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New property tax for Victoria

The Victorian government has issued proposed legislation (Bill) outlining the framework for assessing and collecting the new windfall gains tax (WGT) first announced as part of their budget in May this year. While adding a layer of complexity to Victorian property transactions, this state tax is aimed at recouping windfall profits arising from rezoning land and directing those profits to community projects, such as roads, hospitals and schools.

Builders, developers and landowners should seek advice on WGT liability as lawyer Luke Hefferan explains below.

Proposed legislation

We flagged this proposal in a previous article and now confirm if the Bill is passed in its current form, then from 1 July 2023—

  • Landowners will be liable for tax on value increases to their property over $100,000 due to rezoning.
  • WGT will be assessed at the time of rezoning on a capital improved value basis.
  • Landowners must pay the tax after receiving the notice of assessment, but can defer payment (with interest accruing) until the earlier of—
    • the next dutiable transaction on the property (most likely the sale of the property)
    • 30 years from the date of assessment.
  • Exemptions will apply so not all value uplifts resulting from rezoning will incur a tax liability on landowners.

Application of WGT

The original commencement date of the WGT has been postponed by one year to 1 July 2023. As outlined below, if a ‘WGT event’ occurs after this date (and the landowner cannot claim an exemption), then the landowner will incur a tax liability for any uplift in value of the property over $100,000.

A WGT event is essentially any event where a rezoning of Victorian land occurs under the Planning and Environment Act,  unless it is an ‘excluded rezoning’.

An excluded rezoning includes—

  • a rezoning between schedules in the same zone
  • any rezoning which results in land being included in the Growth Areas Infrastructure Contribution (GAIC)
  • the first rezoning of land after 1 July 2023 of land which was in the GAIC
  • any rezoning which results in land becoming part of a public land zone
  • any excluded rezoning as determined by the Treasurer.

Calculation of WGT

As a starting point, WGT will be assessed on the rise in the capital improved value of the land calculated as the difference between the most recent valuation before rezoning and the newly conducted valuation after rezoning. The capital improved value is the sale price the land could achieve on the open market if not encumbered by a mortgage or any charges on the land.

The Bill indicates landowners can make deductions from the new valuation as permitted in the regulations.  However, no proposed regulations have been announced. We will continue to monitor announcements about permitted deductions. We expect (at least) costs incurred by the landowner in achieving the uplift as a result of rezoning would be deducted from the new valuation. Otherwise, it would seem counterintuitive for landowners to actively seek to improve the value of their land by rezoning methods.

Rates of WGT

The proposed legislation includes a tax-free threshold of $100,000 with the tax rates scaled as follows:

Value uplift Tax rate
Less than $100,000 Nil
$100,000 or more, but less than $500,000 62.5 percent of the uplift above $100,000
More than $500,000 50 percent of the total uplift

For example, if a landowner is assessed to have a total value uplift of $450,000, then they would pay tax at a rate of 62.5 percent of $350,000, being $218,750. However, if the assessment determined an increase of $550,000, then they would pay tax at a rate of 50 percent of the total $550,000, being $275,000.

If a landowner owns multiple parcels of land affected by the rezoning, then any increase in value is aggregated between those lots (ie the landowner cannot claim the $100,000 tax-free threshold on an individual lot basis).

Similarly, if multiple lots are held on trust by the same trustee, the above aggregation principle also applies without regard to any land held beneficially for another trust or in the trustee’s personal capacity.

Likewise, with groups of ‘related’ companies or trusts (generally meaning where a 50 percent threshold of ownership or control is determined between entities), this aggregation principle can only be applied once on the aggregated value uplift of the land owned by the related entities. The tax is then apportioned to each parcel of land proportionate to the value uplift each individual parcel contributes to the overall aggregated value uplift.

Liability and timing for payment of WGT

The liability for WGT falls to the landowner with the landowner becoming liable for the tax at the time of gazettal of the planning scheme amendment implementing the rezoning.

The Bill simply says ‘the owner of the land when the WGT event occurs is liable to pay windfall gains tax on the land’. Although not specifically mentioned in the Bill, we expect a notice of title will be recorded, or at the very least a publicly available register maintained, to record any unpaid WGT affecting Victorian land.

