays what” in the contract is under more scrutiny than ever.

For many of our downsizing clients (like “Diane & Peter” in Mornington), these changes are an extra nudge to:

• Review which properties they still want to keep, and

• Decide whether it makes sense to hold onto under-used or vacant property in this new tax environment.

For investors, especially those who own multiple properties or land holdings, it’s a good time to:

• Sit down with your accountant to check your VRLT exposure across Victoria;

• Confirm your absentee owner status (if you spend a lot of time overseas);

• Review your land tax assessments, exemptions and ownership structures.

8. Practical action steps to take now

Here’s a simple checklist to discuss with your tax adviser or accountant:

1. List all your Victorian properties

   • Include residential, commercial, vacant land and any undeveloped blocks in metropolitan Melbourne.

2. Check usage for the 2025 calendar year

   • Was any residential property vacant for more than 6 months?

   • Was any Melbourne land undeveloped for 5+ continuous years?

3. Confirm your residency and ownership structure

   • Are you, or any relevant company or trust, an absentee owner as at 31 December 2025? State Revenue Office+1

4. Review your land tax and VRLT exemptions

   • Principal place of residence, primary production, holiday home exemptions, contiguous land, land that cannot be developed, etc. State Revenue Office+1

5. Diary the key deadlines

   • 15 January 2026 – absentee owner surcharge notifications

   • 15 February 2026 – VRLT and undeveloped metropolitan Melbourne land notifications

6. For upcoming purchases or developments

   • Ask your solicitor about:

     • Economic entitlement rules;

     • Whether any agreement for you to pay the vendor’s land tax, windfall gains tax or congestion levy might now form part of the dutiable consideration.

9. Need help understanding how this affects your property plans?

The Victorian tax landscape is getting more complex each year, particularly around vacant residential land, undeveloped metropolitan Melbourne blocks, and overseas ownership.

While we can’t provide tax or legal advice, we work alongside your accountant and solicitor to help you:

• Understand how these changes may interact with your sale or purchase.

• Plan the timing of your downsizing move or investment sale.

• Prepare your property for market in a way that supports both a strong sale result and a clean, compliant transaction.

If you own property on the Mornington Peninsula or in greater Melbourne and you’re unsure how vacant residential land tax, the absentee owner surcharge or the latest Victorian tax changes fit into your plans, feel free to get in touch for a confidential chat. We’re happy to help you map out your next steps and, where needed, point you towards trusted tax professionals who can give tailored advice.