Silence broken on new Victorian Windfall Gains Tax and Build-to-Rent measures

By Meg Lee, Jim Koutsokostas and Bradley White

The hot button issues in the Victorian property industry right now are the Victorian Government’s latest Build-to-Rent (BTR) announcements and the controversial Windfall Gains Tax (WGT).

The BTR concessions and WGT were first announced in the 2020/21 and 2021/22 budgets respectively. Since then, the industry has been patiently waiting for further detail – and in some cases delaying much needed development projects to ensure that they don’t inadvertently miss out on the benefits by completing projects before the commencement of the legislation. With the draft legislation now released, the wait is finally over.

Below we summarise some of the key points from this draft legislation, including eligibility requirements and exemptions. However, keep in mind that the legislation is subject to change so make sure to watch this space for further updates!

Windfall Capital Gain

What is it and how does it work?

The WGT is a new tax imposed when a WGT event occurs, this being the time land is rezoned.

When rezoning occurs, and provided no exemption applies, the taxpayer will be liable for WGT on the taxable value uplift, calculated as the difference in the capital improved value of the land before and after the rezoning.

The tax comes into effect from 1 July 2023 and will operate as a charge on the land. Where a property subject to WGT is subdivided the WGT will be allocated proportionately to the new subdivided lots.

How much is it?

The tax will be applied at different rates depending on the gain made in accordance with the below table:

Taxable value uplift Applicable tax rate
Less than $100,000 Nil
$100,000 to $500,000 62.5% on the part of the gain that exceeds $100,000
More than $500,000 50% on the whole of the gain.


Where an entity owns multiple parcels of land that are impacted by the same rezoning, WGT is levied on the aggregate taxable value uplift of the land, ignoring any decreases in taxable value.

Grouping provisions also apply to aggregate the taxable value uplift of all land held by associated entities.

Who pays and when?

The owner of the land at the time of the rezoning is liable for the WGT. Taxpayers will be issued with a notice setting out their WGT liability and the date by which payment must be made.

Like the GAIC, landowners are able to elect to defer their liability until 30 days from the first to occur of the following:

  • when a dutiable transaction (other than an excluded dutiable transaction) occurs in relation to the WGT land; or
  • where a relevant acquisition (other than an excluded relevant acquisition) occurs in respect of a landholder who is the owner of the WGT land; or
  • the day that is 30 years after the WGT event.

Excluded dutiable transactions include:

  • a dutiable transaction for no consideration;
  • transfers between charities where the land has and will continue to be used and occupied by the charities for a charitable purpose;
  • the acquisition of an economic entitlement;
  • a further acquisition of an interest in a landholder under section 78(1)(b) of the Duties Act 2000 (Vic); and
  • the transfer to a legal personal representative of a deceased individual.

While liability is deferred, it continues to accrue interest daily at the 10-year bond rate.


Although responsibility for the WGT is the landowner’s, and would ordinarily be triggered upon the sale of WGT land, it is possible for a purchaser of affected land to assume liability for the WGT where:

  • the transaction involves no consideration and the transferee elects to assume the liability; or
  • in some cases, for transfers between charities where the land is used and occupied for a charitable purpose.

In these circumstances, the 30 year deadline for the payment of the WGT does not reset; it remains 30 years from the WGT event (the rezoning).

Exemptions for residential land

Residential land that does not exceed two hectares and is used primarily for residential purposes (or primary production) will be exempt. To be considered ‘residential land’ there must either be:

  • a building affixed to the land which, in the Commissioner of State Revenue’s (Commissioner) opinion, is designed and constructed primarily for residential purposes and may lawfully be used as a place of residence; or
  • a residence:
    • that is being constructed or renovated on the land; and
    • before work started, the land was either capable of being lawfully used as a place of residence or there was an uninhabitable residence on the land; and
    • once the works are complete, the land will be capable of being lawfully used as a place of residence.

For residential land greater than two hectares, the tax is chargeable on the uplift attributable to the portion of the land exceeding two hectares.

This two-hectare limitation could cause concern for farmers with significant landholdings that are caught by a rezoning decision. Additionally, land that is on a separate title to which the farm’s residence is on will not be considered residential land and will be subject to WGT.

Other exemptions and exclusions

Certain exemptions and exclusions have been inserted to ensure that projects commenced before the announcement of the WGT will not be caught by these new provisions. For example, WGT is not imposed where a contract of sale was executed before 15 May 2021, but a WGT event occurs after 1 July 2022 but before the land has been transferred.

Where rezoning activities are underway, the relevant exemption depends on whether the planning scheme amendment was prepared by a Council or by (or at the request of) the Planning Minister.

Where the planning scheme amendment is prepared by a Council, an exemption applies where the Commissioner is satisfied that:

  • the planning scheme amendment constituting the rezoning was prepared by a Council; and
  • the request for the amendment was created and registered in the Amendment Tracking System by the Council before 15 May 2021; and
  • before 15 May 2021, the owner of the land:
    • requested the rezoning from Council; and
    • paid for, was liable to pay for, or had otherwise performed or procured relevant work in relation to the rezoning; or
    • paid, or was liable to pay, relevant costs to support consideration of the rezoning; and
  • the total value of the relevant work is greater than:
    • $100,000; or
    • 1% of the capital improved value of the land before the rezoning (if less than $100,000).

