Councils and authorities may be caught by Windfall Tax legislation

18 February 2022

The Victorian Government has introduced the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) (Act), which applies to landowners including Councils and other Authorities.

The rezoning of land from one type to another may cause it to significantly increase in value (value uplift). If a value uplift occurs as a result of rezoning, the Act imposes Windfall Gains Tax (WGT) on relevant landowners.

WGT applies to rateable and non-rateable land. Council land and Authority land is generally non-rateable land if it is either unoccupied or used exclusively for municipal or other public purposes.

Councils and other public Authorities will pay WGT if land is rezoned from a public use zone to a zone such as a residential or commercial zone. However, landowners of some non-rateable land will be exempt from paying WGT if the rezoning is an excluded rezoning or an exemption applies. These are discussed below.

What is rezoning?

Rezoning is a change to a planning scheme which causes land to be in a different zone than it was immediately prior to the change. For example, changing land from farming zone in a planning scheme to a residential zone in the same planning scheme. However, for the purposes of the Act, this does not include any excluded rezoning which may occur.

Excluded rezonings include:

  • keeping a piece of land in the same zone but moving it to a different schedule within that zone (eg moving land from Farming Schedule 1 to Farming Schedule 2);
  • changing land to or from a Growth Areas Infrastructure Contribution (GAIC) area; or
  • changing land to a public land zone, or from one public land zone to another public land zone.

What are the WGT triggers?

The table below outlines the value uplift threshold that must be met before the WGT will take effect.

CategoryValue upliftRate of WGT
1Up to and including $100,000Nil
2More than $100,000 but less than $500,00062.5% of that part of the value uplift that exceeds $100,000
3$500,000 or more50% of the total value uplift

The value uplift is determined by comparing the land value immediately before the rezoning occurs with the land value immediately after the rezoning occurs.


Example One: Land is rezoned and its value increases from $500,000 to $900,000. The value uplift is $400,000, falling into category 2 of the table above. A liability of $187,500 (62.5% of $300,000) arises.

Example Two: Land is rezoned and its values increases from $1.5 million to $4 million. The value uplift is $2.5 million, falling into category 3 of the table above. A liability of $1.25 million (50% of $2.5 million) arises.

Are there any exemptions?

Landowners are exempt from paying WGT despite a rezoning causing a value uplift if:

  • the rezoning of residential land is smaller than 2 hectares;
  • there is a correction of a previous zoning error;
  • the contract of sale was entered into before 15 May 2021;
  • the land is used for a charitable purpose for at least 15 years after the rezoning; or
  • a private applicant (proponent) led rezoning was underway before 15 May 2021.

What is a private applicant (proponent) led rezoning?

A proponent led rezoning is a rezoning request initiated by a landowner, including Councils or Authorities.

When this occurs, the landowner must demonstrate they have paid, or will have to pay, for works required for that rezoning. These works may include surveying, engineering, traffic or environmental analysis, among other things. These works must be at least $100,000 or 1% of the value of the land before the rezoning, whichever is lesser.

Where a Council or Authority has requested a rezoning, and the above conditions are met, they may be exempt from paying WGT despite the value uplift.

The above conditions are a summary of the more detailed considerations contained in the Act.

When do landowners need to pay WGT?

The requirement to pay WGT arises at the time the land is rezoned. However, payment can be deferred until 30 years after the rezoning or until the land is sold or transferred (whichever comes first). Deferred payment will accumulate interest which is calculated at the 10 year bond rate.


If Council or Authority land is rezoned, and that rezoning causes a value uplift, a WGT liability may accrue. However, Councils and Authorities may rely on various exceptions, including the movement of land to or from a GAIC area or where the Council or Authority has requested the rezoning itself before 15 May 2021.

This article was written by Mark Bartley, Partner and Alex Gelber, Special Counsel.

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