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Landholders can accrue significant windfall gains when the value of their land increases due to the actions of government. These landholders will pay a tax on their windfall gains.

What is the windfall gains tax? 

From 1 July 2023, a windfall gains tax (WGT) will apply to land that is subject to a government rezoning resulting in a value uplift to the land of more than $100,000. 

A rezoning is an amendment of a planning scheme that causes land to be in a different zone from the zone that it was in immediately before the amendment.  The taxable value uplift is the difference in the capital improved value (CIV) of the land before and after the rezoning takes effect, less any deductions. The Valuer-General Victoria will be responsible for determining the value of the land before and after a rezoning. These valuations will be based on the CIV of the relevant land.

How much is the windfall gains tax?

For a rezoning of land that results in a taxable value uplift:

  • more than $100,000 but less than $500,000: the tax will apply at a marginal rate of 62.5%  on the uplift above $100,000
  • $500,000 or more: a tax rate of 50% will apply to the total uplift. 

Are there any exclusions? 

A small number of rezonings are excluded from WGT: 

  • rezonings to and from the Urban Growth Zone within the Growth Areas Infrastructure Contribution (GAIC) area, recognising that these properties are already subject to GAIC
  • rezonings to Public Land Zones to reflect that such land will be used for public purposes.

Additionally, transitional arrangements exempt some rezonings which were underway by the announcement date of 15 May 2021, as well as rezonings of land which were subject to a pre-existing contract of sale or option arrangement entered into by 15 May 2021. 

Are there any exemptions?

Exemptions are available for:

  • land that is capable of being used for residential purposes at the time of the rezoning, up to a maximum of 2 hectares of such residential land, owned by the same owner or group and rezoned by the same planning scheme amendment
  • in relation to rezonings, to correct obvious or technical errors in the Victoria Planning Provisions or a planning scheme.

A waiver is also available for land owned by a charity if the land is used and occupied by a charity exclusively for charitable purposes for 15 years after the rezoning. 

Who pays WGT?

The owner of the land that is subject to the rezoning pays WGT. 

Grouping and aggregation provisions can apply so that the $100,000 threshold applies only once to properties owned by the same owner or group of owners and rezoned under the same planning scheme amendment. 

When does WGT have to be paid?

Owners of land liable to pay WGT will be issued with a WGT assessment with a due date for payment. 

They will have the option to defer payment of any liability until the next dutiable transaction (or relevant acquisition) occurs, or until 30 years after the rezoning event, whichever occurs first. Certain excluded dutiable transactions and relevant acquisition will not cease deferral. 

Who administers the WGT?

WGT will be administered by the Commissioner of State Revenue (Commissioner) as a taxation law under the Taxation Administration Act 1997 (TAA), which provides rights of objection to the valuations used in the calculation of WGT. 

Unpaid or deferred WGT will constitute a first charge on the relevant land, with provision to include WGT information on property clearance certificates issued under the TAA.

Last modified: 23 March 2022
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