New Victorian windfall gains tax expected to rake in $280 million

State budget estimates show the incoming Victorian windfall gains tax is expected to slug landholders millions.

The state government’s incoming windfall gains tax is projected to rake in $280 million in its first four years as farmland is rezoned for housing across regional Victoria.

From July 1 this year, rezoned farmland will be taxed at a rate of 62.5 per cent on the uplift of more than $100,000, dropping to 50 per cent on the gain greater than $500,000.

The Victorian Government’s 2023-24 state budget shows the new tax is estimated to raise $40 million in the next financial year, before surging to $59 million in 2024-25, and rising to $84 million in 2025-26 and $97 million by 2026-27.

Mitchell Shire Council chief executive Brett Luxford said about 950ha of land in the shire was designated for future residential zoned land via the council’s township structure plans.

“The development industry is aware of the (new tax) and is reviewing the potential implications it may have on the viability of future developments,” Mr Luxford said.

Last month a 136ha farm poised to be rezoned for housing, Warden Park, located on the outskirts of Broadford in the Mitchell Shire, was listed for sale where it is expected to generate offers worth more than $35 million.

Meanwhile a 120ha property at Echuca West was sold in a $40 million deal last year after the former livestock farm was rezoned to residential with plans for 1200 lots.

The Campaspe Shire Council passed a motion to rezone about 615ha of farmland for residential development in Echuca West in 2021.

A Rural Councils Victoria report commissioned in 2021 found 87,400 new homes were needed in rural Victoria over the next 15 years.

The report said “the tax could significantly cut their prospective profit margins and therefore discourage subdivision”, while the Urban Development Institute of Australia said it “remains strongly opposed to WGT”.

“Taxes on development comprise almost half of the state government’s taxation revenue. In the most recent state budget, property taxes are forecast to comprise 47.2 per cent of the state’s total taxation revenue in 2023-24,” a UDIA spokesman said.

“We are in the middle of a growing housing crisis.

“Long-term lack of supply is driving house prices higher and you simply cannot tax your way to affordability.”

Meanwhile in the state’s east, a Latrobe Shire spokesman said there were proponent-led amendment requests currently lodged with the council that would be affected by the tax.

“There may be a decline in proponent-led planning scheme amendment requests into the future, however, this is something we have not seen as yet,” the spokesman said.

The tax will not apply where land is shifted from one rural zone to another, such as if a property was reclassified from farming to green-wedge zone.

It will only apply to land that is rezoned after July 1 this year, with landholders given the option of paying the tax when the property is rezoned or deferring payment, until the property is sold or subdivided for up to 30 years.