Until a couple of years ago, most Victorians with a single investment property never thought about land tax. The general threshold sat at $300,000 of taxable land value, and many holdings stayed under it. That changed in 2024. The threshold dropped to $50,000, and a temporary “COVID debt levy” was layered on top, pulling tens of thousands of property owners into the system for the first time. Both are still in place for the 2026 assessment year (current rates and thresholds are published at sro.vic.gov.au).
That has made exemptions matter in a way they didn’t before. A property that would have cost you nothing five years ago can now generate a four-figure assessment, so getting an exemption right, or claiming one you didn’t realise applied, is the difference between paying and not paying.
The State Revenue Office has noticed too. Its 2026 compliance program is openly focused on incorrect principal place of residence and primary production exemptions, alongside mistakes around trust holdings and absentee owner status. Both sides of the equation are tightening at once: more people in scope, more scrutiny on who’s claiming what.
Key Takeaways
- The general land tax threshold in Victoria is now $50,000 of taxable land value, down from $300,000 before 2024.
- The COVID debt levy still applies on top of standard rates for the 2026 assessment year.
- The SRO has flagged PPR and primary production exemptions as a key audit focus in 2026.
- Several exemptions were widened from 1 January 2026, including a new partial PPR rule and longer protections for absent owners.
The exemptions most Victorian property owners can actually use
Most landowners only need to know about a handful of exemptions. The rest exist for narrow circumstances.
Principal place of residence (PPR). The home you live in is exempt from land tax. To qualify, you (or a vested beneficiary if the property is held in an eligible trust) must have lived there for at least six continuous months from 1 July of the year before the assessment, and the property must not have earned income during the qualifying period. PPR is by far the most common exemption, and also the one most likely to be silently lost through a change in circumstances.
Holiday home exemption. A second home used as a holiday home can be exempt from vacant residential land tax (VRLT) if the owner already has a PPR in Australia and the property is genuinely used by the owner or a relative for at least four weeks a year. From 1 January 2026, land that adjoins a holiday home (a separate title containing a garden, tennis court or similar) is also covered.
Primary production land. Land genuinely used for farming, grazing, horticulture or similar can be exempt, with stricter tests applying to land in greater Melbourne and to land held by trusts or companies. The SRO has flagged primary production claims as a 2026 audit priority, so the activity has to be real, not just a zoning box.
Unfit-to-live and construction exemptions. If your home is being built, renovated, or has been damaged and is uninhabitable, the PPR exemption can continue while you’re not living there. The window was extended from 1 January 2026, which the next section covers.
Low-value land with a non-permanent residence. A new exemption introduced for 2026 covers land valued under $300,000 where the owner lives in a non-permanent dwelling such as a cabin or a shed used as a residence, provided they own no other land and meet PPR-style use requirements. It fills a gap that previously caught owners of rural blocks living in temporary structures.
A handful of specialised exemptions also exist for charitable land, residential care facilities, retirement villages and rooming houses. If you’re using the land for any of those purposes, an accountant can confirm whether you qualify.
What changed in 2026, and why it matters even if you already had an exemption
The 2026 land tax year brought several reforms that quietly widened who can keep an exemption. If your situation didn’t change, you may not realise the rules around you did.
Partial PPR exemption. Before 2026, earning any income from your home generally killed the entire PPR exemption. From 2026, land tax can be apportioned where only part of the property qualifies as a PPR. The classic example is a home with a granny flat that earns rental income: the part containing your residence stays exempt, and only the portion generating income is taxable. The same logic helps in mixed residential and business-use scenarios, and where a property earns income after the owner’s death during estate administration.
Family violence absence. Where an owner is forced to leave their home due to family violence, the PPR exemption can now be preserved for up to six years, provided no income is derived from the property. The change is designed to stop a tax bill from compounding the harm.
Unfit-to-live exemption extended. If your home becomes unfit to live in due to fire, storm, accident or malicious damage, the exemption used to apply for two years. From 2026, that runs to four years, with an additional two years possible at the Commissioner’s discretion where the delay is genuinely outside your control. With insurance and rebuilding timelines what they are, the old two-year window often expired before the keys went back in the door.
