Written by

Steven Lee

Mortgage Director, ODIN Mortgage & Tax

10+ years in Australian banking and mortgage lending

Last reviewed

Updated on: October 13, 2026 View profile →

If you own residential property in Australia and live overseas, leaving that property vacant could cost you more than you expect. Vacant residential land tax is a state-level charge applied to residential properties that are not occupied or genuinely rented out for a minimum period each year. For Australian expats, this tax compounds an already complex tax picture that includes foreign owner surcharges and the federal vacancy fee. Understanding how each charge applies, where it applies, and what exemptions are available is not optional; it is essential to protecting your investment returns.

What Is Vacant Residential Land Tax, and Why Does It Target Expat Property Owners?

Vacant residential land tax is a state-imposed annual tax on residential land that sits unoccupied for a defined portion of the year, typically fewer than six months of occupation. The policy intent is to push empty dwellings back into the housing market. In practice, Australian expats are disproportionately affected because they hold Australian properties while living abroad, making natural occupancy difficult unless the property is actively tenanted.

This is distinct from, but frequently confused with, two other charges:

• The federal vacancy fee, administered by the ATO on behalf of the Foreign Investment Review Board, which applies to foreign owners of residential property who do not rent or occupy their property for at least 183 days per year.
• Foreign owner surcharge land tax, which applies at the state level to residential land owned by foreign persons, regardless of whether the property is vacant ^[2].

Australian citizens living overseas are generally not “foreign persons” under state revenue law for the purposes of surcharge land tax, but this distinction depends on the specific state and the individual’s circumstances. Getting this wrong creates serious compliance exposure.

How Does Victoria’s Vacant Residential Land Tax Work in 2026?

Building on the federal layer, Victoria operates one of the most expansive vacant residential land tax regimes in Australia. Following legislative changes, Victoria extended its vacant residential land tax to apply statewide, covering all residential land across Victoria rather than only properties within specified council areas. This means the number of Victorian properties caught by this charge has grown significantly.

Key points for expat owners of Victorian property:

• The tax applies where a property is unoccupied for more than six months in a calendar year.
• Victoria also imposes a vacant residential land tax surcharge of 4% on residential land owned by foreign persons, applied as a separate charge on top of standard land tax.
• Victorian land tax thresholds, rates, and foreign person definitions are subject to change. These depend on individual circumstances, lender policy, and state revenue authority determinations at the time of assessment.

Understanding Victoria’s layered regime matters because expats often hold Victorian investment properties expecting passive income, only to discover that vacancy, even during renovation or between tenancies, can trigger the tax.

What Vacancy Tax Exemptions Are Available to Expats?

Stepping back from state-specific detail, the broader question expat owners ask is whether exemptions actually apply to them. Vacancy tax exemptions exist in most states but require active steps. They are not applied automatically.

Common exemptions across jurisdictions include:

For the federal vacancy fee, the 183-day occupation or genuine availability threshold applies. A property genuinely available for rent on the open market can satisfy this requirement even if it was not actually tenanted for the full period.

How Do These Taxes Stack for Non-Resident Property Owners?

A related but distinct question is how these charges accumulate for an Australian non-resident tax position. The risk for expats is not any single charge in isolation but the combination of multiple overlapping obligations that interact with each other.

Consider a simplified scenario: an Australian citizen permanently based in Singapore who owns a vacant residential investment property in inner Melbourne. Depending on their individual circumstances and the applicable law at assessment time, they could potentially face:

• Victorian land tax on the unimproved land value above the applicable threshold
• Victorian vacant residential land tax if the property is unoccupied for more than six months
• The federal vacancy fee if they are classified as a foreign person under FIRB rules and the property is not rented or occupied for 183+ days
• Stamp duty foreign purchaser additional duty (a one-time charge at purchase) of 8% on top of standard duty if they were classified as a foreign purchaser at the time of purchase ^[1]

Australian citizens are typically exempt from the foreign purchaser additional duty and FIRB approval requirements when purchasing property, but this depends on the nature of the transaction and their individual residency classification. These determinations are not always straightforward and should be verified for each purchase.

Frequently Asked Questions

References

1. Understanding foreign purchaser additional duty | State Revenue Office (www.sro.vic.gov.au)
2. What is surcharge land tax? | Revenue NSW (www.revenue.nsw.gov.au)