First Vacant Residential Land Tax Holiday Home decision – taxpayer unable to claim Carlton apartment as a holiday home
The first case to consider the holiday home for vacant residential land tax (VRLT) has provided guidance as to what the Tribunal and State Revenue Office will consider in applying the exemption.
https://www.austlii.edu.au/au/cases/vic/VCAT/2026/806.html
The taxpayers owned two properties that were 2.2km apart:
A terrace house in Carlton North (exempt from land tax and vacant residential land tax as their principal place of residence (PPR));
An apartment in Carlton.
The taxpayers sought in 2019 an exemption from VRLT on the basis that the Carlton apartment was their holiday home.
In January 2024, the Commissioner denied the exemption and issued VRLT assessments for the Carlton apartment for the 2019, 2020, 2022, 2023 and 2024 land tax years. This was on the basis tha the Commissioner was not satisfied that the Carlton apartment was a genuine holiday home and not satisfied that the use of the Carlton Apartment was sufficient.
No explanation for the delay between application and assessment was given in the VCAT decision. The taxpayers were successful in overturning the 2019 assessment on objection as it was outside the period of retrospectivity. However, their objection for the other years was denied and the matter was referred to VCAT for review.
VRLT is imposed at rates up to 3% on the capital improved values of residential properties that are not used as a principal place of residence of an owner or permitted occupant. Ostensibly designed to discourage land banking – in practice it is another tax on Victorian land ownership.
VRLT exemption for holiday homes
The exemption has been rewritten and amended a number of times since the years in question. At the time, the holiday home had to be used by an owner and was restricted to individuals. Certain trusts and companies that held a holiday home before 28 November 2025 can now also access the exemption.
Subsection 88(1) of the Land Tax Act 2005 (Vic) relevantly now provides:
(1) Land is exempt from vacant residential land tax if—
In the year preceding the tax year
the owner of the land … used and occupied other land in Australia as a principal place of residence; and
the owner of the land … or a relative of the owner … used and occupied the land as a holiday home for a period of at least 4 weeks (whether continuous or aggregate); and
the Commissioner is satisfied that the land was used and occupied as a holiday home in that year.
Subsection 88(2) goes on to provide for factors for the Commissioner to take into account:
(2) In considering whether or not the Commissioner is satisfied for the purposes of subsection (1)(b) … the Commissioner must have regard to—
the location of the land; and
the distance between the location of the land and the principal place of residence of the owner … and
the nature and frequency of the use of the land.
Taxpayers usage
Mr and Mrs Hughes and her brother (who lived in the ACT) gave evidence that they used the property as a holiday home.
Mr Hughes, in particular, gave evidence that he stayed with her at the apartment when he came to Melbourne for a holiday.
A logbook was in evidence as were utility bills.
While Mrs Hughes’ brother’s usage was not relevant to the 4 week test at the time (for subparagraph 88A(1)(a)(ii)), it was still relevant to the issue of whether the property was used and occupied as a holiday home (for the paragraph 88A(1)(b) test).
What is a holiday home
The tribunal looked at the meaning of the term “holiday home”. As there is no definition in the legislation, it was held that it should be taken to be the ordinary sense of the term, based on dictionary definitions:
The term ‘holiday house’ is defined in the Macquarie Dictionary as
a house on the beach or at some other holiday centre, and used mainly during annual holidays, sometimes rented out for the remainder of the year.
The Oxford English Dictionary definition of “holiday home” was also considered:
Originally: a house used as a residence during holidays from military duty, school, etc. Later: a house used as a residence while on holiday, esp. by its owner as a second home.
The Tribunal determined that the term “holiday home” may have a narrower meaning than its ordinary meaning, in the context of the VRLT provisions and must be considered in light of the subsection 88A(1)(b) factors.
Tribunal findings
1) The Hughes could not prove that they used and occupied the Carlton Apartment as a holiday home for a period of at least 4 weeks during the relevant calendar years.
In particular, while utility bills were in evidence, this did not show who was using the property.
Further, while a log book of nights stayed showed Mrs Hughes’ use of the property – she could not recollect or provide documentary evidence for what she was doing at the apartment on those dates. The tribunal noted the lack of photographs in evidence of her use of the apartment on those days to corroborate her stay (including of fireworks on New Year’s Eve).
2) With respect to paragraph 88A(1)(b), the Tribunal was not satisfied that the Carlton Apartment was used and occupied as a holiday home for the relevant years based on the factors in subsection 88A(2):
The requirement to consider the location of the land involves a consideration of the “locational attributes”.
In this case, the Carlton Apartment being located near the Melbourne CBD, Lygon street etc could allow it to be a “holiday home” (particularly for the relevant years where VRLT only applied to the inner ring of suburbs).
The distance requirement was not satisfied, however, the tribunal held that the concept of a ‘holiday’ as a period of at least a day required that the distance between the apartment and the PPR should be consistent with travel that “ordinarily would be undertaken where a person has a day or several days available for a holiday”. In the Victorian context, that meant that travel of an hour or so was “reasonable”– but the short distance of 2.2km between the PPR and the apartment was not sufficient.
3) For Section 88A(2)(c) the ‘nature and frequency’ of use and occupation of the land.
For similar reasons to the 4 week test, there is insufficient material before the Tribunal to allow it to be satisfied about the nature and frequency of it use.
The utility bills provided limited support as they were for periods of several months at a time.
The logbook was not sufficient. This was particularly because the brother had used the logbook to refresh his memory of when he was at the apartment and that that Mrs Hughes had no corroborating evidence of her use of the property.
Key takeaways
If this decision is followed by later tribunals and the State Revenue Office, to prove use of a property as a holiday home and qualify for the exemption taxpayers may require:
A logbook of days at the holiday home – including person present, reason for their presence and specifics of what they did while there – potentially including documentary evidence such as receipts etc.
Photographs of the holiday home including view from the home (if relevant), possessions in the holiday home to show that it was furnished as a holiday home.
Photographs of activities at the holiday home (possibly including “selfies”) – such as fireworks on New Year’s Eve.
This case will make it potentially more difficult for taxpayers to prove holiday home usage where contemporary photographs were not taken. Until now, we are not aware of any suggestions from the State Revenue Office that photographs were required to confirm holiday home usage (the SRO’s website did refer to logbooks).
Current law
Now that usage of a holiday home is allowed by a family member of an owner, it would be interesting to see if a case with similar facts may be determined differently in the future. In particular, a person that holds an apartment near their house for holiday home usage by interstate family members that come to visit may potentially make a virtue of the short distance between a PPR and a holiday home.
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Phil Broderick
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