Victoria Land Tax & The Impact on Your Property Strategy as an Expat
In recent years, the Victorian Government has implemented significant changes to its land tax regime. This regime directly affects property owners across the state. This includes a notable cohort: Australian expatriates who maintain investment properties in Victoria.
These policy adjustments have had far-reaching impacts on tax liabilities, rental yields, cashflow, and the viability of property investment strategies for Australians living abroad.
This blog explores the effects of the increased Victorian Government land tax on Australian expats with investment properties. It focusses detailing the legislative changes, the economic and practical implications, and possible strategies for mitigation.
Understanding the Victoria Land Tax Changes
Land tax is a yearly tax charged by State Governments on the unimproved value of land above a certain threshold. It excludes your principal place of residence. Each state calculates land tax separately. The tax applies to all landholdings owned by an individual or entity. Rates increase as the value or number of properties rises.
Recent Increases and Policy Changes
In the 2023 and 2024 Victorian Budgets, several changes were introduced that increased the tax burden on property investors.
- Lowered Thresholds: The land tax-free threshold was reduced, meaning more property owners with lower-value holdings are now subject to land tax.
- Higher Rates: Higher marginal rates apply to landholdings above specific value thresholds, increasing the land tax liability for those with larger portfolios.
- Absentee Owner Surcharge: The government applies an additional surcharge—rising to 4% in some cases—on top of the increased base land tax to “absentee owners,” effectively targeting non-residents for extra revenue (though all Australian citizens are exempt).
- Vacant Residential Land Tax Expansion: The government expanded the scope of the vacant residential land tax (VRLT) to cover the entire state, not just inner-city suburbs. This change penalises regional owners who leave properties unoccupied for extended periods.
Victoria Land Tax Effects on Australian Expats
Increased Tax Liability
Many Australian expats with investment properties in Victoria are seeing the effect of the above changes via dramatically increased annual land tax bills. These increased tax outlays translate directly into reduced cash flow for property owners.
The additional tax burden puts more pressure on expats, who already manage higher property and compliance costs due to living overseas. Affordability becomes a challenge, especially when properties are negatively geared or rents can’t keep up with rising expenses.
Impacts on Investment Returns
As the financial burden grows, many investors are choosing to sell their Victorian properties, leading to downward pressure on property prices, as seen below with Melbourne and Victoria significantly underperforming the rest of the country for the year to May 2025.
PropTrack Home Price Index | PropTrack
Property has become a less attractive investment class for Australians living abroad. Primarily due to the combination of a reduced net rental yield and lower capital gains. Particularly when compared to other investment opportunities that don’t impose similar penalties and outgoings.
Administrative and Compliance Challenges
Expats must also contend with the administrative burden of staying abreast of changing tax rates, thresholds, and surcharges. The complexity of the system—especially with definitions around residency, absentee status, and the requirements for exemption or reduction. This can lead to inadvertent non-compliance and penalties.
Strategies for Mitigation
Reviewing Property Portfolios
Expats should regularly review the performance and tax efficiency of their property portfolios in light of the new land tax regime. Properties with poor net yields or high exposure to land tax may need to be re-evaluated or divested.
Structuring Ownership
Some investors may consider restructuring ownership through trusts, companies, or joint ownership with resident family members, that is where appropriate and compliant with tax regulations. Professional advice is essential to avoid unintended consequences, such as higher rates or loss of exemptions.
Seeking Professional Advice
Given the complexity of the tax system and the frequency of changes, consulting with Australian tax professionals, property advisors, and accountants is important. They can provide tailored advice on minimising tax liabilities, claiming exemptions, and ensuring compliance.
Alternatives to Victorian Property Investment
With other Australian states and territories offering different land tax regimes, some expats may choose to diversify or redirect investment to regions or asset classes with more favourable conditions. Therefore, international investment options may become more attractive given the absence of these taxes and surcharges.
Final Thoughts on Victoria Land Tax
The increased Victoria land tax has created additional financial and administrative challenges for Australian expats with investment properties. The net effect is a reduction in investment returns, increased costs, and a more complex compliance landscape. However, while some may be able to absorb the changes or pass costs on to tenants; others may be forced to reconsider their long-term investment strategies or divest from Victorian real estate altogether.
For Australian expats, staying informed and seeking professional guidance are essential in navigating these changes. Ultimately, by adapting their strategies and remaining proactive, investors can mitigate some of the negative impacts while considering broader opportunities in the property market both within and beyond Victoria.
Contact Us to Learn More About Victoria Land Tax
Contact us to arrange a consultation with our team to get personalised guidance tailored to your circumstances. At Atlas Wealth Group, we specialise in supporting Australian expats with cross-border tax planning, superannuation, and wealth management.
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Disclaimer: This article is intended for informational purposes only and does not constitute legal or financial advice. Individuals should consult licensed professionals when seeking guidance regarding their financial circumstances.