Introduction of a windfall gains tax to land in Victoria
16 November 2021
The Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 (Vic) (Bill) has passed the Victorian Legislative Assembly and has had its second reading by the Legislative Council.
What changes will the Bill bring about?
The Bill, once passed, will impose a windfall gains tax on the increase in the value of land that results when land is rezoned. The new tax will be applied to land rezoned under a planning scheme decision made from 1 July 2023 where the decision results in an increase in the value of the land by $100,000 or more.
Exemptions that will apply to this tax include that the tax will not be imposed on:
- residential land of up to two hectares (other conditions must also be met), or
- charities – if the land continues to be used for charitable purposes for 15 years after the rezoning
What are the implications for charities?
The Bill also proposes to amend the Land Tax Act 2005 (Vic) so that charitable institutions will be required to occupy land exclusively for charitable purposes to be eligible for a land tax exemption. This means that the Bill, once passed, will overturn the decision in University of Melbourne v Commission of State Revenue  VSC 156 (1 April 2021) where the Supreme Court of Victoria held that the University did not have to pay land tax on land that it leased to a third-party company to develop it for student accommodation (even though the third party was a non-charitable entity).
Visit our online resources on state tax laws for more information on state tax laws.
For more information about the Bill, see the Victorian Department of Treasury and Finance’s fact sheet on the new tax.