Vacant Residential Land Tax and ‘Uninhabitable’ Property – KES v Commissioner of State Revenue [2026] VCAT 75
The recent Victorian and Civil Administration Tribunal (VCAT) matter of KES v Commissioner of State Revenue [2026] VCAT 75 involved the review a land tax assessment issued by the Commissioner of State Revenue (Commissioner) under the Land Tax Act 2005 (Vic) (LTA), applying vacant residential land tax (VRLT).
The matter was brought before VCAT following the Commissioner rejecting an objection made to the land tax assessment by applicant, KES (KES). KES challenged the assessment issued by the State Revenue Office on the basis that the Commissioner had erroneously determined that the property in question was subject to VLRT.
Background
Under section 34A of the LTA, VRLT applies to residential land (defined in section 34B of the LTA) located in the greater Melbourne area that has been vacant (defined in section 34C of the LTA), insofar as it has not genuinely been used or occupied, for a period of six months or more in a relevant land tax year.
KES purchased a residential property in West Footscray, Victoria (Property) in 1988 and resided in the Property as her principal place of residence until 2003. In approximately 2007, KES began leasing the Property to third parties from time to time. However, in 2010 the tenants at that time caused significant damage to the Property - to the extent that KES considered the Property to be ‘uninhabitable’. The Property was then left vacant until 2020.
Despite KES considering the Property to be in a complete state of disrepair, a family member moved into the Property in 2022.
Following investigation by the Commissioner, VRLT was imposed on the Property for the 2018 to 2020 and 2022 land tax years on the finding that the Property was not sufficiently used or occupied during the relevant land tax years. The Commissioner also applied penalty tax.
KES objected to the assessments and the imposition of VLRT on the basis that:
the Property was in such a state of disrepair, it was uninhabitable between 2018 and 2020 and therefore unable to be used for residential purposes; and
for the 2022 land tax year, the Property was not vacant.
In 2023, the Commissioner disallowed the objection however, determined to remit the payment of penalty tax. The matter was then referred to VCAT.
Key issues
VCAT was asked to consider several issues in determining whether VLRT had been incorrectly applied as contended by KES, namely whether:
the definition of ‘vacant’ contained in section 34C of the LTA had been correctly applied by the Commissioner in issuing its assessment;
the evidence submitted by KES was sufficient to support the position that the Property had been genuinely used and occupied during the relevant land tax year;
any exemptions, including temporary absence provisions, were applicable in the circumstances; and
the penalties imposed by the Commissioner were correctly assessed under the Taxation Administration Act 1997.
VCAT’s decision
Where an objection to a land tax assessment is brought before VCAT, the burden of proof is with the taxpayer to demonstrate the assessment is incorrect. In making its decision, VCAT will consider evidence of actual use and occupation of the property in question, which includes, physical use of the land, supporting documentation and utility usage.
Therefore, the two key questions before VCAT were:
1. Did the Property meet the definition of residential land?
Subsection 34B(1) of the LTA defines residential land as ‘land that is capable of being used solely and primarily for residential purposes’. VRLT is only imposed on residential land, as defined, that is vacant.
KES argued that because of the condition of the Property, it could not be used solely or primarily for residential purposes and therefore, did not meet the definition of residential land under the LTA and therefore, VRLT could not be imposed.
VCAT considered the evidence presented, which included photos taken of the property in 2011 showing a fully furnished living room, kitchen and bedrooms that clearly demonstrated that in 2011 the Property was habitable. In the 2022 land tax year, being the year KES’ family member moved into the Property, despite photographs evidencing that the hot water supply was disconnected the occupants using bottled water, the VCAT member was not satisfied that the Property was incapable of being used for residential purposes.
Therefore, KES was unable to demonstrate that during the period from 2011 to 2022, the Property was not capable of being used for residential purposes. Therefore, the Property met the definition of residential land under the LTA, specifically in relation to VRLT.
2. Was the Property vacant for more than six months?
In relation to the assessments issued for the 2018 to 2020, it was not disputed that the Property was vacant for greater than six months in the preceding land tax year in accordance with section 34C(1) of the LTA.
However, in respect to the 2022 assessment, the VCAT member was asked to consider whether the Property was used and occupied for at least six months in the preceding land tax year by a permitted occupant (section 34C(1)(b) of the LTA).
In making its determination, VCAT considered evidence presented by the Commissioner that:
2.1. there was low water and electricity usage in relation to the Property for the 2022 land tax year; and
2.2. the Property was not recorded as the address for any occupant by any relevant authority (including the ATO and/or VicRoads).
The low utility usage demonstrated that the use of the Property was not consistent with the requisite degree of permanence to establish a property as a principal residence and therefore, the VCAT member was satisfied that the Property was vacant for six months or more in the preceding land tax year, and therefore the 2022 assessment had been correctly issued.
The VCAT member found that the circumstances did not justify excluding the property for VRLT, and the assessment issued by the Commissioner was upheld.
Significance
The matter highlights that it is not sufficient to simply claim that a property is uninhabitable, and therefore not subject to VRLT on the basis that it cannot reasonably be used as residential land.
Sound, corroborative, evidence must exist to demonstrate that that VRLT should not be applied.
For more information, please contact:
Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal
Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal
Tayla Berger
Senior Associate
T: 03 5226 8559 | M: 0407 825 365
E: tberger@ha.legal
This article was prepared with the assistance of Philippa Duniam, Law Clerk.