VRLT reach has widened. From 1 January 2026, vacant residential land tax extends to land in metropolitan Melbourne that is capable of residential development but has remained undeveloped for five continuous years or more. New exemptions sit alongside this for land that genuinely cannot be developed and for land contiguous to your PPR. The annual VRLT vacancy notification deadline has also moved from 15 January to 15 February, which is worth diarising if you own a second residential property.
Why people lose exemptions they were entitled to
This is where most Victorian property owners get caught. The exemption rules are unforgiving about a handful of small situations, and the SRO doesn’t usually warn you before issuing an assessment.
The Airbnb and short-stay trap. Listing your home on a short-stay platform while you’re overseas, or renting out a single room for a stretch, can break the no-income requirement attached to the PPR exemption. Once the SRO sees rental income against an address flagged as a PPR, the exemption is at risk for that assessment year. The new 2026 partial-exemption rule helps with permanent setups like granny flats but does not give a free pass on intermittent short-stay income.
Moving overseas for work. The temporary absence provision lets you keep the PPR exemption while you’re away, but only if you maintain the intention to return, don’t claim a PPR exemption on another property, and don’t earn rental income from the home (subject to limited exceptions). Long postings without proper documentation are a regular source of unexpected assessments.
The two-PPR overlap. When you buy a new home but haven’t sold the old one, you can usually claim the PPR exemption on both for a limited period, but only if specific conditions are met around your move-in timing and the sale of the previous property. Owners who assume the overlap is automatic sometimes get assessed on whichever property they didn’t nominate correctly.
Trust and company ownership. Holding property in a trust or company changes which exemptions are available and how they’re claimed. PPR via a discretionary trust, for example, has tighter rules than personal ownership, and the trust surcharge can apply on top. People who restructure for asset protection without checking the land tax consequences often end up worse off.
Not telling the SRO when things change. You’re required to notify the SRO within 60 days if the use or ownership of your PPR changes in a way that affects the exemption. Penalties and interest can apply on top of any back-assessed tax.
If you own more than one Victorian property, have moved recently, or have changed how a property is used, it’s worth having an Epping-based accountant review your most recent assessment before you simply pay it. RPS Accountants helps property owners across Melbourne’s northern suburbs work through their exemption position, lodge objections within the 60-day window, and structure future purchases to keep the exemptions they’re entitled to. Call us on 1300 110 120 or visit our office at 136 Gateway Boulevard, Epping.
Frequently asked questions
Do I have to apply for the PPR exemption, or does it happen automatically?
It’s usually applied automatically when you buy a property, based on the principal place of residence box ticked on the Notice of Acquisition lodged at settlement. If your conveyancer didn’t tick it, or if you’ve moved into a different property you already owned, you need to apply through the SRO’s My Land Tax portal. If you receive a land tax assessment for a home you actually live in, that’s a sign your PPR was never properly recorded and needs to be corrected.
Can I rent out a room or run a home business and keep my PPR exemption?
Running a home-based business where the actual business operates from another premises (for example, an employee working from home as an alternative to their employer’s office) generally does not affect the PPR exemption. Renting a room out, listing on Airbnb, or having a granny flat that earns rent has historically been enough to break the exemption because of the no-income test. From 2026, a partial PPR exemption can apply where part of the land is genuinely used as a residence and another part earns income, but you’ll only be exempt on the residential portion. If you’re considering a short-stay let, run the numbers first, because losing the PPR exemption on a Melbourne property can easily cost more than the rental income.
What happens to my PPR exemption if I move overseas for work?
The temporary absence provision lets you keep the exemption while you’re abroad if you intend to return to the home, you don’t claim a PPR exemption on any other property in Australia, and you don’t derive income from the property in the year before the assessment. Renting it out for six months or more in a year typically breaks the exemption. Long-term postings should be documented and, ideally, planned with an accountant before you go, because the absentee owner surcharge is a separate issue and can apply at the same time.
I think my land tax assessment is wrong, what do I do and how long do I have?
You have 60 days from the date of the assessment to lodge an objection with the SRO. That window is firm, especially for valuation objections. If an exemption you’re entitled to has been missed, contact the SRO through My Land Tax with supporting evidence, or have your accountant prepare and lodge the objection on your behalf. Don’t pay an incorrect assessment and assume it’ll be sorted later. Refunds are possible but slower, and missed objection deadlines limit your options.
