Foreign land tax surcharges imposed by Australian states are discouraging billions of dollars in global investment, with Victoria the hardest hit, according to the Property Council of Australia.
A new report by Mandala Partners, commissioned by the Property Council, found that global institutional investment in Victoria’s property sector dropped 53% in three years – from more than $10 billion to $5 billion. It said removing the state’s absentee owner surcharge could inject $5.7 billion in extra investment, boost gross domestic product by $2.5 billion and create 5,900 jobs by 2030 — roughly equal to the workforce of Melbourne’s West Gate Tunnel Project.
The Property Council’s executive director for capital markets, Torie Brown, said the surcharges “significantly stymie the money needed to supply new Australian property, including housing and new commercial developments.” She noted that “the benefits of abolishing the absentee owner surcharge on global investors in Victoria far outweigh the cost as it would deliver up to $10 in economic activity for every $1 it costs the Budget.”
The report found that across New South Wales, Queensland and Victoria, these taxes – levied annually on foreign owners of commercial and residential properties – could collectively deter $8.1 billion of global investment over five years. Queensland and Victoria remain the only states to apply the surcharges to commercial properties such as office buildings, build-to-rent developments, and student accommodation, a report from The Australian Financial Review noted.
Brown said that “global investors go where they are welcome, but Victoria has shut the door,” noting that policy uncertainty and shifting tax settings have made the state less attractive. In Victoria, the absentee owner surcharge was doubled to 4% in 2024. A foreign investor buying a $50 million office building in Melbourne now faces around $3.3 million in annual land taxes, compared with $1 million in NSW.
Property Council Victorian executive director Cath Evans warned the surcharges are “holding back billions of dollars that could be creating jobs, housing, and infrastructure right here in our state.”
While some analysts, such as K&L Gates partner Matthew Cridland, noted in an interview with The Australian Financial Review that the surcharges were initially designed to prevent foreign buyers from purchasing existing homes, they are now restricting capital for new housing supply.
The Property Council has urged state governments to “bring global investors back in full force” by scrapping the surcharges and restoring policy certainty across Australia.
