Victorian Government to Review Foreign Investor Property Taxes

Victoria is moving to make selected foreign-investment tax settings more supportive of new housing development, with the State Government announcing changes designed to reduce the tax burden on qualifying developments and encourage more investment into housing supply.

On 14 October 2026, the Victorian Government announced that qualifying developers will be able to receive relief from the Absentee Owner Surcharge during construction where projects meet the Development Facilitation Program’s criteria. It also plans to allow eligible residential developments to receive an exemption from the surcharge for up to two years after construction is completed.

The changes are intended to give developers and foreign investors greater certainty while they build, sell and lease new housing. The Government has specifically linked the reform to maintaining Victoria’s housing pipeline and supporting the delivery of more homes.

This is particularly relevant for Melbourne’s western growth corridor, where large volumes of new housing are planned across expanding communities. New estates, townhouses, apartments and house-and-land developments often require substantial capital before homes are completed and sold.

Reducing holding costs for qualifying projects could improve the financial viability of some developments. Where foreign capital is involved, lower tax pressure during construction may make Victoria more attractive compared with jurisdictions where development costs are lower.

If this results in more projects proceeding, Melbourne’s west could benefit from additional housing supply and a broader range of property types. Greater supply could provide more choice for first-home buyers, families, downsizers and investors as the region continues to grow.

Foreign investment could be particularly important in large-scale developments, where substantial upfront funding is required for land acquisition, infrastructure and construction. Encouraging capital toward new housing can also support the broader objective of increasing supply rather than directing additional demand toward established homes.

However, the latest announcement should not be interpreted as the removal of Victoria’s foreign purchaser taxes. Foreign purchasers of Victorian residential property are still generally subject to an additional 8% Foreign Purchaser Additional Duty on top of normal land transfer duty, unless an exemption applies.

This means the immediate reform is more targeted than a broad reduction in foreign purchaser taxation. The focus is on improving conditions for developments that contribute additional housing and economic activity.

For foreign investors, the distinction between purchasing an established property and investing in new development will therefore remain important. Tax treatment, federal foreign investment rules and project eligibility should all be assessed before a purchase or development decision is made.

For buyers in Melbourne’s western growth corridor, increased development activity could eventually translate into greater competition between projects and more options across apartments, townhouses and detached homes. It could also help support the delivery of new communities around transport, schools, retail and employment precincts.

For developers, greater certainty around the Absentee Owner Surcharge may make it easier to model project costs and determine whether developments remain viable through longer construction or sales periods.

The effectiveness of the policy will ultimately depend on how strongly developers and investors respond, as construction costs, finance expenses, planning requirements and buyer demand will continue to influence whether projects proceed.

Overall, Victoria’s latest move suggests a more targeted approach to foreign investment taxation, with incentives increasingly focused on capital that contributes to new housing supply. For Melbourne’s western growth corridor, this could support additional development and housing diversity as the region continues to expand.