Victoria’s newest property tax - Windfall Gains Tax

Articles Written by Kathryn Bertram (Partner)

In May this year, the Victorian government announced it would be introducing a Windfall Gains Tax (WGT) in order to tax the value of gains made by landowners as a result of certain rezoning decisions by government.

Following public consultation, last week the Victorian government introduced the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 (the Bill). The Bill contains a number of adjustments to the proposal that was originally announced. We outline below the key features of the proposed new regime.

Imposition and assessment of WGT

Originally the government had anticipated the WGT would commence on 1 July 2022, however, recognising the impact of lockdowns and the pandemic on taxpayers, the government has now deferred the commencement until 1 July 2023.

A liability for WGT arises when a rezoning that constitutes a WGT event takes effect under the Planning and Environment Act 1987 (Vic). Rezonings relating to public land zones and to and from the Urban Growth Zone within the Growth Areas Infrastructure Contribution area are excluded from WGT.

The owner of land when the WGT event occurs is liable to pay the WGT. However, it is proposed that taxpayers will be able to defer payment of up to 100% of the WGT until a dutiable transaction or a relevant acquisition (other than an excluded dutiable transaction or excluded relevant acquisition) occurs in respect of the land or for up to 30 years after the WGT event (whichever occurs first). Taxpayers who choose to defer some or all of the WGT will be liable to pay interest on the deferred amount.

The following dutiable transactions are some of the excluded transactions that will not trigger the cessation of deferral arrangements:

  • a relevant acquisition that results solely from a pro rata increase in the interests of all shareholders or unitholders;
  • the acquisition of an economic entitlement in relation to WGT land under Part 4B of Chapter 2 of the Duties Act 2000 (Vic);
  • a no consideration dutiable transaction; or
  • a relevant charitable land transaction.

If an excluded transfer is made, the deferred tax liability and accrued interest are rolled over to the purchaser.

WGT is proposed to be charged at the following rates:

Taxable value uplift Rate of WGT
Not more than $100,000 Nil
>$100,000 but < $500,000 62.5% of that part of the taxable value uplift that exceeds $100,000
$500,000 or more 50% of the taxable value uplift

WGT will be imposed on a value uplift measured at the time of rezoning on the Capital Improved Value (CIV) of the land. A valuation will be undertaken by the Valuer-General on the pre-zoning value (which will be the most recent general valuation that is used for other purposes such as council rates) and the post-zoning value (which will be determined by a supplementary valuation undertaken as at 1 January of the same year). The aim of taxing at this point in time is to avoid capturing any growth in value due to market forces before or after the rezoning. Any negative taxable value uplifts will be ignored. Certain deductions prescribed in regulations will be allowed.

For example, if land has a CIV of $1 million before a rezoning and a CIV of $1,600,000 after a rezoning, the value uplift is $600,000. Assume the taxpayer has eligible deductions of $50,000. Therefore the taxable value uplift would be $550,000 ($1,600,000 - $1,000,000 = $600,000 - $50,000 = $550,000). Accordingly, WGT of $225,000 would be payable ($550,000 x 50%).

Unpaid WGT (including any interest and penalty tax under the Taxation Administration Act 1997 (Vic)) and any accrued interest on deferral) is a first charge on the land on which the tax is payable. The charge has priority over all other encumbrances to which the land is subject.

Grouping provisions

Members of a group are to be assessed for WGT on the aggregated taxable value uplift of all land owned by members of the group that is rezoned by a WGT event. Every member of the group is jointly and severally liable to pay WGT in relation to the group.


The Bill contains certain exemptions from WGT including in relation to:

  • Residential land (whether on one or more titles) that does not exceed 2 hectares if the land is the only residential land owned by a taxpayer that is rezoned by a WGT event;
  • Rezoning errors;
  • Pre-existing contracts of sale and options entered into before 15 May 2021 that have not been completed or exercised and the contract to which an option relates has not completed (as the case may be) before the WGT event occurred; and
  • Rezonings underway before 15 May 2021.

Waiver for charitable land

The Bill provides that the Commissioner must waive WGT and any interest accrued in respect of charitable land if the land has remained charitable continuously for 15 years after the WGT event that gave rise to the liability for the tax. If only part of the land has remained charitable, the waiver will only relate to that part.


The Commissioner of State Revenue will be responsible for administering the WGT.

Implications for taxpayers

Taxpayers who hold land in Victoria that is rezoned and subject to WGT will now need to allow for this tax in addition to any other state and federal taxes that are currently payable in relation to land. For purchasers it means they will need to factor in WGT (and any accrued interest) into the purchase price if the vendor has deferred this liability. This may be in addition to the costs associated with obtaining development approval for the land. 

WGT imposes a significant burden on taxpayers as a result of circumstances and decisions beyond their control.  It is rather extraordinary that a taxpayer will become liable for a tax without any dutiable transaction or relevant acquisition having taken place. At a time when governments should be supporting taxpayers to invest and recover from the economic burden of the pandemic, particularly since stamp duty revenues have increased as a result of low interest rates and people having excess cash reserves from months in lockdown, it is rather surprising that the Victorian government now wishes to impose a further tax on landowners.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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