Victoria’s Treasurer Colin Brooks announced on Wednesday, October 14, that developers delivering affordable housing through the state’s Development Facilitation Program (DFP) will be exempt from the Absentee Owner Surcharge (AOS) during construction, with the exemption extended up to two years after completion for residential developments, plus a separate one-year exemption for land sales following construction. The Carroll Labor Government also pledged to review the AOS and the Foreign Purchaser Additional Duty (FPAD) — but only if it is re-elected on November 28.
Developers that meet the DFP’s eligibility thresholds — minimum development costs of $50 million in metropolitan Melbourne or $15 million in regional Victoria — qualify for the AOS construction exemption immediately. The surcharges under review apply more broadly to overseas and absentee property investors: the AOS currently adds 4% of taxable land value on top of ordinary land tax, while the FPAD adds an extra 8% duty on residential property purchases by foreign buyers.
Both surcharges date back to the Andrews government era. The Property Council of Australia estimates the 2023 doubling of the AOS cost Victoria around $5 billion in lost investment, and the two surcharges together raised a combined $563 million last year — $458 million from the AOS and $105 million from the FPAD. The announcement comes as Victoria falls well short of its target of 800,000 new homes over a decade, with annual construction running at roughly 55,000 dwellings against a required 80,000.
Treasurer Colin Brooks said the planned review “will be a comprehensive review to make sure the settings are right for Victoria to continue to lead the nation.” Property Council Victoria executive director Cath Evans welcomed the step but called for broader reform, saying “Victoria cannot afford to keep losing investment to other states.” Housing Industry Association Victoria executive director Keith Ryan was more cautious, noting that government taxes, regulatory costs and charges already account for more than 40% of the cost of a typical house-and-land package in Melbourne, and that an AOS exemption alone is unlikely to make many medium- and high-density projects commercially viable. Importantly, the review of the AOS and FPAD is a pre-election commitment, not a locked-in change — it proceeds only if Labor wins the November 28 state election, with findings due before the next state budget.
References
Elite Agent – Victoria Property Tax Changes for Foreign Investors / News24 Australia – Victorian Premier Ben Carroll Announces Review of Controversial Foreign Property Taxes and New Concessions for Housing Developers Ahead of State Election / Victorian State Revenue Office – Understanding Foreign Purchaser Additional Duty
