June 2026 :: Market Updates
Understanding Victoria’s Absentee Owner Surcharge
Victoria's Absentee Owner Surcharge rose to 4%. Learn who it affects, how ownership structures trigger it, and what commercial and industrial property owners, investors and occupiers should do.
Understanding Victoria’s Absentee Owner Surcharge
Recent changes to Victoria’s Absentee Owner Surcharge (AOS) have prompted renewed discussion across the commercial and industrial property market.
While the legislation itself is not new, the increase in the surcharge and the broad range of ownership structures it can apply to means that many property owners, investors and occupiers are taking a closer look at how it may impact future property decisions.
For some, the implications may be minimal. For others, the surcharge may become an important consideration when assessing acquisitions, ownership structures, leasing arrangements and long-term investment strategies.
In this article, we break down what the Absentee Owner Surcharge is, who may be affected, and some of the key considerations for commercial and industrial property stakeholders moving forward.
What is the Absentee Owner Surcharge?
The Absentee Owner Surcharge is an additional land tax imposed by the Victorian Government on certain property owners who meet the State Revenue Office’s definition of an absentee owner.
The surcharge applies to Victorian land holdings and is calculated based on the property’s unimproved land value.
From the 2024 land tax year, the surcharge increased from 2% to 4%, significantly increasing the potential cost for affected property owners.
Importantly, the surcharge applies across a range of property types, including:
- Industrial property
- Commercial property
- Development sites
- Vacant land
- Residential property
The surcharge is applied in addition to standard land tax obligations and should be considered as part of a property’s overall holding costs.
Whys is this receiving increased attention?
For many years, the Absentee Owner Surcharge was viewed as a niche issue affecting a relatively small segment of the market.
However, recent increases to the surcharge, combined with broader changes to Victoria’s property taxation framework, have made it a more significant consideration for investors and property owners alike.
As holding costs continue to play a larger role in acquisition and asset management decisions, understanding all associated property costs is becoming increasingly important.
The increase in the surcharge has prompted many property owners to review their ownership structures and seek clarity around their potential exposure.
Who could be affected?
One of the most important things to understand is that the surcharge can apply more broadly than many people initially assume. Potentially affected ownership structures may include:
Non-Resident Individuals
Individuals who are not Australian citizens or permanent residents and who do not ordinarily reside in Australia may be considered absentee owners under Victorian legislation.
Foreign-Controlled Companies
An Australian-registered company is not automatically exempt from the surcharge.
In certain circumstances, companies may still be captured where foreign persons hold significant ownership interests, voting rights or influence over the entity.
Trust Structures
Trusts with foreign beneficiaries may also be subject to the surcharge depending on their structure and circumstances.
A common misconception
One of the most common misconceptions surrounding the Absentee Owner Surcharge is that it only affects overseas property owners. In reality, ownership structures can be more complex than they initially appear.
An entity may be incorporated in Australia and still require further assessment depending on its ownership, control arrangements or beneficiary structure.
This highlights the importance of understanding not only the property itself, but also how that property is held.
For investors and business owners with more complex structures, professional advice may be beneficial to ensure their position is fully understood.
What does this mean for investors?
For commercial and industrial investors, the surcharge represents another factor to consider when evaluating opportunities and managing existing assets. While every investment strategy is different, some common considerations may include:
Understanding Total Holding Costs
Investment performance is influenced by a range of factors, including acquisition costs, finance, maintenance, vacancy and taxation. Where applicable, the Absentee Owner Surcharge should be considered as part of a property’s overall holding cost profile.
Reviewing Ownership Structures
Many investors periodically review ownership structures as portfolios grow and evolve. The recent changes provide a timely reminder to ensure structures remain appropriate and aligned with long-term investment objectives.
Portfolio-Level Considerations
For investors with multiple Victorian assets, any applicable surcharge may need to be considered across the broader portfolio rather than on an individual asset basis alone.
Acquisition Due Diligence
Understanding potential taxation implications before acquisition can help investors make more informed decisions and avoid unexpected costs later in the ownership cycle.
What does this mean for commercial and industrial occupiers?
While much of the discussion around the surcharge focuses on property owners, occupiers should also be aware of how property-related taxes can influence overall occupancy costs. Depending on the lease structure, certain outgoings may be recoverable by landlords and passed through to tenants.
This means it is increasingly important for occupiers to understand:
- How outgoings are structured under their lease
- What costs may be recoverable
- The broader occupancy costs associated with a property
- Any potential implications during lease negotiations or renewals
For occupiers, understanding the full cost of occupation extends beyond simply reviewing the advertised rental rate.
Why understanding ownership structures matters
One of the broader themes emerging from these changes is the increasing importance of ownership structures within commercial property.
Whether purchasing, investing, leasing or reviewing existing holdings, ownership structures can influence a range of commercial outcomes.
As the regulatory and taxation landscape continues to evolve, taking a proactive approach to understanding these structures may help property owners and investors make more informed decisions.
What practical steps should stakeholders consider?
While every circumstance is different, some practical actions may include:
Review Existing Ownership Structures
Consider whether your current ownership structure remains appropriate and whether further advice may be required.
Understand Existing Lease Arrangements
Owners and occupiers should ensure they understand how outgoings and property-related costs are treated under current agreements.
Seek Professional Advice
The Absentee Owner Surcharge is a specialised area and should be reviewed with qualified taxation, legal or accounting professionals where required.
Stay Informed
Legislative changes can have long-term implications for property decisions. Remaining informed allows owners, investors and occupiers to respond proactively rather than reactively.
How Rutherfords can help
At Rutherfords, we work closely with property owners, investors, developers and occupiers across Melbourne’s North and West industrial markets.
While we do not provide taxation advice, we understand how legislative changes can influence property transactions, leasing decisions, investment strategies and broader market activity.
Our team can assist by:
- Providing local market insights
- Identifying commercial property considerations
- Supporting acquisition and leasing decisions
- Connecting clients with the appropriate professional advisers where required
As the industrial property landscape continues to evolve, access to informed market guidance remains as important as ever.
If you would like to discuss how these changes may influence your next property decision, contact the Rutherfords team for a confidential conversation.
