Property tax & budget changes for Victorian investors in 2026

2026 has been a big year for property policy — a federal budget that takes aim at how investors are taxed, and a Victorian tax stack that keeps climbing. Some of it is law; some of it is only proposed. Here's what's changed, what's coming, and what it means for an investment decision — with the legislated and the proposed kept clearly apart.

Federal: the two changes that matter most

Negative gearing — limited to new builds Proposed

The headline measure from the 2026–27 Federal Budget (budget night, 12 May 2026) is a proposal to limit negative gearing to new builds from 1 July 2027. Under the proposal:

• Property held before budget night keeps its current treatment — nothing changes for existing portfolios.
• New builds retain negative gearing and the 50% CGT discount, to channel investment toward new supply.
• Established residential property acquired after 7:30pm AEST on 12 May 2026 would no longer let investors deduct net rental losses against non-rental income (e.g. wages) from 1 July 2027.

This is significant — but it is a budget proposal, not yet legislated. Treat it as a planning signal, not a settled rule, and watch for the actual legislation.

Foreign-buyer ban on established homes — extended In effect

Foreign persons (including temporary residents and foreign-owned companies) are banned from buying established dwellings in Australia. The ban ran from 1 April 2025 and has been extended in the 2026–27 Budget to 30 June 2029, with the ATO funded to enforce it. Limited exceptions apply (chiefly investments that genuinely add housing supply). If your strategy relied on foreign demand for established stock, that demand is switched off for now.

Victoria: no new property taxes in 2026 — but the stack stays high

The Victorian State Budget 2026–27 (handed down 5 May 2026) announced no changes to land tax rates, thresholds or surcharges. The relief is that nothing got worse; the catch is that the recent increases all continue. The settings an investor is holding under in 2026:

Measure	What it means for investors
COVID Debt Levy (land tax)	A temporary surcharge running to 30 June 2033. Non-home land is taxed from a $50,000 threshold ($25,000 for trusts), with fixed amounts (around $500–$975) plus a small rate uplift on top of base land tax.
Absentee owner surcharge	4% surcharge (doubled from 2%) on land held by absentee owners.
Vacant Residential Land Tax (VRLT)	Now applies state-wide. Charged on homes vacant more than 6 months a year, starting at 1% of capital improved value and rising for consecutive vacant years.
Short-stay levy	7.5% levy on short-stay accommodation bookings (stays under 28 days), in effect since 1 January 2025.
ESVF levy	The Emergency Services & Volunteers Fund levy rises again from 1 July 2026 (e.g. the residential non-PPR fixed charge from $132 to $136; non-residential $267 to $275).
Commercial & Industrial Property Tax	Stamp duty is being abolished on commercial/industrial property: once a site transacts after 1 July 2024 it enters the new regime and, after a 10-year transition, pays a 1% annual tax on unimproved land value (0.5% for build-to-rent).

Sources: Victorian State Revenue Office; Victorian State Budget 2026–27 (5 May 2026) and advisory analyses (Pitcher Partners, PwC); ATO; foreigninvestment.gov.au; Federal Budget 2026–27 papers. Figures rounded — confirm exact rates and thresholds with the SRO and a registered tax agent.

What this means for an investment decision

• Holding costs are the story in Victoria. Land tax (including the COVID levy), VRLT and the ESVF levy raise the annual cost of holding — model them into your cash flow, not just the purchase price.
• The "new vs established" line is hardening. Both the foreign-buyer ban and the proposed negative gearing change point investor incentives toward new housing. If you're buying established, don't bank on tax-driven demand.
• Vacancy is now expensive. State-wide VRLT and the short-stay levy change the maths on leaving a property empty or running it as a short-stay.
• Commercial/industrial buyers face a genuine choice between upfront duty and the new annual tax — run the numbers for your hold period.
• It still comes back to the asset. Tax settings change; a property's growth fundamentals, zoning and overlays are what you're really buying.