In brief

The Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 ("Bill") has been introduced into the Victorian Parliament.  The Bill introduces the Windfall Gains Tax (WGT) as previously announced in the State budget for 2021/22.

Key takeaways

  • WGT applies to increases in the value of certain land resulting from rezoning.
  • The rate of tax is up to 50% of the value of the increase.
  • Tax can be deferred until the land is sold.
  • A charge attaches to the land for unpaid tax.
  • WGT regime commences 1 July 2023, with some transitional relief available on certain transactions entered into before 15 May 2021.
  • Purchasers will need to obtain a clearance certificate for land they buy to ensure that there is no unpaid tax charged on the land.

Outline of WGT

What is taxed?

The WGT is imposed on the increase in value of relevant land resulting from rezoning. Land within urban areas subject to GAIC contributions will generally not be subject to WGT.

The trigger for taxation is the rezoning of land by a "WGT event". This will capture a relevant rezoning under the Planning and Environment Act 1987 (Vic) (PEA).

Who pays and when?

Liability attaches to the owner of the land when the WGT event occurs.

Joint owners of land are to be jointly assessed irrespective of the proportionate interest held by the owner.

In addition, trustees are to be assessed without regard to any land held by the trustee for any other trust or for the trustee's own benefit.

When a WGT event occurs, a valuation and assessment of liability will be undertaken. Once the taxpayer receives an assessment of a tax liability, payment will be due typically within 60 days from the date of assessment.

How much tax?

The rate of tax depends on the value of the relevant taxable value uplift. The rates are as follows:

The base used for valuation is generally the capital improved value of the land under the Valuation of Land Act 1960.

The tax base to be assessed for WGT is the aggregated taxable value uplift of all land owned by the taxpayer that is rezoned by a WGT event. Apportionment of value will be made to each title.

Where the land in question is subdivided, on registration of the plan of subdivision, the deferred WGT will be taken to be apportioned to each lot by reference to area.

There are grouping rules and these apply to both corporations and trusts. "Related corporations and "related trusts" have specific meanings however generally a 50% ownership or control threshold between the entities must be met. The effect is that the thresholds set out above can only apply once on the aggregated taxable value uplift of the group.


Landowners will have the ability to object to the pre-rezoning and post-rezoning valuations when they receive their assessment notice if they believe the valuations are not reflective of their property value. They can also notify the Commissioner of any error regarding details of the land owned, joint ownership or grouping status. Objections and notices of error must be given typically within 2 months of the date of assessment.

Deferral of tax

Importantly, deferral of WGT can occur in certain cases. A person liable that is the owner, may elect to defer the payment of up to 100% of WGT. The deferred tax together with accrued interest (at the Treasury Corporation of Victoria 10-year bond rate i.e. 1.52% as at 31 August 2021) must be paid within 30 days after any dutiable transaction (such as a transfer of land) or a relevant acquisition (i.e. where the landholder or an interest in the landholder is sold to a third party).

Where neither of these things occur, the deferral can run up to 30 years after the WGT event.

The below diagram shows a typical timeline of how WGT would be assessed and paid:1


Rezonings that cause land to be brought within the contribution area within the meaning of section 201RC of the PEA are not subject to WGT. This will generally include land within urban growth areas that might be separately subject to GAIC. Also, rezonings caused by an amendment prepared under the PEA to correct an error is exempt.

Certain types of dutiable transactions are not trigger events. These include a dutiable transaction for no consideration. For example, this may be the case on a change of trustee. Certain deferrals are also available to charities.

There is an exemption for WGT on certain residential land. The land must not exceed 2 hectares if the land is the only residential land owned by the taxpayer that is rezoned by a WGT event. Where the land exceeds two hectares, a partial exemption may apply.

When does WGT commence?

The commencement date is 1 July 2023.

Certain transitional relief is also allowed. WGT is not imposed on land that is rezoned by a WGT event if the land is subject to a contract of sale entered into before 15 May 2021 that has not been completed by the transfer of the land before the WGT event occurred. Relief also applies to relevant options entered into before 15 May 2021.

Transitional relief is also applied to certain rezonings that were underway when the WGT was announced on 15 May 2021.

Charge on land

Unpaid WGT and any accrued interest is a first charge on the land on which the tax is payable. That charge has priority over all other encumbrances to which the land is subject. Relief may apply to purchasers who obtain a clearance certificate from the Commissioner.


The introduction of the WGT represents a significant change to the tax system in Victoria as regards to land. A tax of this kind is unprecedented, at least in Australia.

Purchasers of land in particular will need to take great care to ensure that they do not inherit a liability to the tax by reason of a charge attaching to the land for the tax. Obtaining a clearance certificate in this regard will be critical.

Given that the charge is expressed to take priority over other securities, the effect of such a charge will be displacement of priority accorded to other charges to which the land is already subject. How such a priority operates alongside the order of priority accorded to charges under the Corporations Act 2001 (Cth) is not clear.

Contracts for sale of land will need to ensure that they adequately deal with the risk for unpaid WGT. Ideally, from the perspective of a purchaser, any unpaid WGT plus interest should be an adjustment to the purchase price in favour of the purchaser.

Landowners, developers and investors will need to pay particular attention to the cost of any potential WGT liability and the availability of any exemption or deferral mechanisms.

Given that land tax as it currently exists is calculated annually on unimproved value, that unimproved value as it increases also produces an increase in the amount of land tax. To the extent that capital gains tax is also applied to a sale of the land, it is hard to avoid the conclusion that the economic effect of WGT is one of (indirect) multiple taxation.