Victoria Considers Foreign Investor Tax Adjustments

Victoria is adjusting parts of its foreign investor tax framework as the State Government looks for ways to encourage more capital into housing development and maintain the pipeline of new homes.

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

The changes are intended to provide greater certainty for developers and foreign investors while reducing some of the holding costs associated with delivering new housing. The Government has linked the policy directly to supporting additional housing construction and maintaining development activity across Victoria.

For Melbourne’s western growth corridor, this could be particularly relevant because the region continues to accommodate large volumes of new housing, including master-planned estates, townhouses, apartments and house-and-land developments.

Foreign capital can play an important role in financing larger residential projects, particularly where significant funding is required before construction and sales are completed. Reducing some tax costs during development could improve the feasibility of qualifying projects and encourage more investment into new housing.

If more projects proceed as a result, Melbourne’s west could benefit from increased housing supply and a broader range of property choices. Additional development may also support associated infrastructure, retail activity, employment and services as new communities expand.

Land sales could also attract greater attention if overseas-backed developers become more confident about committing capital to Victorian projects. Large growth areas in the west may be particularly relevant where land is already earmarked for residential expansion.

However, the current changes should not be interpreted as a general removal of foreign purchaser taxes. Victoria’s Foreign Purchaser Additional Duty remains at 8% for foreign purchasers acquiring residential property, unless a specific exemption applies.

The Absentee Owner Surcharge also remains in place at 4% for affected absentee owners, although the newly announced development-related exemptions will provide relief in qualifying circumstances.

This means the policy direction is more targeted than a broad tax reduction. The emphasis is on encouraging investment that contributes directly to additional housing supply rather than simply making all residential property purchases cheaper for foreign buyers.

For investors, the distinction between established housing and new development will therefore remain important. Federal foreign investment rules, Victorian tax settings and eligibility for exemptions should all be considered before committing to a project or property.

For local buyers, increased development activity could ultimately mean greater choice across different housing types and price points. More competition between projects may also help improve the range of options available to first-home buyers, families and investors.

Melbourne’s western growth corridor is already one of Victoria’s key housing growth areas, and policy settings that make new development more viable could reinforce that role over the coming years.

Overall, Victoria’s latest approach shows a willingness to use targeted tax relief to encourage housing construction and investment. For Melbourne’s west, the potential benefit is not simply more foreign capital, but more projects moving from planning into construction and ultimately delivering additional homes.