Navigating Changes to Holiday Home Taxes: What You Need to Know

At Butler, we’re here to help you navigate changes in tax laws that could affect you. Here’s a breakdown of what’s happening with the Vacant Residential Land Tax (VRLT) in Victoria and what you need to do if you own a holiday home.

What’s Changing?

Starting January 1, 2025, the Vacant Residential Land Tax will apply to holiday homes across all of Victoria, not just in certain parts of Melbourne like before. This means if your holiday home is empty for too long, you might have to pay this tax.

The amount of tax you pay depends on how long your property sits empty:

In the first year, it’s 1% of your property’s value.
In the second year, it’s 2%.
From the third year onwards, it’s 3%.

Understanding Exemptions
Some holiday homes may be exempt from paying this tax. Here are the main reasons you might qualify for an exemption:

If Someone Lives There: If your holiday home is used as someone’s main residence for at least six months of the year, you won’t have to pay the tax.

If It’s Rented Out: If you rent out your holiday home to tenants for at least six months of the year, you’re also exempt from the tax.

If You’re Renovating: If your holiday home is undergoing significant renovations and you have a building permit, you won’t be taxed for up to two years.

If It’s Used by Family Members: A recent change allows relatives of the property owner or vested beneficiaries of a trust to use the holiday home, potentially qualifying for exemption from the tax.

If It’s Owned by Certain Entities: Some trusts or companies may qualify for exemptions, but the rules are a bit more complicated

What You Need to Do
If you own a holiday home in Victoria, here’s what you need to do:

Assess Your Situation: Review the new rules and determine how they might affect you. Consider factors like how often your holiday home is occupied and whether it qualifies for any exemptions.

Keep Records: Make sure to keep detailed records of when your holiday home is occupied and by whom. This documentation will be crucial if you need to prove eligibility for exemptions.

Stay Informed: Keep an eye out for any updates or changes to the VRLT rules. We’ll do our best to keep you informed, but it’s also a good idea to stay informed through other channels.

Seek Professional Advice: If you’re unsure about how the new rules apply to your situation, don’t hesitate to reach out to us for guidance. We’re here to help you navigate these changes and ensure compliance with the law.

Owning a holiday home in Victoria comes with tax responsibilities, but with the right knowledge and guidance, you can navigate these changes successfully. Butler is here to support you every step of the way. If you have any questions or concerns, don’t hesitate to reach out to us.