Two Federal Court penalties against foreign owners who never built have put a price on idle residential land. Victoria now taxes it too. Both sets of rules run on a clock, and builders often hold it.
Two foreign investors who bought vacant residential land and never built on it have been ordered to pay a combined $878,000.
Against a national housing shortfall, the sums are small. The principle behind them is not. Across federal and Victorian law, idle residential land is now measured in years, and many of those years are counted the same way a builder counts a job.
What did the Federal Court penalties involve?
In September, the Australian Taxation Office secured civil penalty orders in the Federal Court against two individuals who held foreign investment approvals for vacant residential land.
Guno Handojo was ordered to pay $370,000. Fengqin Li was ordered to pay $508,000. In each case, the ATO says, a home was not completed within the four years required by the conditions of the approval.
The Court froze both blocks while the matters ran. In the second case, the ATO also registered a charge over the land to secure the amounts owed. Both decisions are subject to appeal.
The ATO says both breaches were found through data matching and its land banking audit, which is reviewing every foreign investment approval that requires residential land to be developed. It has said its powers extend to forcing the sale of land.
The court cases sit on top of routine enforcement. In the year to 30 June 2025, the ATO forced remediation of 217 breaches of the foreign investment rules, including the disposal of 111 residential properties.
Why do foreign buyers of vacant land have four years to build?
The foreign investment framework is designed to steer overseas money into new supply. Foreign buyers of vacant residential land are generally required to build within four years. Established homes are largely closed to them. A temporary ban on foreign purchases of established dwellings began on 1 April 2025, and the Government announced in its May 2026 Budget that it would extend the ban to 30 June 2029.
The flow of approvals is modest and shrinking. Treasury’s quarterly report for the three months to 31 March 2026 shows 663 residential proposals approved, worth $1.0 billion. In the same quarter of 2025 the figures were 929 proposals worth $1.2 billion. On our calculation, that is a fall of about 29 per cent in the number approved.
Vacant land made up 16.7 per cent of foreign residential purchase transactions recorded in the year to 30 June 2023, according to the register of foreign ownership insights. The register itself cautions that it reflects confirmed transactions and is not a full stocktake of foreign ownership.
None of those figures shows how much land is being banked. They show how much land carries a deadline.
How does Victoria’s vacant residential land tax treat undeveloped land?
Victoria has taken the deadline idea further, and taken nationality out of it.
Since 1 January 2026, vacant residential land tax has applied to land in metropolitan Melbourne that is capable of residential development and has stayed undeveloped for a continuous five years or more. The five years can include time before 2026. It does not matter who owns the land.
The rate on that land is 1 per cent of capital improved value each year. On a block with a capital improved value of $800,000, that is $8,000 a year.
The State Revenue Office counts land with no home on it as undeveloped. It also counts land with a residence that is partially built and has never been occupied. Land incapable of residential development is exempt, and the Commissioner can extend the five year period using factors published in a November 2025 Government Gazette.
What counts as undeveloped residential land in Victoria?
From 1 January 2026, Victoria’s State Revenue Office treats land in metropolitan Melbourne as undeveloped residential land if it is outside a non residential zone, is capable of residential development, and has stayed undeveloped for a continuous five years or more. This includes vacant blocks and land with a partly built home that has never been occupied. The tax is 1 per cent of the land’s capital improved value each year, subject to exemptions.
Where does the build program come into it?
This is the part of the land banking debate that rarely reaches the headlines.
Separately from the undeveloped land rule, the SRO treats a property as vacant if, on 31 December, a residence on it has been under construction or renovation for two years or more. The clock starts when the building permit is issued. The SRO can extend that period where there is an acceptable reason.
Victoria applies the same logic at the other end of a job. A newly built home that stays unsold and unoccupied can be exempt for up to three years, provided the owner has genuinely tried to sell at or below the price expected when construction began. After that, the tax applies at 1 per cent.
The federal rule works the same way. The obligation on a foreign approval holder is to complete a home within four years, and completion is something a builder delivers.
That means a stalled build is no longer only a contract problem. Months lost to a failed trade, a finance delay or a dispute can move a client’s land closer to a tax line. Victorian owners must notify the SRO of vacant residential land by 15 February each year, even where they believe an exemption applies.
A stalled build is no longer only a contract problem.
Are other states acting on idle land?
Not in the same way, and not with a dedicated tax.
In Queensland, the Government told Parliament in February that land sold through its Land Activation Program will carry requirements to develop, enforced through development conditions and the contract of sale.
In New South Wales, a Legislative Assembly committee has been examining historical development consents. These are approvals granted years or decades ago that were physically commenced, so they cannot lapse, but were never finished. The committee held its final hearing in November 2025.
South Australia has moved through stamp duty instead, rewriting its residential land test so that more vacant sites are treated as residential.
Is every idle block a land bank?
No, and the evidence does not support that reading.
The Productivity Commission’s interim report on housing supply draws a line between land that is zoned and land that is serviced, approved and feasible to build on. As we reported, zoned land is not ready land. A block can be zoned for years and still be waiting on sewer, roads or a feasibility that works.
A tax on idle land changes the cost of holding it. It does not lay a water main.
The figures published so far count approvals, transactions and exemptions. None of them counts serviced, buildable land that is sitting unused, or explains why.
What does a clock on land mean for builders?
For most residential builders, the federal cases will feel distant. Few will build for a client holding a foreign investment approval.
The direction is closer to home. Governments are defining idle land by elapsed time rather than intent. Four years to complete under a foreign approval. Five years undeveloped in metropolitan Melbourne. Two years under construction. Three years unsold.
Each of those periods is partly made of build time. That draws the program, the reasons for delay and the paper trail behind every extension of time into a conversation they were never designed for.
Land banking is a debate about owners. The clock it runs on is one builders keep.
We will keep tracking the ATO audit, Victoria’s tax and what other states do next. For more on the forces shaping the pipeline, follow our Australian construction industry trends coverage and listen to The Good Builder Podcast.
Frequently asked questions
Land banking is holding land, usually while it rises in value, without developing it. Under Australia’s foreign investment rules, the ATO describes it as a foreign investor holding residential land for future gain rather than putting it to productive use through development.
Foreign buyers of vacant residential land are generally required to complete construction within four years under the development conditions attached to their foreign investment approval. The ATO is auditing every approval that carries a residential development condition.
In September 2026 the Federal Court ordered Guno Handojo to pay $370,000 and Fengqin Li to pay $508,000, a combined $878,000, for failing to complete homes on vacant residential land within four years. Both decisions are subject to appeal.
Yes, in metropolitan Melbourne. From 1 January 2026, land that is capable of residential development and has stayed undeveloped for a continuous five years or more can attract vacant residential land tax at 1 per cent of capital improved value each year, subject to exemptions.
It can. The State Revenue Office treats a property as vacant if, on 31 December, a residence on it has been under construction or renovation for two years or more, counted from when the building permit was issued. The SRO can extend that period where there is an acceptable reason.
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Last updated 26 October 2026. Federal penalties are subject to appeal. Victorian State Revenue Office guidance is as published on 22 October 2026.
General Information Only. This article reports on published regulator, court outcome and government information. It is general information only and does not take account of the circumstances of any particular business, project, site or landowner. It is not legal, tax or financial advice. Seek advice from a qualified professional before acting on it.
Author: TGB Editorial
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