The State Government is aiming to fight the housing crisis and put an end to unaffordable housing with a range of new land taxes. Some of the land tax legislation was first introduced at the start of 2024 but adjustments were implemented in June, with more following in 2025.
These land taxes apply to investment properties, unoccupied homes, holiday homes, commercial properties, or vacant land.
It divided parliament during debates last November, with the opposition staunchly against new taxes. The Greens Party advocated for these new legislations as the state attempted to battle the housing crisis.
Particular focus has been placed on unoccupied properties, including homes and apartments. If a property is vacant for six months in a calendar year it will become taxable. The longer a property is vacant the more the tax will increase.
The State Government wants to encourage those with unused properties to sell or rent them, creating more housing options and easing the housing crisis.
“Expanding vacant residential land tax will free up empty houses for rent and sale, boosting supply and making homes more affordable,” said Treasurer Tim Pallas.
This tax is already present in Melbourne’s inner and middle suburbs and will be expanded across the state in 2025, including regional areas.
In 2022 there were approximately 300,000 empty homes and earlier this year the Government assessed five specific apartment complexes in inner Melbourne and found over 170 apartments to be vacant and eligible for this new tax.
Existing dwellings that are vacant for one year will still pay 1 per cent of the capital improved value, but those vacant for two consecutive years will pay 2 per cent and those vacant for three or more consecutive years will pay 3 per cent – hopefully prompting owners of vacant homes to make these properties available to live in.
The cost of living crisis, the expensive housing market and the approximately 100,000 people experiencing homelessness in Victoria, mean that the state is in desperate need of more affordable housing.
Since the beginning of this year, land tax now applies to properties valued at over $50,000 instead of just properties valued at over $300,000.
The Victorian Government will also introduce a levy on all revenue collected from short-stay accommodation (such as Airbnb) of up to 7.5% next year. It has been reported that the levies received will be used to fund the construction of social and affordable housing across Victoria.
Holiday homes are generally exempt from the vacant land tax, including those owned by a trust or a company.
From 2026, empty residential land will also be eligible for a similar tax, incentivising landowners to sell or build homes.
“We know we need more homes for Victorians and by cracking down on vacant properties we are easing the housing pressures,” Pallas said.
“This is all about freeing up empty houses for rent and vacant land for new homes, particularly across the outer suburbs and regional Victoria,” he said.
There has been some debate about how these changes may affect property investment with many believing that it will encourage investors to look elsewhere.
Last year, The Property Investment Professionals of Australia named Victoria as the worst state in the nation for renters. Opinion is divided on whether a lack of new investment properties will increase the pressure being felt by renters, or whether vacant homes being listed for rent will provide more options for those needing affordable housing.
Local MP Melina Bath believes that the taxes will actually prompt vacant homeowners to sell rather than rent out their properties.
“There are only two plausible outcomes of Labor’s land tax – a rental property fire sale or increased rents – neither is a palatable option,” she said.
Bath made it clear that she was against all of the new taxes.
“In the midst of a cost-of-living crisis it is unfathomable land tax has been introduced by the Allan Government when people can least afford it,” Bath said.
“Labor is punishing Victorian homeowners and investors for its own economic mismanagement through this appalling tax that’s driving up costs for homeowners, increasing rents, increasing the cost of doing business and impacting our most vulnerable citizens,” she said.
In the face of the new land taxes, Bath also urged Eastern Victorian landholders to check their liability.
“I am urging anyone who has received a land tax bill for the first time and is unsure of their rights, to ensure they are not paying tax when they should not be,” Bath said.
“There are many examples of land tax bills being incorrectly issued to people, organisations and community groups who qualify for exemptions,” Bath said.
Bath said it is important to note that while residents may no longer be eligible for an exemption based on property value alone, there are other exemptions, and it is important to check the criteria before paying.
With the Labor Government already enacting these new taxation laws and with more on the way, those with unused properties will have to sell up or rent out, or bear the consequences amid a severe housing shortage.
Whether Victoria has found an effective solution to supply affordable housing, only time will tell.
