Despite concern by Master Builders Victoria, The Property Council of Australia, Housing Industry Association, and Urban Development Institute of Australia (Victoria), the Windfall Gains Tax was introduced into the Victorian Parliament on Tuesday. 

The Government has pledged that this new tax will return a share of the profits from land rezoning’s to the community for vital infrastructures such as public transport and schools. 

The total value uplift from a rezoning decision will be taxed at 50 per cent for windfalls above $500,000, with the tax phasing in from $100,000. 

Master Builders Victoria again cautioned the Victorian Government this week against introducing any new costs that may compromise Victoria's ability to deliver a solid pipeline of new building and construction activity to support economic growth and recovery. 

The building and construction industry supports 320,000 Victorian workers and delivers thousands of new homes a year. It is vital to our state's economic recovery from the pandemic.  

It's therefore critical that this recovery isn't jeopardised by introducing more new taxes. 

Following stakeholder engagement with a range of industry bodies, including strong representation by Master Builders Victoria, the Victorian Government has announced some changes to this policy. 

These adjustments include:  

  • Residential land, which includes a home - including holiday homes and investment properties – will be exempted from the tax. It will not apply to any other increases in value, such as appreciation in property value over time. 
  • Primary production land that contains a home will also be exempted up to two hectares. Rezoning's to most rural zones, or to a Public Land Zone, will be exempted. Landowners with a windfall gains tax liability will be able to defer payment until the next dutiable transaction of the land or after 30 years, whichever occurs first. 
  • Exemptions will also be provided for charities if the land continues to be used for charitable purposes for the next 15 years after a rezoning, and to rezoning's to and from the Urban Growth Zone within existing Growth and Infrastructure Contribution areas which are subject to GAIC will not be taxed. The Growth Areas Infrastructure Contribution or GAIC is a charge that contributes towards the cost of essential State infrastructure in Melbourne's growth areas. 
  • New transitional arrangements will push back the start of the tax by a year, to 1 July 2023, and will provide an exemption to proponent-led rezoning's that were well in train by 15 May 2021. 

Please note that the windfall gains tax will be calculated based on valuations undertaken by the Valuer-General on the pre-rezoning and post-rezoning capital-improved land values, with the difference between the two representing the value uplift.  

It will also apply to other increases in value due to improvements to the property or appreciation over time. 

Click here for our joint media release.