Developers, landowners and charities must be aware of another approaching tax which will have significant impacts on land which is rezoned in Victoria, subject to a few narrow exemptions – the Windfall Gains Tax. It is a new tax on a windfall that a landowner is deemed to have enjoyed in relation to a rezoning of their land.

As part of the Victorian Budget 2021/22, the government announced the concept of a new windfall gains tax. The aim of the tax is to capture a share of the profits currently enjoyed by landowners when their land is rezoned.

The proposed legislation to impose the tax has now been introduced to Parliament. It is not yet law, and is still a Bill. There have been a number of changes from the original proposal when the concept was flagged in the budget.

Summary of Key Details

  • Subject to some narrow exemptions, the tax applies to land that increases in value by more than $100,000 as a result of rezoning.It is incurred by the land owner at the time of the rezoning.
  • Where the increase is between $100,000 and $500,000, a phenomenal tax rate of 62.5% will apply on the value uplift above $100,000. Where the increase is $500,000 or more, a tax rate of 50% will apply to the total value uplift.
  • The tax will come into operation from 1 July 2023; 12 months later than initially planned.
  • The trigger for the tax liability will be the day the Minister for Planning’s notice of approval of the amendment to rezone land is published in the Victoria Government Gazette.


The value uplift will be calculated as the difference in the capital improved value of the land (changed from site value) before and after the rezoning takes effect. The former value being the most recent valuation in force for the land and the latter determined through a supplementary valuation certified by the Valuer-General.

Further clarification is required on the considerations that will be made when valuing the land. For example, whether the impact the tax has on the market will be factored into the valuations and what deductions will be allowed, such as any costs incurred in a rezoning process or remediation of land before rezoning. The proposed legislation refers to allowable deductions but the details are not yet known.


A number of exemptions apply as follows:

  • rezonings relating to land which is within an area to which the Growth and Infrastructure Contribution applies and land which is rezoned to a public land zone are excluded from the scope of the tax;
  • residential land up to two hectares that includes a dwelling fit for occupancy at the time of the rezoning is exempted, regardless of whether the dwelling is the landowner’s principal place of residence;
  • charities are exempted, provided the relevant land continues to be used for charitable purposes for a 15-year period after the rezoning;
  • land that is subject to a contract of sale, or an option to enter a contract of sale, entered into before 15 May 2021 and not completed before the rezoning event occurred is exempt;
  • rezonings that were underway before 15 May 2021 (some conditions apply); and
  • land that is rezoned to a Rural Zone, other than the Rural Living Zone, is exempted.

Payment Deferral

Landowners may, before the date that the tax is payable, elect to defer payment for up to 30 years or until a dutiable transaction in respect of the land occurs.

When the rezoning occurs, a valuation and assessment of liability will be undertaken. Once the taxpayer receives notice of the assessment, they will have until the due date, typically 60 days from the date of assessment, to request that the liability be deferred. Interest will be incurred on any assessed liability at the Victorian Treasury Corporation’s 10-year bond rate.

Some dutiable transactions will not cease the deferral arrangement, including an acquisition of an economic entitlement and a no consideration dutiable transaction.

Grouping and Aggregation Provisions

Grouping provisions apply which provide for grouping of related corporations and trusts. Members of a group will be jointly and severally liable to pay any tax assessed in relation to land owned by the group.

It is also important for owners of multiple properties to be aware that the tax will be calculated based on the total value uplift of all land owned by a group, as opposed to the $100,000 threshold applying to each individual property.

Implications and Conclusion

This tax will have significant consequences, particularly for owners of large blocks of land that will be rezoned for residential development purposes. Landowners and speculators could lose a substantial portion of any expected profits from a rezoning of the land.

The provisions of the legislation are not yet finalised and there may be some changes made to the finer detail of the scheme. However, the tax in some form is inevitable and it is important landowners are aware of its potential effect.