A new tax on windfall gains arising from rezoned land applies in Victoria from 1 July 2023 under the Windfall Gains Tax Act 2021 (Vic).

Rezoning

This tax captures the increased value from a significant uplift in a property’s worth from government decisions to rezone land. Revenue raised is intended to fund the construction of infrastructure to complement development from a rezoning.

Land that is rezoned, resulting in an increase of more than $100,000, will have the tax applied: s 9 of the Windfall Gains Tax 2021. The owner of the rezoned land pays the tax, with liability arising when the rezoning occurs.

A tax assessment containing a due date for payment will issue to the owner.

Section 3 creates exclusions, including land zoned for public places or land subject to the Growth Areas Infrastructure Contribution. Residential land not exceeding 2 hectares is also exempt, as are rezonings underway before 15 May 2021.

Rate

If the increase in value is more than $100 000 but less than $500 000, the tax is applied at 62·5% of the part of the taxable value uplift that exceeds $100 000.

If the gain is $500 000 or more the tax is 50% of the taxable value uplift.

Deferral

Owners can defer some or all their liability until the earlier of:

• a dutiable transaction occurring with the land, for instance a sale and purchase;
• the landowner being the subject of a relevant acquisition;
• 30 years after the rezoning event.

Interest accrues on deferred windfall gains tax liability at the 10-year Treasury Corporation of Victoria bond rate.

For a deferral not to cease when a dutiable transaction occurs, the purchaser or transferee must elect to assume the windfall gains tax liability including any accrued interest. If so, the deferral continues and the tax liability rolls over to the new owner.

Full payment is due within 30 days of a deferral ceasing. A form available from the State Revenue Office website needs to be completed to request a deferral. A part payment can be made at any time before the deferral period ends.

The relevant By Lawyers Victorian conveyancing publications have been updated accordingly. The Purchase of Real Property (VIC), Sale of Real Property (VIC), and 1001 Conveyancing Answers (VIC) guides contain extensive coverage of windfall gains tax.