What is the windfall gains tax?

From 1 July 2023, a windfall gains tax applies to all land rezoned by the same planning scheme amendment resulting in a value uplift to the land of more than $100,000. In determining the value uplift, all land owned by the person or group and subject to that rezoning is taken into account.

What is rezoning?

A zone means a zone referred to in Clauses 32 to 37 of the Victoria Planning Provisions (VPP).

A rezoning is an amendment of a planning scheme that causes land to be in a different zone from the zone that it was in immediately before the amendment.

Rate of windfall gains tax

For a rezoning of land that results in a taxable value uplift:more than $100,000 but less than $500,000:

  • the tax will apply at a marginal rate of 62.5% on the uplift above $100,000
  • $500,000 or more: a tax rate of 50% will apply to the total uplift

Example 1

If a rezoning of land results in a taxable value uplift of $300,000, windfall gains tax of $125,000 (($300,000 – $100,000) × 62.5%) is payable.

Example 2

If a rezoning of land results in a taxable value uplift of $600,000, windfall gains tax of $300,000 ($600,000 × 50%) is payable.


Exemptions and exclusions from windfall gains tax

There are a number of exemptions or exclusions from windfall gains tax:

  • Residential land exemption
  • Land entitled to a transitional exemption from windfall gains tax
  • 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 Victoria Planning Provisions or a planning scheme

Who pays windfall gains tax?

The owner of the land that is subject to the rezoning pays the windfall gains tax.

Grouping and aggregation provisions can apply so that the $100,000 threshold applies only once to properties owned by the same owner or group of owners and rezoned under the same planning scheme amendment.

For further information and clarification of Windfall Gains Tax visit the State Revenue Website link here: https://www.sro.vic.gov.au/windfall-gains-tax

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