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

Following a public consultation last week, the Victorian government introduced the Windfall Gains Tax and State Taxation and Other Laws Amending Bill 2021 (the Invoice). The bill contains a number of adjustments to the initially announced proposal. The main features of the proposed new regime are described below.

Taxation and assessment of the WGT

Originally the government planned that the WGT would begin on July 1, 2022, however, recognizing the impact of lockdowns and the pandemic on taxpayers, the government has now postponed the start to July 1, 2023.

A liability for WGT arises when a zoning change that constitutes a WGT event takes effect under the Land Use Planning and Environment Act 1987 (Vic). Rezonings relating to public land areas and to and from the urban growth area within the growth areas infrastructure contribution area are excluded from the WGT.

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

The following dutiable transactions are among the excluded transactions that will not trigger the termination of the deferral agreements:

  • a relevant acquisition that results only from a pro-rated increase in the interest of all shareholders or unitholders;
  • the acquisition of an economic right to WGT lands under Part 4B of Chapter 2 of the Homework Act 2000 (Vic);
  • a transaction without consideration; Where
  • a relevant charitable land transaction.

If an excluded transfer is made, the deferred tax liability and accrued interest are transferred to the buyer.

It is proposed that WGT be billed at the following rates:

The WGT will be imposed on an increase in value measured at the time of rezoning on the enhanced value of the capital (CIV) ground. An assessment will be undertaken by the General Assessor on the pre-zoning value (which will be the most recent general assessment that is used for other purposes such as municipal tariffs) and the post-zoning value (which will be determined by an evaluation carried out on January 1 of the same year). The aim of taxation at this stage is to avoid capturing any growth in value due to market forces before or after rezoning. Any negative increase in the assessed value will be ignored. Certain deductions provided for by regulation will be permitted.

For example, if a lot has a VIC of $ 1 million before rezoning and a VIC of $ 1,600,000 after rezoning, the mark-up is $ 600,000. Suppose the taxpayer has allowable deductions of $ 50,000. Therefore, the increase in the assessed value would be $ 550,000 ($ 1,600,000 – $ 1,000,000 = $ 600,000 – $ 50,000 = $ 550,000). Therefore, a WGT of $ 225,000 would be payable ($ 550,000 x 50%).

Unpaid WGT (including interest and tax penalties under the Tax Administration Law 1997 (Vic)) and any interest accrued on the deferral) is a first charge on the land on which the tax is payable. The load takes precedence over all other loads to which the land is subjected.

Consolidation arrangements

Members of a group should be assessed for WGT on the increase in the aggregate assessed value of all land owned by group members that are rezoned by a WGT event. Each member of the group is jointly responsible for paying WGT in relation to the group.


The bill contains certain exemptions from WGT, in particular with regard 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 who is rezoned by a WGT event;
  • Rezoning errors;
  • Pre-existing sales contracts and options entered into before May 15, 2021 that have not been completed or exercised and the contract to which an option relates has not been completed (if any) before the WGT event occurs. produce; and
  • Rezones in progress before May 15, 2021.

Waiver for charitable lands

The bill provides that the commissioner must relinquish the WGT and any interest accrued in charitable land if the land has remained charitable continuously for 15 years after the WGT event that gave rise to the subjugation to tax. If only part of the land has remained charitable, the waiver will only apply to that part.


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

Implications for taxpayers

Taxpayers who own land in Victoria that is rezoned and subject to the WGT will now need to authorize this tax in addition to all other federal and state taxes that are currently payable in respect of the land. For buyers, this means that they will have to factor in the WGT (and any accrued interest) in the purchase price if the seller 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 due to circumstances and decisions beyond their control. It is quite extraordinary that a taxpayer becomes liable for a tax without any relevant dutiable transaction or acquisition having taken place. At a time when governments should help taxpayers invest and recover from the economic burden of the pandemic, especially as stamp duty revenues have increased due to low interest rates and people with reserves of excess cash after months of foreclosure, it’s rather surprising that the Victorian government now wants to impose an additional tax on property owners.

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