Navigating the Windfall Gains Tax: Implications and Risk Management for the Property Industry

In brief

The Windfall Gains Tax (WGT), implemented by the Victorian Government, is one of the most significant State tax regime changes to affect the property industry since the introduction of the Growth Area Infrastructure Contribution.

The Windfall Gains Tax and State Taxation and other Acts Further Amendment Act 2021 (WGT Act) establishes a new tax on the uplift in land value that occurs as a result of a planning scheme amendment to change the zoning of certain land in Victoria on or after 1 July 2023. This tax regime poses new challenges for landholders, property developers, lenders and those engaging in land banking.

In this article we will delve into the key elements of the WGT Act, discuss the exemptions and exclusions, and provide some strategies for land owners and developers.

What you need to know

With the WGT coming into effect on 1 July 2023, it is now essential for property developers and investors to familiarise themselves with the WGT Act and proactively manage issues around the liability to and time for payment of the tax.

The WGT is imposed in respect of contracts entered into on or after 15 May 2021 and on rezonings that occur from 1 July 2023. The WGT will be applied where the increase in the taxable value of the subject land is more than $100,000. The land owner at the date of rezoning is liable to pay the tax.


While Growth Area Infrastructure Contribution (GAIC) applies to developments within designated Urban Growth Boundary (UGB) areas, the WGT applies to all land in Victoria, including metropolitan Melbourne and regional centres.

It is triggered by events such as rezoning (a WGT event), where changes are made to the land's allocated zone as part of a planning scheme amendment.

For capital improved value (CIV) uplifts of more than $100,000 but less than $500,000, the tax will apply at a rate of 62.5% on the uplift amount greater than $100,000. Any uplifts of $500,000 or more will see a tax rate of 50% apply to the total uplift amount.

For example, a piece of land is currently zoned as being within a farming zone and has a CIV of $4 million. At some point after 30 June 2023, this land is rezoned to become part of a residential zone, and this increases the CIV to $40 million. The State Revenue Office (SRO) will then issue a Notice of Assessment to the land owner for the payment of $18 million, being 50% of the $36 million uplift in value.

Where land is owned by multiple persons, the owners will be jointly assessed for WGT without consideration to the separate, proportionate interest of each owner.

It is crucial to note that the liability for the WGT falls on the owner at the date of rezoning, not the date of sale.

There is an ability to defer the time for repayment of a WGT assessment, essentially, until the property is sold up to a maximum deferral of 30 years. The deferral comes at an interest cost with interest imposed on the WGT owing at the Federal Government’s 10-year bond rate.

Under S42 of the WGT Act, the amount of any unpaid WGT and penalty and interest thereon sits as a registrable first charge on the land. Importantly, S42(2) states that:

“The charge has priority over all encumbrances to which the land is subject”

This has important implications for financiers and other creditors of the landowner.

Objections to rezoning assessments must be lodged within 60 days of the assessment.

Although the WGT applies to most land undergoing rezoning, there are several exemptions and exclusions.

Rezoning between schedules within the same zone, rezoning to a public land zone, rezoning to or from the GAIC area and rezoning to specific rural zones are among the exclusions. An exemption is also available for up to two hectares of residential land owned by the same owner or group. Certain conditions may allow for a waiver for charitable and university land.

It is essential for property developers, landholders and investors to familiarise themselves with the WGT Act, its exemptions and exclusions, and proactively manage associated risks.

Engaging the services of legal professionals, such as Madgwicks Lawyers, will provide assurance in:

  • determining the applicability of the WGT
  • ensuring payment responsibilities and timelines are allocated in agreements
  • preparing and lodging objections
  • obtaining a WGT property clearance certificate from the SRO to identify any deferred WGT liability
  • identifying the transactions or WGT events that may trigger an end to the deferral of WGT; and
  • determining if any alterations to a contract prior to 15 May 2021 will have unexpected consequences

In addition, our tax specialists can provide guidance on deferral options, deferral end triggers, and the impact on land transfer duty and economic entitlement duty.

Do not hesitate to contact Partners Angelo Conti for queries related to possible financial implications of the WGT's impact on managed investments in the property sector, James Christodoulakis for advice on the optimum structure or amendment of property transaction agreements or Philip Diviny to discuss repaying an obligation to WGT and the tax implications of the WGT to an investment scheme or transaction.

About the Author

Latest Knowledge

Fair Work Reforms 2024: The Second Wave

Tim Greenall summarises the key changes employers need to know about, helping to ensure your business remains compliant with the new obligations.
27 March, 2024

Unyielding tax obligations: Understanding tax debt write-offs

John Miller provides clarity around when a tax debt is considered "uneconomical to pursue," and the potential future implications for taxpayers with historical tax debts.
18 March, 2024

Fair Work Commission rejects first employee request for flexible working arrangement

FWC rejects an an employees' appeal for flexible work arrangement.
17 January, 2024