Passing the upper house on Thursday, Victoria's new windfall gain policy taxes up to 62.5% of any uplift in land value as a result of rezoning.
Initially announced in Victoria's 2020-21 State Budget, and introduced to the Legislative Assembly (lower house) on 12 October, the bill passed in the Legislative Council (upper house) on Thursday with an absolute majority.
The Windfall Gains Tax (WGT) applies when the taxable value uplift in land owned resulting from a rezoning exceeds $100,000.
It would apply from 1 July 2023, and landowners would need to pay the tax bill either at time of sale or 30 years after rezoning - whichever happens first.
They would also need to pay interest on the deferred tax bill every year from rezoning.
The bill is targeted primarily at property developers, with residential land less than two hectares exempt.
Value Uplift | Windfall Tax Payable |
Less than $100,000 | $0 |
$100,000-$200,000 | 62.5% in uplift exceeding $100,000 |
$500,000< | 50% on the total uplift |
The Housing Industry Association (HIA) was particularly vocal in its opposition to the new tax.
"In pursuing such an outcome, the Government appears determined to put home ownership out of reach for even more Victorians, by placing further upward pressure on the cost of land for new housing which continues to be in short supply," HIA executive director Fiona Nield said.
"For private land owners, the tax will be a major disincentive for them to sell or develop their land for housing, and if they do then the costs will be passed directly to developers and homebuyers.
"The timing of this new tax couldn’t be worse. It will come as homes built using the recent Federal Government’s HomeBuilder grant will have been completed, with the risk that new home builds will most likely be in decline threatening jobs in the years ahead."
The latest package also includes a premium stamp duty rate on properties over $2 million, and there are also concerns about 'double taxation' with the WGT and capital gains tax, or CGT.
"Further thought will need to be given to the interaction between any other taxes such as capital gains tax, which is a federal tax, and WGT and the impact, if any, that WGT may have on any CGT that may be payable on any disposal of the relevant land," Clayton Utz lawyers said.
Fear mongering
In July, SGS Economics & Planning senior associate, Gerard Lind, called the opposition to the taxes "fear mongering".
"A windfall gains tax is simply taxing the unearned land value generated by a rezoning. As far as taxes go, this is about as fair as they come," Mr Lind said.
"Giving property rights away for free when it’s time to rezone ... is akin to letting mining companies dig up minerals without paying any royalties.
"From this perspective, making landowners pay for only half of the property rights is a bargain."
The Australian Capital Territory has had a WGT of up to 75% since 1971, while NSW is considering a 'development contribution regime'.
Emily Sims, research manager at tax reform research institute Propser, said WGT is one of the fairest taxes.
"Removing half the honeypot will affect some of the wealthiest players in the industry – those that simply buy land 'in the path of development' and wait," Ms Sims said.
"They wait for earnest developers to come knocking at their door wanting land at an affordable price. This kind of activity doesn’t add any value to the development process and it should be discouraged."
Advertisement
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
Lender | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Variable | More details | ||||||||||||
FEATUREDUNLIMITED REDRAWSSPECIAL OFFER | Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
| ||||||||||||
Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
| |||||||||||||
Variable | More details | ||||||||||||
FEATURED100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES | Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
| ||||||||||||
Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
| |||||||||||||
Variable | More details | ||||||||||||
QLD/NSW/VIC/SA METRO & INNER REGIONAL AREAS | Variable Home Loan (Principal and Interest)
| ||||||||||||
Variable Home Loan (Principal and Interest)
| |||||||||||||
Variable | More details | ||||||||||||
REFINANCE ONLY | Variable Rate Home Loan – Refinance Only
| ||||||||||||
Variable Rate Home Loan – Refinance Only
| |||||||||||||
Variable | More details | ||||||||||||
NO ONGOING FEESFREE REDRAW FACILITY | Live-in Variable Loan (Principal and Interest) (LVR < 90%)
| ||||||||||||
Live-in Variable Loan (Principal and Interest) (LVR < 90%)
|

- Fast turnaround times, can meet 30-day settlement
- For purchase and refinance, min 20% deposit
- No ongoing or monthly fees, add offset for 0.10%
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of July 3, 2022. View disclaimer.
Disclaimers
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.
Latest Articles
- How much will the RBA lift the cash rate in July?
- Home values decrease for the second month in a row amid rising interest rates
- NAB increases fixed home loan rates
- Census data shows mortgage holders still better off financially than renters
- How are rate hikes affecting appetites for mortgages?
Latest News
How are rate hikes affecting appetites for mortgages?
June 30, 2022
Be Savings smart.
Subscribe for free money newsletters.
to the Savings Privacy Policy