In relation to rezonings prepared or requested by the Planning Minister, the same requirements as those above apply except that the exemption does not take into account when the request was lodged in the Amendment Tracking System. Instead, before 15 May 2021, the Planning Minister must have agreed to prepare the amendment.

It is important to note that ‘relevant work’ and ‘relevant costs’ have defined meanings in the legislation, and not all costs and work generally will be captured when determining if the 1%/$100,000 threshold is met.


This additional information goes some way in addressing concerns and criticisms of the WGT, in particular, allaying fears that your average individual landowner or farmer would suddenly find themselves with a tax liability they’re unable to fund. However, the limitation of the residential land exemption to two hectares could cause pain for farmers with significant landholdings on separate titles.

The clarity regarding the WGT’s payment timeframe (being the earlier of the next dutiable transaction in relation to the land or 30 years) is also welcomed. It is a common sense addition ensuring that developers will not be hit with a tax bill before being able to fund the liability from the project triggering WGT.

While we now have the wording of the draft legislation to review, which may change before it is passed into law, many questions remain. Is this the right time for the WGT? Will the WGT act as a deterrent to much needed increase in residential land supply? Will the Victorian property and construction industry suffer at a time the pandemic-stricken economy is in need of a boost?

Headlines on Victoria’s (and NSW’s) property price boom are as frequent as those concerning the pandemic. For many Australians, the prospect of owning a home is becoming but a pipe dream. The WGT is a new cost that is likely to be absorbed by developers and passed on to purchasers, or will potentially act as a handbrake on new development and restricting supply – both fuelling price increases.


What is it and how does it work?

A BTR development is one or more buildings that are constructed or substantially renovated for the purpose of providing multiple dwellings for lease under residential rental agreements.

As part of the 2020/21 budget the Victorian Government announced that eligible BTR developments would receive a 50% reduction in the taxable value of land subject to land tax and be exempt from the absentee owner surcharge (BTR Concessions). More recently, the Victorian Treasurer announced the extension of the BTR Concessions from the initial 2040 cut off to eligible BTR developments completed and operational between 1 January 2021 and 31 December 2031 – meaning that the BTR Concessions can be claimed for the full 30 year period even if it extends beyond 2040.

These concessions are available upon application to the State Revenue Office and as stated above, if all relevant eligibility requirements are met, can be claimed for 30 years.

Eligibility requirements

An eligible BTR development:

  • contains over 50 self-contained dwellings that are:
    • fixed on the same parcel of land;
    • owned by one owner or owned collectively;
    • managed by a single management entity (except to the extent that the dwellings consist of affordable or social housing);
    • suitable for occupancy on a date that is on or after 1 January 2021 and before 1 January 2032 (measured objectively by when an occupancy permit is issued); and
    • subject to a residential rental agreement as defined under the Residential Tenancies Act 1997 (Vic). The lessee must be offered a fixed term of at least three years (however the lessee can opt for a shorter period); and
  • the criteria above must be met for a continuous period of 15 years from the occupancy date.

The BTR Concessions will also apply to common areas for use by residents of the BTR dwellings.

What if more accommodation is built later?

Existing BTR developments can be expanded at a later date to add more dwellings provided all dwellings (existing and new) satisfy the eligibility criteria.

When applying the 15 year criterion to the new part of the existing BTR Development, the 15-year period will start to apply from the date of occupancy of the new dwellings, meaning that one development may have different stages with different 15-year periods applying simultaneously.

Where the 15-year eligibility requirement is not met

If at some point during the 15-year period after occupancy has commenced, a BTR development no longer satisfies the eligibility criteria, the landowner will become subject to a BTR special land tax for each year in which concessions applied. The result of this is to offset any benefit the landowner would have received from previously claiming the BTR concessions when they are no longer entitled to do so.

Importantly, the BTR concessions cannot be regained if the BTR development manages to meet the eligibility criteria again in a subsequent year. Once it is lost, it’s gone for good.


It is hoped that the extension of the BTR concessions will drive further investment in this area. We are already witnessing global players in the market turn their eyes towards Victoria and investing heavily, however there has been hesitancy to commence approved projects in the absence of clear guidance on eligibility.

Recently, Hall & Wilcox advised Greystar Real Estate Partners on Australia’s largest BTR project, a $500 million project in South Yarra. The development will have 625 apartments and over 3,500 square meters of communal amenities.

The clarity now provided that projects completed after 1 January 2021 are eligible will give confidence to the industry to move forward with approved projects. This demonstrates that the interest is there, and that investment in the Victorian property industry is ready to go. If other developers follow suit, the Victorian housing landscape could be in for a big change.

If you have any questions please contact our Tax and Property & Projects teams.


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