From 1 July 2023, if you own land in Victoria, and it’s rezoned and subsequently goes up in value, you may have to pay a windfall gains tax of up to 50% on the total value uplift.
The Victorian government says this will return a share of the profits from government rezoning decisions to the community for vital infrastructure such as public transport and schools.
How much is the windfall gains tax?
The windfall gains tax will be payable when there’s been an increase in land value of more than $100,000 following the rezoning.
It only applies to the ‘taxable value uplift of the land’ – or the difference in the capital-improved value of the land before and after the rezoning takes effect, less any deductions.
For example, if the land was valued at $300,000 before rezoning and $580,000 after, the taxable value uplift would be $280,000.
For value uplifts:
- Between $100,000 and $500,000 – a tax rate of 62.5% will apply on the uplift above $100,000
- Above $500,000 – a tax rate of 50% will apply to the total uplift
When do you pay windfall gains tax?
The windfall gains tax is payable at the time the rezoning takes effect. However, landholders can defer payment until the next dutiable transaction (such as a sale) or 30 years from the date of the rezoning, whichever comes first.
Are there any exemptions and exclusions from the tax?
There are several exemptions or exclusions from the tax including:
- Residential land not exceeding 2 hectares
- Land rezoned to or from the urban growth zone within the Growth Areas Infrastructure Contribution (GAIC) area
- Charitable and university land
- Land rezoned to public land zones
- Land rezoned to correct an obvious or technical error in the Victorian planning provisions or a planning scheme
- Land rezoned to a rural zone (other than the rural living zone
Freya Southwell is a property lawyer and principal of Sutton Laurence King Lawyers.
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