Assuming a landowner cannot (or does not want to) promptly pay what could be a substantial impost, the landowner may defer this payment until the earlier of—

  • the next dutiable transaction (ie the sale of the land)
  • a relevant acquisition of the landholder (ie where a (corporate) landholder, or any interest in the landholder, is transferred to a third party)
  • 30 years after the WGT event.

WGT can be deferred either in whole or in part. However, interest is incurred on any deferred amount equivalent to the Victorian 10-year bond rate, currently 1.52 percent per annum. The election to defer any part of the WGT must be made before the due date for payment of the WGT.

Unhelpfully however, the Bill states if any non-deferred WGT is not paid by the due date, then the entire WGT becomes immediately payable as though the landowner never made a deferred payment arrangement.

Any unpaid (and not deferred) WGT, including interest and penalties, will be recorded as a first ranking charge on the title for the land, taking priority over any other encumbrances on the land until it is repaid in full.


There are some exemptions outlined in the proposed legislation confirming no WGT liability will arise where the rezoning is—

  • undertaken to correct a technical or manifest error in the planning provisions, or
  • in relation to residential land (which does not exceed two hectares) and this land is the only residential land owned by the landowner (ie ‘Mum and Dad’ property owners will not be liable to any WGT).

The term ‘residential land’ has a technical definition. Put simply, the land will require a permanent building to be in place which is primarily for residential purposes and can legally be occupied as a place of residence to be considered residential land.

Alternatively, the land may be considered residential land if a residential building is being constructed or renovated on the land.  However, the landowner will need to provide a building permit for the construction or renovation for the land to be considered residential land. 

Also, no WGT liability will arise where there is no consideration paid for the transaction (ie the appointment of a personal representative for a deceased estate or a change of trustee).  

Transitional arrangements

Certain transitional exemptions from WGT liability will be applicable in the following circumstances:

  • A contract for the sale of land was entered into before 15 May 2021 and completion does not occur by 1 July 2023.
  • An option deed for the sale of land was entered into before 15 May 2021 and the option is not exercised before 1 July 2023. For this exemption to apply, the terms of the contract to be entered into on exercise of the option must be completely finalised at the time of granting of the option.
  • An owner requests a rezoning prior to 15 May 2021 with the request registered in the Amendment Tracking System by the relevant local council or the Planning Minister, and the owner incurs (or is liable to incur) the cost to perform works above a threshold limit, being the lower of—
    • 1 percent of the capital improved value of the land immediately before the WGT event, and
    • $100,000.

Ramifications for buyers and sellers

Although not yet announced, it is expected there will be a ‘clearance certificate’ style arrangement implemented (like those for land tax and CGT withholding) to minimise buyers inheriting any unpaid or deferred WGT.

If this arrangement is not implemented, then buyers will need to ensure the contract of sale contains a mechanism for dealing with such a risk, most likely, that unpaid or deferred WGT is paid or otherwise adjusted in the buyer’s favour at settlement.

From a seller’s perspective, if a contract allows the buyer to obtain approval for rezoning the land prior to the completion date, then the contract should contain a mechanism to pass the WGT liability to the buyer

If a party intends to rely on the exemption regarding option deeds entered into before 15 May 2021, great care should be taken in respect of any agreement to amend the contract terms prior to the exercise of the option (as the exemption only applies if the contract terms are finalised at the date the option was granted). On a strict reading of the Bill, this exemption would no longer apply if the contract terms were amended.

Careful consideration also needs to be given to any internal restructuring of corporate landowners or changing of trustee for land held on trust to ensure there is not an inadvertent triggering of the liability to pay any deferred WGT.

Review should also be undertaken of any generic contract terms which may shift the liability for WGT to the buyer should a WGT event occur during the contract period. For example, terms which make the buyer responsible for any orders or levies imposed on the property after the contract date.

Reach out to our Real Estate team for more details about how this impacts you.


Luke Hefferan

Luke Hefferan


Contact McMahon Clarke

T +61 7 3239 2900
A Level 7, 100 Creek Street, Brisbane Qld 4000

T +61 3 9909 1400
A Level 2, 696 Bourke Street, Melbourne Vic 3000