Land tax is a significant consideration for property investors, business owners, and even some homeowners in Victoria. Each year, the state government reviews and adjusts land tax policies to reflect economic conditions, housing affordability concerns, and revenue needs.
In 2025, Victoria is introducing several key changes to land tax that could impact property owners across the state. Whether you’re a seasoned investor or a first-time landlord, understanding these updates is crucial for financial planning and compliance.
In this article, we’ll break down the most important changes, explain how they might affect you, and provide actionable insights to help you navigate the new rules.
1. Increased Land Tax Rates for High-Value Properties
One of the most notable changes in 2025 is the increase in land tax rates for high-value properties. The Victorian government has introduced new tax brackets targeting properties with higher land values.
New Land Tax Thresholds (2025)
| Taxable Land Value | Current Rate (2024) | New Rate (2025) |
|---|---|---|
| 300,000−300,000−600,000 | 0.5% | 0.6% |
| 600,001−600,001−1,000,000 | 0.8% | 1.0% |
| 1,000,001−1,000,001−1,800,000 | 1.3% | 1.5% |
| $1,800,001+ | 2.25% | 2.5% |
What This Means for You
- Investors with multiple properties: If your combined land holdings exceed $300,000, expect a higher tax bill.
- Commercial property owners: Businesses with large landholdings will see increased costs.
- Potential rent increases: Some landlords may pass on higher taxes to tenants through rent adjustments.
Action Tip: Review your property portfolio and consider whether restructuring ownership (e.g., through trusts or companies) could optimize your tax position.
2. Removal of the Tax-Free Threshold for Absentee Owners
Previously, absentee owners (foreign investors or Australians living overseas) enjoyed a tax-free threshold on land tax. However, starting in 2025, this exemption is being removed entirely.
Key Changes:
- Absentee owners will now pay land tax from the first dollar of land value (no $300,000 threshold).
- Surcharge remains at 4% (on top of standard land tax rates).
Who Is Affected?
- Foreign investors
- Australian expats who own Victorian property but live abroad
- Companies or trusts with overseas beneficiaries
Action Tip: If you’re an absentee owner, consult a tax advisor to explore potential exemptions or restructuring options.
3. Introduction of a Vacant Residential Land Tax (VRLT) Expansion
To combat housing shortages, Victoria is expanding its Vacant Residential Land Tax (VRLT) to include more regions and tighten enforcement.
Key Updates:
- Geographic expansion: Previously limited to inner Melbourne, the VRLT now applies to regional cities (e.g., Geelong, Ballarat, Bendigo).
- Shorter vacancy period: Properties left vacant for 6 months (down from 12) may now be taxed.
- Higher penalty rate: The tax rate increases from 1% to 2% of the property’s capital improved value (CIV).
Why This Matters
- Investors with holiday homes: If your property isn’t rented or used for at least six months, you could face penalties.
- Developers holding onto land: Delays in construction could trigger the tax.
Action Tip: If you own a vacant property, consider renting it out or using short-term leasing to avoid the tax.
4. New Exemptions for Build-to-Rent (BTR) Developments
To encourage more affordable housing, the government is introducing land tax concessions for Build-to-Rent (BTR) projects.
What’s Changing?
- 50% land tax discount for eligible BTR developments.
- Extended eligibility: Projects must provide affordable housing components (at least 10% of units at below-market rates).
Who Benefits?
- Institutional investors developing large-scale rental projects
- Developers focusing on long-term rental housing
Action Tip: If you’re involved in property development, assess whether transitioning to a BTR model could offer tax advantages.
5. Stricter Compliance and Data-Matching Measures
The State Revenue Office (SRO) is ramping up enforcement with improved data-matching technology.
What’s New?
- Tighter monitoring of land use: The SRO will cross-check property records with rental databases, Airbnb listings, and council data.
- Higher penalties for incorrect declarations: Fines for underreporting land values or incorrect exemptions will increase.
How to Stay Compliant
- Ensure your property details are up-to-date with the SRO.
- Keep records of rental agreements or occupancy to prove exemption eligibility.
Action Tip: Conduct an annual review of your land tax obligations to avoid unexpected penalties.
6. Transitional Relief for COVID-Impacted Landlords
Acknowledging ongoing financial pressures, the government is offering limited land tax relief for landlords who provide rent reductions to struggling tenants.
Key Details:
- Up to 25% land tax discount if landlords offer at least three months of reduced rent.
- Application required: Landlords must apply through the SRO with proof of rental assistance.
Action Tip: If you’ve helped tenants with rent reductions, check if you qualify for this relief.
Final Thoughts: How to Prepare for 2025 Land Tax Changes
The 2025 Victorian land tax reforms bring both challenges and opportunities. Here’s a quick summary of steps to take:
✅ Review your property portfolio – Assess whether restructuring ownership could reduce liabilities.
✅ Check absentee owner rules – Foreign investors should plan for higher costs.
✅ Avoid vacant property tax – Rent out unused properties or explore short-term leasing.
✅ Explore Build-to-Rent incentives – Developers can benefit from new tax discounts.
✅ Stay compliant – Keep accurate records and update the SRO on any changes.
Need Help?
Land tax can be complex, especially with these new changes. Consulting a property tax specialist or financial advisor can help you optimize your strategy and avoid costly mistakes.
Your Turn: What Do You Think?
How will these changes impact your property investments? Are you considering any adjustments to your portfolio? Share your thoughts in the comments below!
By staying informed and proactive, you can navigate Victoria’s 2025 land tax changes with confidence.
