Ian Holloway's team, promoted from the Championship to the Premier League as play-off winners last season, have been involved in a protracted pursuit of the Socceroo since Australia's participation at the EAFF East Asian Cup in South Korea in July.
A succession of improved offers have been tabled for the versatile 28-year-old in the past week, and reports had indicated he was set to leave Victory.
However, Palace have consistently failed to meet Victory's valuation of one of their prized assets.
A figure believed to be A$1.4 million would have been enough to lure the former Sydney and JEF United man to the UK, but the Selhurst Park outfit reportedly sought to deliver the transfer fee in two instalments which Victory rejected.
Milligan, capable of playing in midfield and defence, would have joined Australia international Mile Jedinak at Palace and been a direct rival for a starting berth as well as a potential colleague in the Socceroos' midfield at the World Cup in Brazil next year.
Victory are still in the hunt for a marquee signing to replace Marcos Flores and have been in preliminary talks with former Arsenal, Chelsea and Tottenham defender William Gallas.
They are expected to step up their pursuit of a new marquee now the European transfer window has closed.
Elsewhere on Monday, Australian forward Nikita Rukavytsya joined compatriot Mathew Leckie at second tier German outfit FSV Frankfurt, moving on loan from Bundesliga side Mainz.