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All You Need To Know About Windfall Gains Tax

In Victoria, the newly introduced Windfall Gains Tax (WGT) will come into effect from 1 July 2023 and will apply to a land that is subjected to government rezoning, which in turn, results in a profit or value uplift of more than $100,000.

Landholders will pay a tax on the windfall gains if their property comes under rezoning. The before and after difference in the capital improved value (CIV) is called taxable value uplift. The Valuer General Victoria is assigned the duty of determining the value of the land before and after a rezoning based on the CIV.

How Much Is The Windfall Gains Tax?

For a rezoning of land that results in a taxable value uplift:

  • up to $100,000, no tax will be imposed
  • more than $100,000 but less than $500,000, tax will apply at a marginal rate of 62.5%
  • on $500,000 or more, a tax rate of 50% plus the capital gains tax will apply to the total uplift.

Who Is Excluded From The Tax?

A small number of rezonings, including the below are excluded from WGT:

  • rezonings to and from the Urban Growth Zone within the Growth Areas Infrastructure Contribution area.
  • rezonings to Public Land Zones to reflect that land will be used for public purposes.

Are There Any Exemptions?

Exemptions are available for:

  • land that is capable of being used for residential purposes at the time of the rezoning.
  • rezonings to correct obvious or technical errors in the Victoria Planning Provisions.
  • land owned by a charity if it is used and occupied by a charity exclusively for charitable purposes for 15 years after the rezoning.

When Does WGT Have To Be Paid?

Landowners liable for paying WGT will be issued with an assessment with a due date for payment. The payment will have to be paid until the next dutiable transaction occurs, or until 30 years after the rezoning event.

For more information, feel free to consult our tax accountants at KPG Taxation.