Absentee owner surcharge in Victoria

What is the absentee owner surcharge?

The absentee owner surcharge is an additional amount of Victorian land tax that applies to taxable land held by certain absentee owners as at midnight on 31 December each year. It is assessed and collected by the SRO as part of the annual land tax assessment.

The surcharge is calculated on the taxable value of the land and is added on top of the general land tax and, in some cases, the separate trust surcharge that already applies to that land. It is not a stamp duty surcharge, and it is not the same as foreign purchaser additional duty (which is a separate, one-off duty payable when a foreign purchaser acquires residential property).

The legislative framework sits in the Land Tax Act 2005 (Vic) and related rulings. The SRO publishes detailed guidance on its website at sro.vic.gov.au/absentee-owner-surcharge covering the rules for absentee individuals, absentee corporations and absentee trusts, exemptions and the notification process.

Who may be an absentee owner?

The SRO treats an owner as an absentee owner where they fall within one of three categories at the relevant date:

• Absentee individuals — broadly, individuals who are not Australian citizens or permanent residents, who do not ordinarily reside in Australia, and who were absent from Australia at the relevant date or for more than six months in the preceding calendar year. The detailed test in the Act turns on residency, citizenship and visa status.
• Absentee corporations — broadly, corporations incorporated outside Australia, or Australian corporations in which an absentee person (or their associates) holds a controlling interest. Beneficial ownership and indirect interests can be traced through layers of entities.
• Absentee trusts — the rules differ between discretionary trusts, unit trusts and fixed trusts. A discretionary trust can be an absentee trust where at least one of the specified beneficiaries is an absentee person. Unit trusts and fixed trusts can be absentee trusts based on the identity of the unitholders or fixed beneficiaries.

The definitions are technical, and small differences can change the answer. The SRO's online tool "Do I have to pay the absentee owner surcharge?" is a useful starting point, but it does not replace tailored advice — especially where structures include companies, trusts, joint ownership or overseas connected parties.

How the surcharge interacts with Victorian land tax

The absentee owner surcharge does not replace land tax. It sits on top of it. For each parcel of taxable Victorian land an absentee owner holds, the SRO will:

• determine the general land tax that would apply based on the taxable value of the owner's aggregated holdings;
• add any trust surcharge that applies (for example, for certain trust holdings above the trust threshold); and
• add the absentee owner surcharge to the assessment.

The interaction can produce a materially higher total land tax bill than an owner who is not absentee would pay on the same property. For high-value commercial or investment property, the additional surcharge can be a very significant annual cost, and one that often comes as a surprise when an owner's circumstances change.

Current rate and notification obligations

The absentee owner surcharge rate has been 4% from the 2024 land tax year. It was 2% from 2020 to 2023, and lower rates applied in earlier years. The current rate should always be confirmed on the SRO website before relying on it for a specific assessment year or transaction.

Notification is a separate obligation. Under the Victorian rules, an owner is required to notify the SRO when they become an absentee owner, and to update the SRO when their absentee status changes (for example, when an individual returns to Australia permanently, or when a trust no longer has any absentee beneficiaries). The SRO provides an online notification process via its absentee owner portal.

The notification obligation is broader than many owners realise. It applies to individuals, corporations and trustees of trusts. Where an entity holds Victorian land and any of its underlying owners or beneficiaries change, the trustee or corporate officers may need to review absentee status afresh.

Common situations where the surcharge may arise

In our experience, the absentee owner surcharge most commonly catches out owners in situations such as:

• An Australian property is held by a foreign-incorporated company or by an Australian company with offshore shareholders.
• A family discretionary trust has been set up in Victoria but the class of beneficiaries includes adult children or relatives who have moved overseas and become non-residents.
• A unit trust or fixed trust holds Victorian real estate and a non-resident investor acquires units.
• An individual owner takes up long-term overseas employment or relocates without notifying the SRO.
• An Australian-resident testator's estate is administered for the benefit of overseas-based beneficiaries.
• A Victorian property is acquired by a purchaser who is both a foreign purchaser for duty and an absentee owner for land tax — triggering both regimes.

Property purchases, ownership structures and estate issues

Decisions about how a property is purchased and held have direct consequences for the absentee owner surcharge. Holding the same property through an individual, a company, a discretionary trust, a unit trust or a self managed superannuation fund can produce different outcomes for duty, land tax, the absentee owner surcharge and capital gains tax.

For purchasers, the surcharge should be considered as part of pre-contract due diligence. Our practical guides on buying property in Victoria and selling property in Victoria cover the broader conveyancing process. For commercial premises, our article on when the Retail Leases Act applies in Victoria discusses related landlord/tenant exposure.

For deceased estates, executors should review the residency and citizenship status of beneficiaries before assets are distributed. Where overseas-based beneficiaries are involved, the estate or the receiving entity may become subject to the surcharge on Victorian real estate. Our articles on probate in Victoria and deeds of family arrangement and estate asset transfers cover related administration and restructuring options.

Risks of failing to notify or incorrectly assessing status

The SRO has wide powers to reassess prior land tax years where an owner has been incorrectly treated as a non-absentee. Common consequences of getting it wrong include:

• Reassessment of prior years — the SRO can issue amended assessments for past years adding the surcharge that should have applied.
• Interest — interest is typically charged on the unpaid amounts from the original due date.
• Penalty tax — penalty tax can be imposed in addition to interest, with the rate depending on whether the failure was inadvertent, careless or deliberate, and whether disclosure was made voluntarily.
• Cash-flow impact on settlement — reassessments can disrupt sale, refinance or restructure plans, particularly where land tax clearance certificates need to be obtained.
• Director and trustee exposure — for corporate and trust owners, decision-makers may face additional scrutiny about whether they took reasonable steps to identify and notify changes.

Voluntary disclosure before an SRO investigation usually attracts lower penalties than disclosure during or after an audit, and an early review with legal and tax advice can substantially reduce the overall cost.

When to seek legal or tax advice

The absentee owner surcharge is a good example of an area where legal and accounting advice often need to work together. Legal advice is typically important when:

• buying or selling Victorian property where any party, shareholder, beneficiary or trustee has an overseas connection;
• setting up or amending a trust deed or company constitution that will hold Victorian real estate;
• administering a deceased estate with overseas beneficiaries or overseas-resident trustees;
• responding to a notice, investigation or reassessment from the SRO; or
• considering whether to vary distributions, redirect entitlements or restructure ownership to address absentee status.

Accounting and tax advice is usually needed alongside legal advice — including on land tax modelling, the trust surcharge, GST, CGT and the interaction with foreign-resident withholding. Where the issue affects a business, our Commercial & Business Law team can help.

Practical checklist

A short, practical checklist for owners and advisers considering absentee owner exposure:

• Identify every entity that owns or will own Victorian real estate (individual, company, trust, SMSF).
• For each entity, map out the underlying owners, shareholders, unitholders, beneficiaries and trustees — including residency, citizenship and visa status.
• Check whether any of those persons would meet the SRO's definitions of absentee individual, absentee corporation or absentee trust.
• Confirm whether notification has been provided to the SRO and whether it is up to date.
• For purchases, factor the absentee owner surcharge into feasibility, cash-flow and structuring decisions.
• For estates, review beneficiary residency before assets are distributed.
• Where there has been a past failure to notify, consider voluntary disclosure with the support of legal and tax advisers.

Frequently Asked Questions