Here's the hidden property rule change that could drain your savings overnight

When Melbourne dad Arlo Enemark shared his frustration about being kicked out of a rental that then sat empty for 18 months, thousands of Australians felt the same sting.

His story wasn’t just another tale of housing market heartbreak—it dropped right as Victoria unleashed one of the boldest housing policies in Australian history.

And for property owners who thought they could afford to let homes sit idle, that timing couldn’t have been worse.

From 1 January 2025, the Victorian Government expanded its Vacant Residential Land Tax (VRLT) beyond 16 inner Melbourne councils to cover the entire state.

What was once a city issue is now a statewide reality, with owners of unused homes facing steep financial consequences.

The new tax runs on a progressive system: one per cent of a property’s capital improved value for the first year, two per cent for the second, and three per cent for the third consecutive year.

For a $1 million property, that means $10,000 in the first year, $20,000 in the second, and $30,000 in the third if it stays vacant.

Unlike standard land tax, which only considers the land’s unimproved value, the VRLT is based on the capital improved value listed on council rates notices—including buildings and upgrades.

This difference has caught many property owners off guard.

To qualify as ‘vacant’, a property must not be occupied for more than six months in a calendar year by the owner, a tenant, or anyone under a legitimate short-term arrangement.

Holiday homes and exemptions

For seniors and holiday homeowners, there’s some good news.

Properties used for at least four weeks per year by family members are exempt, as long as the owner’s main residence is in Australia.

From 2025, this exemption also extends to properties owned through companies or trusts.

Family members—including spouses, children, siblings, parents, grandparents, and grandchildren—all count toward the four-week rule.

Other exemptions apply to seniors in aged care or to homes temporarily vacant for legitimate reasons, though all must be properly documented and submitted to authorities.

Early signs suggest the policy is doing what it set out to do.

Government compliance checks have already identified hundreds of empty apartments across Victoria that are now liable for the tax.

Impact on owners and renters

Stories like Enemark’s illustrate the problem at the heart of this policy.

Despite Australia’s tight rental market—with a national vacancy rate of just 1.2 per cent—the 2021 Census revealed more than one million empty homes, many of which weren’t available to renters.

Property owners are now required to self-report vacant homes through the State Revenue Office’s online portal.

Failure to do so can attract penalties of up to 90 per cent of the tax owed, plus interest.

Letters have already gone out to homeowners across regional Victoria, requiring them to confirm whether their properties were occupied in 2024.

For older Australians holding investment or family properties, the message is clear: leaving a home empty could now cost tens of thousands of dollars a year.

What’s next for Victoria’s housing policy

And the state isn’t stopping there.

From 1 January 2026, the tax will expand again to include empty residential blocks in inner and middle Melbourne, targeting land banking and encouraging development.

The Victorian Government says the goal is simple—to make more homes available and discourage speculative ownership that locks up housing supply.

No other state has followed Victoria’s lead yet, but the success of this policy in identifying unused homes could influence future housing strategies nationwide.

For renters like Enemark, it’s a small sign that change might finally be on the horizon.

For property owners, it’s a wake-up call that the era of passive housing investments is ending.

Whether this policy sparks a nationwide shift or remains a Victorian experiment, one thing is certain—the days of leaving properties empty without consequence are over.

While Victoria’s new vacant property tax marks a bold move toward tackling the housing shortage, it’s also reignited debate over how far governments should go when using taxation to influence property ownership.

Some believe the state’s approach could pave the way for broader changes to housing taxes nationwide, including policies once considered off-limits.

One recent discussion explores whether taxing the family home itself might be the next frontier in addressing inequality and housing availability.

Read more: The government has asked for bold proposals. Maybe it’s time to consider taxing the family home

Would you support a similar policy in your state if it meant more homes became available for renters?