Rezoning tax passes through Victorian Parliament

Victorian property owners will face tax bills from July next year if a government rezoning decision lifts the value of their property, after new legislation was passed by state Parliament.

The Windfall Gains tax was announced as part of the Dan Andrews Labor government’s 2021-22 state budget, and immediately drew strong criticism from a wide range of property industry advocacy groups and professionals.

Developers and investors will be subject to a tax of up to 50 per cent of the gain in value of their property directly related to a rezoning decision.

Value uplifts of up to $100,000 will be exempt from the tax, while increases from $100,000 to $500,000 will be taxed at a rate of 62.5 per cent for gains above $100,000.

If the uplift results in a $500,000 or more gain to the property’s value, the owner will be subject to a tax of 50 per cent of the total uplift.

Landowners will be given the option to defer payment of the tax until the next time the property is transacted, while a 30-year limit on deferrals will apply.

Property Council of Australia Victorian executive director Danni Hunter wrote to industry members expressing the lobby group’s strong disappointment with the state government for implementing the tax.

Ms Hunter said she believed the impost would increase housing prices and the cost of doing business in Victoria, as well as create uncertainty for investors.

“As such, implementation of the WGT must be very carefully managed and the Property Council seeks the creation of an implementation advisory group with significant industry involvement to provide industry insights and assist with the complex transition,” Ms Hunter said.

Meanwhile the Victorian government also passed legislation this week relating to land tax concessions for build-to-rent developers.

The concessions comprise a 50 per cent discount to land tax for build-to-rent projects for up to 30 years, as well as exemptions to Absentee Owner Surcharges for the same period.

“The Property Council has been a strong advocate for the tax concessions, which will unlock new housing development and help make Melbourne the BTR capital of the country, and we again congratulate the Government on the delivery of this initiative to support the growth of the Victorian BTR sector,” Ms Hunter said. 

“The concessions passed Parliament as initially proposed despite an attempt from the Greens to significantly restrict eligibility.”