The windfall gains tax (WGT) is a new tax that is imposed on the increase in value of property in Victoria as a result of a rezoning of that land.
The WGT can be triggered by the landowner making a request to the local council to have their land rezoned; however, it can also occur as part of a broader change to the area as promoted by a planning authority.
When is the WGT triggered?
Since 1 July 2023, the WGT is payable by the owner of land when a liable rezoning occurs (WGT event). A WGT event will happen to the land when the rezoning decision results in an increase in the value of the land that is above $100,000.
The calculation of this increase in the value of the land (being the ‘taxable value uplift’) is the difference in the capital improved value of the land before and after the rezoning takes effect, less any deductions.
Where a landowner has multiple properties and related companies and trusts are grouped together, WGT will be assessed on the aggregate of all properties held by the individual or grouped entities.
Once a liable rezoning occurs, the State Revenue Office (SRO) will issue WGT assessments to landowners, which must be paid by the due date unless a deferral election is made.
What is the rate of WGT?
The WGT is calculated based on the rates set out below:
| Taxable value uplift | Tax payable |
| $0 – $100,000 | $0 |
| $100,001 – $499,999 | 62.5% of that part of the uplift that exceeds $100,000 |
| $500,000 or more | 50% flat rate to the total uplift |
For example, if land initially valued at $2 million is rezoned, resulting in an increased value of $5 million with no deductions, WGT is approximately $1.5 million.
Are there any exemptions or exclusions from WGT?
There are various exemptions and exclusions from WGT, as set out below.
Exemptions
- Residential land – up to two hectares of residential land (including primary production land (PPL) with a residence) will receive an exemption, regardless of whether it is a principal place of residence. PPL with a residence on it that can lawfully be used for residential purposes is residential land (notwithstanding that the primary use of the land is primary production). Accordingly, any PPL that contains a home on the land will be exempt from WGT up to two hectares. However, adjoining land on a separate title used solely for primary production will not be eligible for this exemption, even if it forms part of one farm.
- Land used for charitable purposes – charities will not pay any WGT on land they own that has been rezoned, so long as the land is used and occupied by a charity exclusively for charitable purposes for 15 years after the rezoning.
- Negative value uplift – if a WGT event results in a negative value uplift on land, WGT is not imposed on the event that consisted of the original rezoning. In that case, the SRO must reassess WTG on the original event and refund any tax and interest paid.
Excluded rezonings
In addition to the above exemptions, the following excluded rezonings of land will not trigger a liability to WGT:
- a rezoning from one schedule to another in the same zone (e.g. Farming Schedule 1 to Farming Schedule 2);
- certain rezonings of land within the growth areas infrastructure contribution (GAIC) area;
- a rezoning to a public land zone or between different public land zones;
- a rezoning of land to any of the following: Green Wedge Zone (GWZ), Green Wedge A Zone (GWAZ); Rural Conservation Zone (RCZ); Farming Zone (FZ); and Rural Activity Zone (RAZ);
- a rezoning to correct an obvious or technical error in a previous planning scheme.
The Treasurer may declare other rezonings to be excluded rezonings.
Transitional relief
There is transitional relief for contracts, option arrangements and proponent-led rezonings that had commenced prior to 15 May 2021, being the date the WGT was announced.
Broadly, WGT may not apply where:
- a contract was negotiated prior to 15 May 2021 and completed after 1 July 2023, after which a WGT event occurs (i.e. a liable rezoning);
- options were entered into before 15 May 2021 and were not exercised, or exercised but not completed, before 1 July 2023 and a WGT event occurs; or
- in respect of a proponent-led rezoning, the owner requested the amendment before 15 May 2021 and the request was registered in the Amendment Tracking System by the council before that date. Further, the owner must have incurred costs in relation to the rezoning above the threshold amount (being the lesser of 1% of the capital improved value of the land immediately before the WGT event, and $100,000).
Can payment of the WGT be deferred?
A landowner may elect to defer payment of WGT. Any election must be made before the day on which the tax is payable under the WGT assessment.
The deferred WGT will become payable on the earlier of:
- a dutiable transaction occurring in relation to the land (e.g. a sale of the land);
- a relevant acquisition occurring in respect of the landholder that owns the land (broadly, this includes the transfer of 50% of the shares in a private company, or 20% of the units in a private unit trust scheme); or
- 30 years after the WGT event.
Where WGT is deferred, interest will accrue on the deferred WGT.
Any WGT that is not deferred must be paid by the due date stated in the notice of assessment. Importantly, if any non-deferred WGT is not paid by the due date, the whole of the WGT liability becomes immediately payable, as if an election had never been made.
Can I object to a WGT assessment?
Yes. If a landowner disagrees with the WGT assessment, they can lodge an objection within 60 days of the assessment, either challenging the valuation of the land, or the imposition of the WGT (e.g. on the basis that an exemption or exclusion applies).
The Commissioner has no discretion to extend the 60-day period.
Can a WGT liability be passed onto a purchaser?
From 1 January 2024, vendors are prohibited from passing on a WGT liability to purchasers, where that liability is known as at the date of the contract of sale of land (i.e. it has been assessed under a notice of assessment and served on the vendor).
Conclusion
The WGT has broad application to most Victorian landholders, save for limited exemptions and exclusions. Significantly, the WGT is triggered not only by a landowner requesting that their land be rezoned, but also by any rezoning which was commenced by a planning authority. Accordingly, the landholder may not be able to control any rezoning application.
The WGT provisions are complex, and the exemptions and exclusions have various conditions that must be satisfied. Once you receive an assessment, urgent action must be taken to seek deferral and consider any objection rights.
Contact us
If you require advice on the WGT implications in respect of any rezoning of land, or require representation in objecting against a WGT assessment, please contact Tamara Cardan—Tax Counsel.
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