Victoria’s Taxed-Out Investors

Victorians may hold the title of being the most taxed property investors in the country. Simply purchasing a home in Victoria now includes a suite of additional taxes and levies. From the Windfall Gains Tax to the Absentee Owner Surcharge, the taxes are prompting a reassessment of strategies—some exiting the market entirely in favour of alternatives stores of value and wealth like gold bullion.

The tax burdens on property owners - each designed to raise revenue, address housing supply issues, or fund infrastructure - has begun to dramatically reshape the state’s property investment landscape. Gold is looking very attractive by comparison.

The labyrinth of levies and taxes applicable to property in Victoria are as follows:

1. Windfall Gains Tax (WGT) Introduced on July 1, 2023, the WGT targets landowners who benefit from government-driven rezoning that increases land value by more than $100,000. The tax is tiered: a 62.5% rate applies to uplifts between $100,000 and $500,000 (on the amount above $100,000), while uplifts exceeding $500,000 are taxed at a flat 50%. Payment can be deferred for up to 30 years or until a dutiable transaction occurs, but unpaid amounts accrue interest and form a charge on the land. Exemptions exist for small residential plots (up to 2 hectares) and certain charitable uses, but for developers and speculative investors, WGT significantly cuts into profits from rezoning windfalls.
2. Foreign Purchaser Additional Duty (FPAD) Since 2015, foreign buyers of residential property face an additional 8% duty on top of standard land transfer (stamp) duty. A “foreign purchaser” includes non-Australian citizens, non-permanent residents, foreign corporations, and trustees of trusts with foreign beneficiaries. For a $1 million property, this adds $80,000 to the upfront cost, deterring overseas investors and complicating trust structures where foreign beneficiaries might inadvertently trigger the surcharge.
3. Absentee Owner Surcharge (AOS) Applied since 2016, the AOS is an additional land tax for absentee owners—those not ordinarily residing in Australia, including foreign individuals, corporations, and trusts with absentee beneficiaries. As of January 1, 2024, the rate doubled from 2% to 4% of the taxable land value, with the tax-free threshold dropping from $300,000 to $50,000. For a $500,000 investment property, this translates to an extra $20,000 annually, a hefty burden for offshore investors.
4. Economic Entitlement Duty. Introduced to capture value from development agreements, this duty applies when an entity gains an “economic entitlement” to land (e.g., rights to profits or development proceeds) without a formal transfer. Calculated as a percentage of the land’s value, it can catch investors unaware, particularly in joint ventures or complex ownership structures, adding another layer of cost to development projects.
5. Growth Areas Infrastructure Contribution (GAIC) Aimed at funding infrastructure in Melbourne’s fringe suburbs, GAIC is a one-off levy triggered by events like land purchases, subdivisions, or building permits in designated growth areas. For 2024-25, rates range from $115,000 to $137,000 per hectare, adjusted annually by CPI. While it doesn’t apply to smaller plots (under 0.41 hectares), it significantly increases holding costs for developers eyeing large-scale projects.
6. Vacant Residential Land Tax (VRLT) Initially launched in 2018 for inner and middle Melbourne, VRLT expanded statewide on January 1, 2025. It targets residential properties vacant for more than six months in a calendar year, starting at 1% of the capital improved value (CIV), rising to 2% in the second consecutive year, and 3% thereafter. A $500,000 property vacant for a year incurs $5,000 in VRLT, doubling to $10,000 if unused the next year. Holiday homes and undeveloped land (from 2026 in metropolitan areas) are now in the crosshairs, pressuring owners to occupy or develop their assets.
7. Short Stay Levy Effective January 1, 2025, this 7.5% levy applies to booking fees for short-term rentals (under 28 days), such as Airbnb stays. Payable quarterly for properties earning over $75,000 annually, or annually otherwise, it aims to level the playing field with traditional rentals. For a property generating $50,000 in yearly bookings, this adds $3,750 to the tax bill, eroding margins in the short-stay market.
8. Congestion Levy Introduced in 2005, this annual levy targets off-street parking spaces in inner Melbourne’s Category 1 and 2 zones, encouraging public transport use. Rates vary by location and space type, with exemptions for residential or disabled parking. For investors with commercial properties offering parking, this adds a recurring cost—e.g., $1,500 per space in Category 1 areas for 2025—potentially reducing rental appeal.
9. Fire Services Property Levy (FSPL) Collected via council rates since 2012, the FSPL funds Victoria’s emergency services. It includes a fixed charge (e.g., $125 for residential properties in 2024-25) plus a variable rate based on CIV (e.g., $0.000103 per $1,000). For a $500,000 property, this might total $175 annually—a modest but unavoidable expense for all owners. 

This is by no means an exhaustive list. These taxes are collectively increasing the cost of acquiring, holding, and developing property in Victoria, prompting a turn in investor behaviour and a mass exodus from the market. The case is clearly being made for Victorian investors seeking different strategies for creating and holding wealth:

Rising Costs: The cumulative effect of taxes—VRLT on vacant properties, WGT on rezoning profits, and AOS for absentee owners—erodes returns. A 2024 study estimated that 4,900 additional investment properties were sold in Victoria since mid-2023 due to land tax hikes, signalling an exodus.

Policy Uncertainty: Retaliatory measures like the Short Stay Levy and expanded VRLT, alongside potential federal tax changes (e.g., tightened capital gains rules from January 2025), create a volatile environment. Investors fear further squeezes on profitability.

Rental Market Pressure: While rents are rising, tenant affordability is stretched, limiting how much landlords can offset costs. Coupled with higher interest rates and construction delays, the risk-reward balance is tilting unfavourably.

Having recently been reclassified as a Tier 1 asset under the Basel III regulations, gold as an alternative amid this turbulence is gaining traction among Victorian investors.

Tax Advantages: Gold held as an investment (e.g., bullion bars or coins) avoids property-specific taxes like VRLT, WGT, or FSPL. Capital gains tax applies only on sale, and there’s no annual holding cost beyond storage fees—far less than the property’s recurring levies.

Liquidity and Stability: Gold offers a liquid, tangible asset with a global market, free from local policy shifts. As of March 2025, gold prices hover near $2,800 per ounce, buoyed by trade tensions (e.g., U.S. tariffs) and inflation fears, making it a reliable hedge.

Low Entry Barrier: Unlike property, where stamp duty and surcharges can add tens of thousands upfront, gold requires minimal initial outlay. A $10,000 investment buys over 3 ounces, sidestepping the $50,000+ needed for even a modest Victorian unit.

Global Trend: Forecasts for gold for 2025 alone predict golds steady skyward climb driven by the implementation of Basel III, geopolitical anxieties and consistent central bank buying.

Victoria’s property tax regime reflects a government’s desperate attempt to cover the states massive post-Covid debt under the guise of balancing housing affordability and infrastructure needs. Buying property in Victoria remains viable for investors who will stay local, have deep pockets and a stomach for bureaucracy.

$500,000 in a rental property vacant for 6 months will incur Vacant Residential Land Tax, Fire Services Property Levy and Congestion Levy if located within Zone 1 or 2 of Melbourne CBD. $500,000 in gold incurs no annual taxes, and only storage costs if held in allocated storage or private vault.

Property offers income but active management and diminishing returns, gold provides simplicity, security and passive growth. In the state with the tightest tax nets, investors must weigh up if bricks and mortar still stack up, or whether to consider bricks of a different kind.