Thousands of landowners face huge tax bill under Allan government housing plan

Thousands of landowners could be hit with a huge tax bill under the Allan government’s controversial plan to build 60 high-rise transport hubs across Melbourne.

Thousands of landowners could be hit with a huge tax bill under the Allan government’s radical plan to build 60 high-rise transport hubs across Melbourne.

Planning experts say that rezoning of land is being considered by the state as it would be the easiest way to establish new height limits for towers around the new activity centres and set rules to kickstart more housing projects.

However, any rezoning will automatically trigger a state “windfall gains tax”, applied to non-residential properties that have had their values increase.

Landowners would be taxed up to 62.5 per cent of the uplift, payable within 30 days of a bill being issued or deferred for 30 years with interest accruing — or the property is sold.

The tax was designed to share profits between landholders and the state when a windfall is created, such as when prime inner city land is rezoned from industrial to residential.

Landowners could be hit with a huge tax bill under the Allan government’s high-rise plan. Picture: Nadir Kinani

On Sunday, Premier Jacinta Allan named 25 new activity centres, including around Brighton, West Footscray, Mitcham and Armadale, that would have new residential height limits around transport hubs, with the tallest towers permitted next to stations.

Building heights would taper down within the new precincts, and stretch to within 800m of the stations in what the government calls “walkable catchments zones”.

A further 25 locations will be revealed later this year, while 10 were selected last year when the state’s housing blueprint was revealed, and are currently subject to community consultation.

The subject of windfall gains tax has come up during consultation for the 10 initial activity centres, with the government canvassing using new zones to achieve their goal.

The government has also consulted on a proposed Walkable Catchments Zone that will cover areas within 800m of a major public transport hub.

One planning consultant from a major Victorian firm, speaking on the condition of anonymity, said planning overlays could be used to achieve greater heights around stations, but rezoning was the preferred and easiest approach.

Bayside residents are rallying against the high-rise plan. Picture: Nadir Kinani

Another planner said the state government’s plan was rushed, and would have significant impacts.

“The issue is there is so little certainty in anything that the government is proposing,” they told the Herald Sun.

“Yes, we need to intensify the housing in existing suburbs but the unknowns are; will it be a windfall gain tax event? Will there be enough infrastructure? what are the height limits?”

Another planner said permits for developments were being “parked” until the implications of new activity centres were outlined, raising the prospect of a stalled market until clarity is provided.

Residential properties, charitable lands, and universities are exempt from windfall gains under current Victorian laws.

However, planners warn land for childcare centres, medical and dental offices, corner shops, cafes, retail strips, car parks and some local government or statutory authority properties will be liable under a rezoning event.

Across the 60 new activity zones and surrounding walkable zones planners estimate that the uplift in property values would be billions of dollars.

Brighton residents rallied against Ms Allan’s announcement on Sunday. Picture: Nadir Kinani

Emeritus Professor of environment and planning at RMIT University, Michael Buxton, said there would be a variety of options for taxing value uplift of commercial properties around activity centre stations, like the plan for around Suburban Rail Loop precinct, but no detail had been provided on what was being considered.

“They’re making this up as they go,” he said.

He said that the amount of land that could be subject to changes was enormous.

“It’s massive, nothing has ever happened like this in Australia.”

When the state was asked about the proposal to rezone areas around the activity hubs a spokesperson said no decisions have yet been made.

“We’ve been consulting with communities, local councils and industry on these proposed settings since March — the details are still being worked on and no decisions have been made,” they said.

West Footscray has been named as one of 25 activity centres.

“The draft settings for catchments are in line with what we’re been talking to the community about — good quality, low and medium density housing, while protecting the things the matter — sunny streets, parks and good design.”

“We need to deliver more housing choice where Victorians are telling us they want it – close to public transport, jobs and services and close to where they grew up.”

They did not comment on the potential of the new tax being triggered.

Shadow Treasurer Brad Rowswell said: “Labor’s Windfall Gains Tax stifles investment, driving that investment interstate and overseas. What Labor really can’t get their head around is that if you tax something more, it doesn’t get any cheaper. In fact, it gets more expensive. Only genuine tax reform will increase investor and market confidence and Labor can’t be trusted to deliver that.”

Originally published as Thousands of landowners face huge tax bill under Allan government housing plan