The 2021-22 Victorian budget announced a proposed windfall gains tax (WGT) that, as of the time of writing is intended to be implemented as of July 2023. Government actions can lead to significant windfall gains for landholders, for example where land increases in value due to rezoning. The tax will aim to capture a share of the profits gained by the increased land value, to the tune of up to 50% of the uplift value.

The proposed tax has been criticised as being the “wrong tax at the wrong time”. As Australia and the world continues to grapple with the expansive social and economic fallout of covid-19, introducing a tax aimed at private landowners that arises due to government actions seems, at worst, exploitative. While ostensibly targeting wealthy developers, the Property Council of Australia has flagged that the proposed tax could have a “significant and adverse impact on housing supply and housing affordability”, at a time where Australia’s infamously volatile property market continues to make headlines for the extraordinary difficulties facing prospective first homeowners.

Furthermore, the proposed tax has been criticised for its lack of transparency regarding the potential interaction with federal taxes, what exemptions may be in place, what costs may be deductible, and the question of whether the revenue generated from the WGT would be reinvested back into the communities it came from.

Presently, the proposed legislation includes a tax-free threshold of $100,000 on the uplift value. For an uplift value between $100,000-500,000, uplift over $100,000 will be taxed at 62.5%. Where the value uplift is $500,000 or more, the total uplift will be taxed at 50%. For example, where there is a value uplift of $550,000, the tax payable would be a whopping $275,000.