Provisions were recently inserted into the Land Tax Act 2005 of Victoria which now incorporate a new vacant residential land tax impost.
Vacant residential land tax only applies to residential land in certain specified inner Melbourne metropolitan zones which is left vacant (i.e. not used and occupied by anyone) for a period of greater than 6 months in the preceding land tax year (i.e. the preceding 1 January to 31 December period).
The rate of vacant residential land tax is 1% of the capital improved value of the land.
Section 34C discusses certain concepts of when land is to be considered vacant. Section 34C(2) states that residential land is to be considered vacant where construction or renovation occurring on the land was not completed at the end of the preceding land tax year and more than 2 years have elapsed since the building permit for the construction or renovation was obtained. Therefore, by inference, the legislation results in residential land as not being considered vacant for a period of up to 2 years during the course of construction or renovation occurring on the property.
If the construction or renovation period extends beyond 2 years, the landholder will be required to obtain specific consent from the SRO in order to avoid vacant residential land tax on the property. Most likely, this will only be provided where special circumstances contributing to the delay exist.