Days before the Victorian government entered caretaker mode, new rules quietly took effect for one of the state's most expensive property taxes. Guidelines for a land tax absentee owner Surcharge exemption were published in the Government Gazette on 28 October. They matter for foreign-backed developers building homes in Victoria, and they arrive just as the 28 November election puts the whole surcharge regime up for debate.

What was gazetted

The State Revenue Office announced on 28 October that "new guidelines for the land tax absentee owner surcharge exemption have been published in the Government Gazette today."

The SRO's notice itself did not set out the criteria. The detail comes from the Premier's 14 October announcement, which described what the exemption would cover.

The timing is notable. The guidelines landed less than a week before caretaker mode began on 3 November, when governments generally avoid major new policy decisions.

Who the exemption covers and what it is worth

According to the Premier's release, the absentee owner surcharge exemption applies in three situations.

  • Developers that meet the Development Facilitation Program criteria, while construction is under way.
  • Residential developments for up to two years after completion.
  • A formalised one-year post-construction exemption for land sales.

The Development Facilitation Program criteria require a development cost of at least $50 million in metropolitan Melbourne or $15 million in regional Victoria, with at least 10 per cent affordable housing.

That is a high bar. Smaller projects and developments without an affordable component are unlikely to qualify on those criteria.

For Australian-resident investors and home owners, the change makes no direct difference. The surcharge applies only to absentee and foreign owners, and residents continue to pay general land tax at the usual rates.

Foreign buyers also face a separate charge at the point of purchase: the 8 per cent Foreign Purchaser Additional Duty on residential property. The new guidelines deal with the annual land tax surcharge, not that upfront duty.

The absentee owner surcharge is charged on top of general land tax for land held by absentee individuals and foreign corporations and trusts. It stays at 4 per cent of taxable land value.

It is a significant revenue stream. The surcharge raised $457.83 million in 2024/25, according to the same report.

Victoria is not alone in charging foreign owners more. NSW applies a 5 per cent surcharge land tax on foreign-owned residential land, while Queensland charges a 3 per cent foreign surcharge on land valued at $350,000 or more.

Hypothetical example: what an eligible project might save

Hypothetical example: a foreign-backed developer holds a metropolitan Melbourne site with a taxable land value of $20 million. At 4 per cent, the surcharge is $800,000 a year.

Suppose the project meets the Development Facilitation Program criteria and takes three years to build. If the exemption applies during construction, and then for two years after completion, that is five years of relief.

Assuming the land value stays at $20 million, five years at $800,000 is $4 million in surcharge not paid. General land tax would still apply.

If the same project fell short of the criteria, for example because it lacked the 10 per cent affordable housing component, the developer would face the full $800,000 each year. The figures are illustrative and actual eligibility depends on the gazetted guidelines.

Industry says the relief is too narrow

Builders' groups have welcomed the direction but argue it does not go far enough.

The Housing Industry Association's Keith Ryan said on 14 October that the surcharge "needs to be cut completely and not just for government preferred projects".

A similar assessment described the relief as narrower than it first sounds. Because the surcharge rate itself is unchanged, foreign-owned land outside eligible projects is still taxed as before.

The argument from industry is that foreign Capital is an important source of funding for large apartment and build-to-rent projects. A surcharge that applies to land held during the long lead-in to construction can add materially to project costs.

Where it fits in the election debate

Labor has also pledged a review of the absentee owner surcharge and the 8 per cent Foreign Purchaser Additional Duty if it is re-elected.

One Nation has gone the other way on stamp duty, proposing to raise the foreign purchaser duty on residential property.

Land tax for local investors is also in play. Both major parties have promised to return the general land tax threshold to $300,000, though the surcharge on foreign owners is a separate charge.

The broader federal backdrop matters too. From 1 July 2027, negative gearing will be limited to new builds for properties bought after 7:30pm AEST on 12 May 2026, with existing holdings grandfathered. That puts more weight on new supply, which is exactly what the surcharge exemption aims to encourage.

The exemption guidelines are now published in the Gazette, as the SRO confirmed. That is state revenue guidance, not an election promise.

The review of the surcharge and the foreign purchaser duty is an election commitment from Labor. It would only happen if Labor is returned and follows through.

One Nation's proposed duty increase is also only a proposal.

What to watch

  • 3 November: caretaker conventions now apply, so further changes to the surcharge are unlikely before polling day.
  • 28 November: the election result will decide whether Labor's review of the surcharge and foreign purchaser duty goes ahead.
  • The Gazette text contains the precise eligibility conditions.
  • SRO guidance: watch for any further detail on applications and assessment.
  • Land valuations: falling land values would reduce surcharge bills for projects that do not qualify.