If you own a vacant block, an unimproved parcel, or a holiday home that sits empty for
more than six months of the year on the Mornington Peninsula, the Vacant Residential
Land Tax (VRLT) landscape has shifted materially from 1 January 2026.
The changes aren’t theoretical. They come with a five-year lookback, strict notification
deadlines, and penalty provisions that catch owners who don’t engage with the system.
Here’s what you need to know.
What’s changed for 2026?
VRLT now applies statewide, it’s no longer confined to inner and middle-ring
Melbourne councils. That means the entire Mornington Peninsula Shire is covered.
More significantly, a new category of “residential land” has been added: unimproved
land. If you own a vacant block that’s been zoned residential and has remained
undeveloped for a continuous period of five years, it may now be subject to VRLT. The
five-year clock is retrospective for the 2026 tax year, the SRO is looking back to 1
January 2021.
There is an exemption for unimproved land that shares a boundary with your principal
place of residence or holiday home, and a further exemption where there’s an
acceptable reason construction hasn’t commenced. The Treasury Guidelines released in
November 2025 outline what the Commissioner must consider when assessing those
reasons, but the threshold isn’t clearly defined — which means disputes are likely.
The notification deadline matters
VRLT annual notifications had to be lodged by 15 February 2026. If you owned vacant or
unoccupied residential land and didn’t notify the Commissioner of its vacancy status by
that date, a penalty tax of 25% of the VRLT payable can be imposed as additional tax.
If no VRLT is actually payable — for example, because the property was genuinely used
as a holiday home — then no penalty applies either. But the onus is on the owner to have
notified.
Why this matters on the Peninsula
The Peninsula has a high concentration of the exact property types caught by these
changes: vacant blocks held for future development, holiday homes used only a few
weeks a year, and land held speculatively alongside a primary residence.
Pitcher Partners has flagged that the SRO will be issuing 2026 land tax assessments
from late January, and property owners should be reviewing those assessments
carefully for accuracy. Including ownership details, property valuations, and whether
the correct exemptions have been applied.
Combined with the land tax adjustment prohibition (vendors cannot pass land tax costs
to buyers on contracts below the 2026 indexed threshold of $10.7 million, the carrying
cost of holding vacant or underutilised property on the Peninsula has increased
substantially.
What should you do?
If you hold vacant land or a holiday property on the Peninsula, three steps are worth
taking now. First, review your 2026 land tax assessment when it arrives and check it
against the exemptions available. Second, speak with your accountant or tax adviser
about whether the unimproved land provisions apply to your situation, the five-year
lookback catches many owners who aren’t aware of it. Third, if the carrying costs are
tipping the economics, have a conversation with your agent about what the property is
worth in the current market. A number of Peninsula owners are already making the
decision to divest, and ex-investor stock is adding meaningful supply to listings across
the shire.
At HIVE Realty, we’re seeing the impact of these tax changes on the ground, more
stock from owners who’ve run the numbers and decided it’s time. If you’d like to
understand where your property sits in the current market, reach out to our team.
Further reading:
Vacant Residential Land Tax: The 2026 Changes Hitting Peninsula Landowners
If you own a vacant block, an unimproved parcel, or a holiday home that sits empty for
more than six months of the year on the Mornington Peninsula, the Vacant Residential
Land Tax (VRLT) landscape has shifted materially from 1 January 2026.
The changes aren’t theoretical. They come with a five-year lookback, strict notification
deadlines, and penalty provisions that catch owners who don’t engage with the system.
Here’s what you need to know.
What’s changed for 2026?
VRLT now applies statewide, it’s no longer confined to inner and middle-ring
Melbourne councils. That means the entire Mornington Peninsula Shire is covered.
More significantly, a new category of “residential land” has been added: unimproved
land. If you own a vacant block that’s been zoned residential and has remained
undeveloped for a continuous period of five years, it may now be subject to VRLT. The
five-year clock is retrospective for the 2026 tax year, the SRO is looking back to 1
January 2021.
There is an exemption for unimproved land that shares a boundary with your principal
place of residence or holiday home, and a further exemption where there’s an
acceptable reason construction hasn’t commenced. The Treasury Guidelines released in
November 2025 outline what the Commissioner must consider when assessing those
reasons, but the threshold isn’t clearly defined — which means disputes are likely.
The notification deadline matters
VRLT annual notifications had to be lodged by 15 February 2026. If you owned vacant or
unoccupied residential land and didn’t notify the Commissioner of its vacancy status by
that date, a penalty tax of 25% of the VRLT payable can be imposed as additional tax.
If no VRLT is actually payable — for example, because the property was genuinely used
as a holiday home — then no penalty applies either. But the onus is on the owner to have
notified.
Why this matters on the Peninsula
The Peninsula has a high concentration of the exact property types caught by these
changes: vacant blocks held for future development, holiday homes used only a few
weeks a year, and land held speculatively alongside a primary residence.
Pitcher Partners has flagged that the SRO will be issuing 2026 land tax assessments
from late January, and property owners should be reviewing those assessments
carefully for accuracy. Including ownership details, property valuations, and whether
the correct exemptions have been applied.
Combined with the land tax adjustment prohibition (vendors cannot pass land tax costs
to buyers on contracts below the 2026 indexed threshold of $10.7 million, the carrying
cost of holding vacant or underutilised property on the Peninsula has increased
substantially.
What should you do?
If you hold vacant land or a holiday property on the Peninsula, three steps are worth
taking now. First, review your 2026 land tax assessment when it arrives and check it
against the exemptions available. Second, speak with your accountant or tax adviser
about whether the unimproved land provisions apply to your situation, the five-year
lookback catches many owners who aren’t aware of it. Third, if the carrying costs are
tipping the economics, have a conversation with your agent about what the property is
worth in the current market. A number of Peninsula owners are already making the
decision to divest, and ex-investor stock is adding meaningful supply to listings across
the shire.
At HIVE Realty, we’re seeing the impact of these tax changes on the ground, more
stock from owners who’ve run the numbers and decided it’s time. If you’d like to
understand where your property sits in the current market, reach out to our team.
Further reading:
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