Victorian windfall gains tax and build-to-rent concessions: update

Related Knowledge

• Nothing left to gain: Developers and land owners lose out as Victoria moves to impose a windfall gains tax
• New concessions and constraints for build-to-rent developments

The Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) received Royal Assent on 30 November 2021 with no substantive changes to the draft legislation.

Windfall gains tax

From 1 July 2023, a land owner will become liable to pay windfall gains tax (WGT) on the “taxable value uplift” of land in certain circumstances where the land is rezoned.  The rate of WGT will depend on the taxable value uplift, and can be up to 50% of the taxable value uplift.

Transitional arrangements are available for the following transactions (where the specific criteria is satisfied) that were in motion before the announcement was made on 15 May 2021:

• pre-existing contracts of sale for land subject to a WGT event that were entered into before 15 May 2021 but will not be completed before 1 July 2023;
• pre-existing options to enter into a contract of sale for land subject to a WGT event granted before 15 May 2021 but will not be exercised, or will be exercised but not completed, before 1 July 2023;
• certain rezonings prepared by Council and paid for by the owner before 15 May 2021; and
• certain rezonings prepared by or at the request of the Planning Minister and paid for by the owner before 15 May 2021.

Build-to-rent concessions and exemptions

From 1 December 2021, eligible build-to-rent (BTR) development projects in Victoria will be entitled to a 50% reduction to the taxable value of land and an exemption from the absentee owner surcharge for land tax purposes.  

In order to be eligible, the development must satisfy prescribed requirements for a continuous period of at least 15 years from the occupancy date of the development project, and an application can be made to the Commissioner for a concession/exemption in anticipation of compliance with the 15-year eligibility requirement.  However, where the development ceases to comply with the 15-year eligibility requirement, a BTR special land tax will be imposed to claw back the BTR benefit received.