The Oscar-winning actor, who has previously looked at designer Carla Zampatti's home with a view to purchasing a house in Sydney, apparently inspected the Bellevue Hill property with wife Danielle Spencer but was not very impressed.
The 1920s brick house, which has been empty since 1988 when Julian's father Sir William passed away, is reportedly in a state of disrepair but sits on a large, valuable plot of land.
One source in the property industry told The Daily Telegraph: "He's looked at more houses than I've had hot dinners. He doesn't know what he wants but he doesn't want anyone to know he's looking."
The McMahon children are also believed to be selling the family's Palm Beach, Bathurst and city properties.