The Windfall Gains Tax (WGT) applies to significant increases in land value resulting from rezoning.
WGT only applies in Victoria and is effective from effective from 1 July 2023.
How Does It Work?
- When land is rezoned (e.g., from farmland to residential or commercial use), its value may increase substantially.
- WGT is applied to the uplift in land value due to rezoning.
- The landowner is responsible for paying the tax at the time of rezoning, though deferral options are available.
How is the rezoning calculated
- The Valuer-General Victoria (VGV) conducts:
- A pre-rezoning valuation (hypothetical value before the rezoning).
- A post-rezoning valuation (value immediately after the rezoning).
- The uplift amount is calculated as: Post-rezoning value – Pre-rezoning value = Uplift
These valuations are usually as at the date of the rezoning, and the land is assumed to be in the same physical state — only the planning control (zoning) changes. The valuation is independent of the land tax notice valuation.
Example:
Land rezoned on 1 March 2025 from Farming Zone to Residential Growth Zone.
- Pre-rezoning value (as determined by VGV): $1.2 million
- Post-rezoning value (as determined by VGV): $3.0 million
Uplift = $1.8 million → WGT applies
Tax Rates
- Uplift below $100,000 → No tax.
- Uplift between $100,000 and $500,000 → Taxed at 62.5% on the amount exceeding $100,000.
- Uplift above $500,000 → Taxed at 50% of the total uplift.
Exemptions and Exclusions:
- Residential land of 2 hectares or less is exempt if it’s the principal place of residence (PPR).
- Charity landowners may qualify for full or partial exemption.
- Some government-led rezonings may be excluded (e.g., GAIC areas).
Payment Deferrals
The WGT doesn’t have to be paid immediately when the rezoning happens, you can defer payment until a ‘trigger event’ occurs.
- You need to apply to the State Revenue Office (SRO) Victoria to register the deferral.
- The deferred tax amount becomes a charge on the land title — like a mortgage or caveat — which ensures the tax is paid when the trigger event happens.
- Interest is payable on the deferred amounts.
Common Trigger Events for WGT Payment:
- Sale or transfer of the land (or part of it) to someone else.
- Subdivision of the land (e.g., creating new lots).
- Development approval that allows for subdivision or significant change in land use.
- The land ceasing to be owned by the person/entity that had the rezoning uplift (e.g., transfer to a related party that does not qualify for deferral).
Objection Rights
Landowners can object to:
- The pre-rezoning land value (CIV1).
- The post-rezoning land value (CIV2).
Objections must be lodged in writing with the Commissioner of State Revenue within two months of receiving the WGT assessment.
Examples of how WGT applies;
Example 1 – Farmland Rezoned for Residential Use
- A landowner owns farmland valued at $2 million (CIV before rezoning).
- The land is rezoned for residential development.
- Its new value becomes $5 million (CIV after rezoning).
- The uplift in value is $3 million ($5M – $2M).
- Since the uplift exceeds $500,000, 50% of $3M ($1.5M) is payable as WGT.
Example 2 – Contract Before Rezoning, Settlement After
- A sale contract was signed before rezoning, but settlement has not occurred.
- The seller remains the landowner at the time of rezoning.
- The seller is responsible for paying WGT.
Example 3: Moderate uplift – partial WGT
Scenario:
Land rezoned from industrial to mixed-use (residential and commercial).
- Pre-rezoning value: $600,000
- Post-rezoning value: $1,100,000
Tax calculation:
- Taxable uplift = $400,000
- Because uplift is between $100,001 and $500,000, tax rate is 62.5% of the uplift above $100,000:
WGT = 62.5% × $400,000 = $250,000
Example 4: Large uplift – maximum rate
Scenario:
Large parcel of farmland rezoned to allow for high-density residential development.
- Pre-rezoning value: $1.5 million
- Post-rezoning value: $4.5 million
Tax calculation:
- Taxable uplift = $2.9 million
- As the uplift exceeds $500,000, full 50% rate applies:
WGT = 50% × $2.9 million = $1.45 million
Example 5: Exempt Principal Place of Residence (PPR)
Scenario:
A couple lives on a 1.5-hectare property in a semi-rural area. The land is rezoned from rural to residential.
- Pre-rezoning value: $900,000
- Post-rezoning value: $1.6 million
Because the land is less than 2 hectares and is their PPR, they qualify for the PPR exemption.
Result: WGT = $0
For Existing Landowners
If your clients own land that may have the potential to be rezoned in the near future (e.g. Farm land on the edge of the town), please speak to them regarding their options.
For Property Buyers
Before purchasing land, clients should request a Property Clearance Certificate from the State Revenue Office (SRO). This certificate will show:
- Any deferred WGT amounts.
- Whether interest or penalty tax applies.
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