Some developers will be exempt from the 4 per cent Absentee Owner Surcharge during and after construction. The change fixes a real problem with unsold stock, but most of the housing builders deliver sits outside it.
Victoria will exempt some residential developers from its Absentee Owner Surcharge, the 4 per cent annual land tax charged on land held by foreign owners, during construction and for up to two years after completion.
The change was announced on 14 October, six weeks out from the state election. It will be delivered by updating the Treasurer’s guidelines that decide who gets an exemption. The tax itself, and its rate, are not changing.
For builders, the question is whether it gets more projects out of the ground. That depends on who qualifies, and the group is smaller than the headline suggests.
What is changing with the Absentee Owner Surcharge?
The announcement has three parts.
Developers who meet the Development Facilitation Program’s affordable housing criteria will be exempt from the surcharge while their project is under construction.
Residential developments will be able to stay exempt for up to two years after construction is complete, giving developers time to sell or lease finished stock.
A one year exemption after construction will also be formalised for the sale of land, regardless of the type of land.
As at 15 October, the State Revenue Office was still pointing exemption applicants to the guidelines issued on 1 October 2018. The updated guidelines had not yet been published, so the detail is still to come.
What is the Absentee Owner Surcharge?
The Absentee Owner Surcharge is an annual Victorian land tax surcharge on land owned by absentee individuals, absentee corporations and absentee trusts. It is charged on top of general land tax at 4 per cent of taxable land value from the 2024 land tax year, up from 2 per cent for 2020 to 2023. Australian based corporations and trusts can apply for an exemption, which the Treasurer grants under published guidelines.
Why does the surcharge matter on Victorian developments?
The surcharge doubled from 2 per cent to 4 per cent from the 2024 land tax year. Collections followed.
Surcharge revenue was $222.07 million in 2022/23, according to State Revenue Office figures. It reached $444.76 million in 2023/24 and $457.83 million in 2024/25.
Because it is charged on land value every year, the cost builds with time. As an illustration, a development site with a taxable land value of $20 million carries $800,000 a year in surcharge alone, before general land tax.
Under the current guidelines, an exemption granted to a developer ends when the building is finished. The State Revenue Office’s position is that the owner then becomes a passive investor or landlord.
That is the gap the two year window targets. Apartments and townhouses do not all settle or lease on completion day. Stock that sat unsold after handover has carried the full surcharge, at the point in a project when the developer is trying to get its money back.
Who qualifies for the exemption during construction?
The construction phase exemption is tied to the Development Facilitation Program, the state’s fast track planning pathway where the Minister for Planning decides the permit instead of council.
To use that pathway for housing, a project needs a development cost of at least $50 million in metropolitan Melbourne or $15 million in regional Victoria. At least 10 per cent of its dwellings must be affordable housing.
That affordable component can be met in a few ways. Options include selling 10 per cent of dwellings at a 30 per cent discount to a registered housing agency or Homes Victoria, gifting 3 per cent of dwellings, or paying 3 per cent of the development cost into the Social Housing Growth Fund.
In practice, this is a medium and high density pathway. A house in a growth corridor, or a small townhouse job, will not come near those thresholds.
How big is the existing exemption system?
The surcharge is not a flat cost on every foreign owned site. Exemptions are already available to Australian based companies whose activities make a significant contribution to the Victorian economy and community.
The State Revenue Office granted 447 exemptions in calendar year 2025, with a combined value of $459.2 million. That is close to the $457.83 million collected in 2024/25.
The two figures cover different periods, and the exemption count can include earlier tax years. Even so, the exemption system already forgives roughly as much surcharge as the state collects.
What changes now is certainty. Instead of each developer arguing its case on contribution, the guidelines will name a category of project and a timeframe after completion.
The exemption system already forgives roughly as much surcharge as the state collects.
How does Victoria compare with NSW and Queensland?
New South Wales charges surcharge land tax of 5 per cent on residential land owned by foreign persons. Revenue NSW lists exemptions for Australian based developers and for new build to rent projects.
Queensland charges a 3 per cent foreign surcharge on taxable land valued at $350,000 or more. Its Revenue Office has published a ruling on an exemption for residential land developers.
Victoria’s rate sits between the two, and unlike NSW it is not confined to residential land. Its developer relief has also been discretionary and has ended at completion.
The Property Council has called for the surcharge to be abolished or, at a minimum, brought into line with NSW. This announcement does neither. It reduces the cost for a defined type of project.
What does the change mean for builders?
The builders most exposed to the surcharge are those working on medium and high density residential for offshore funded developers or joint venture partners. For them, the change could improve feasibility on projects already in the planning queue.
The supply data puts it in context. ABS building approvals show Victoria approved 57,008 dwellings in the 12 months to August 2026, more than any other state. NSW approved 53,461.
Victoria also completed more homes. ABS building activity data shows 56,303 completions in the year to June 2026, against 49,303 in NSW. But Victorian completions were almost unchanged from the 56,296 recorded a year earlier.
On those numbers, approvals are not where Victoria is stuck. The constraint sits between approval and completion.
Houses made up 34,414 of Victoria’s completions. For builders in that detached market, the surcharge change does not apply directly.
Timing matters too. Writs for the 28 November election are issued on 3 November. Developers will be watching for two things: whether the updated guidelines are published before then, and whether they hold after the election.
A targeted fix, not a tax reform
The surcharge change fixes a specific problem. Unsold stock held by offshore backed developers was carrying a 4 per cent annual land tax after handover. Two years to clear that stock removes a cost that landed at the worst point in a project’s life.
It leaves the rate untouched and does nothing for the detached homes that make up most Victorian completions. The real test is whether it moves projects stuck between approval and start. That will show up in commencement data, not in announcements.
We will keep tracking Victorian approvals, starts and completions as each release lands. Follow The Good Builder for the numbers as they come in.
Frequently asked questions
It is an annual land tax surcharge on land owned by absentee individuals, corporations and trusts. From the 2024 land tax year it is 4 per cent of taxable land value, charged on top of general land tax.
Developers who meet the Development Facilitation Program’s affordable housing criteria. For housing, that means a development cost of at least $50 million in metropolitan Melbourne or $15 million in regional Victoria, with at least 10 per cent of dwellings delivered as affordable housing.
Residential developments will be able to stay exempt for up to two years after construction is complete. A separate one year exemption after construction will apply to the sale of land, regardless of land type. The updated Treasurer’s guidelines had not been published as at 15 October 2026.
Not directly. The construction phase exemption is tied to a planning pathway built for large medium and high density projects with an affordable housing component.
NSW charges surcharge land tax of 5 per cent on residential land owned by foreign persons, with exemptions for Australian based developers and new build to rent projects. Victoria charges 4 per cent and the surcharge is not limited to residential land.
Related articles
- Victorian Housing Starts Jumped in June. Kincaid Says Builders Still Need a Pathway to Scale
- Melbourne Locks In 800 More Build to Rent Homes. Here Is What the Pipeline Looks Like Now
- What Australia’s Construction Data Really Shows in 2026
Last updated: 15 October 2026. ABS approvals are original series, 12 months to August 2026. ABS completions are seasonally adjusted, four quarters to June 2026. All figures are subject to revision.
General information only. This article is general information and does not take into account your circumstances. It is not legal, tax or financial advice. Seek advice from a qualified professional before acting on anything in it.
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