Victoria Exempts Residential Developers From Its 4 Percent Absentee Owner Surcharge

The Victorian government announced on 14 October that it will cut the state's absentee owner surcharge for residential developments, exempting eligible developers from the charge during construction and for up to two years after a project is complete. The surcharge is the 4 percent annual land tax loading that applies to Victorian land held by absentee owners, a category that includes foreign investors who do not live in the state.

What it means for a foreign buyer

This change is written for developers, not for you, and if you are an individual foreign buyer of a Victorian home nothing in it reduces your bill. The 8 percent foreign purchaser additional duty still sits on top of standard land transfer duty on a residential purchase, and the 4 percent absentee owner surcharge still applies to the land you hold if you live outside Victoria. Both are unchanged by this announcement.

What it changes is the economics of the off-plan stock you are being sold. Until now a developer that finished a tower and had not sold every unit kept paying the surcharge on the unsold inventory, which is a standing reason to discount hard into completion or to delay practical completion. Under the updated guidelines that holding cost disappears for up to two years after construction. Expect less willingness to cut price on completed unsold units in Melbourne projects from here, and expect the discount to sit earlier in the sales cycle instead. The second thing to watch is the review the government has committed to on both the foreign purchaser duty and the surcharge itself, because that is the one that would reach your purchase. It sits on the far side of the state election on 28 November.

If you are negotiating on completed stock, the holding-cost argument you had last month is gone.

What changed

The announcement, made by Treasurer Colin Brooks under Premier Ben Carroll's Labor government, covers four things. It cuts the absentee owner surcharge for developments after construction and for those judged to contribute to the Victorian economy. It updates the guidelines so that developers building affordable housing can be recognised for that contribution. It exempts developers who meet the criteria of the state's Development Facilitation Program from the surcharge during construction. And it formalises a one-year exemption after construction for the sale of land, applying regardless of the type of land.

The surcharge itself was introduced in 2016 and doubled in 2023. The foreign purchaser additional duty adds 8 percent to the duty payable by a foreign purchaser of residential property.

The timing is tight and deliberate. Updated Development Facilitation Program guidelines are to be introduced before caretaker conventions begin on 3 November, which is when a government heading into an election stops making substantive decisions. The broader review of the two foreign property taxes is a commitment rather than a dated process, and the 28 November election stands between the promise and any legislation.

The government release names no rates, no dollar figures and no commencement date.

The mechanism

This is being delivered administratively, not through a gazetted amendment. The absentee owner surcharge sits in the Land Tax Act 2005 and the foreign purchaser additional duty in the Duties Act 2000, and the State Revenue Office points to those Acts for the operative rates. But the exemptions announced here run through the Development Facilitation Program's guidelines, which are an administrative instrument the government can rewrite without going back to Parliament.

That cuts both ways for anyone underwriting a Victorian project. A concession granted by guideline arrives faster than one granted by statute, and it can be withdrawn the same way, with no second-reading speech and no transitional provisions to rely on. If your purchase depends on a developer's eligibility under those criteria, the eligibility is only as durable as the guideline, and the guideline is a policy document owned by whichever government is in office.

Context

Australia applies foreign ownership rules at two levels. Federally, the Foreign Investment Review Board must approve most residential purchases by foreign persons, and a ban on foreign buyers acquiring established dwellings runs alongside it. The state surcharges are a second, separate layer, and Victoria's are among the heaviest in the country.

The fiscal argument for easing them is that the layer worked too well. A Property Council report in late 2025 found Victoria had lost more than half of its foreign investment, which the council valued at about 5 billion dollars. Cath Evans, executive director of the Property Council of Victoria, called the announcement a step in the right direction while saying more substantial action is needed, and noted that it does not address the commercial sector at all.