What is the Windfall Gains Tax?

Windfall Gains Tax is an additional tax imposed on owners of land who accrue unanticipated gains of income as a result of the increasing value of their land that arises from actions of the Victorian government. It applies to rezoned areas of land resulting in a taxable value uplift of more than $100,000.00.

The Current Change

Starting 1 January 2024, section 10H of the Sale of Land Act 1962 (Vic) now imposes a prohibition on recovering windfall gains tax under option or contract of sale of land. This provision implies that there is no longer an apportionment of an existing windfall gains tax liability, meaning a person must not grant an option to enter into a contract of sale if there is an existing windfall gains tax liability that requires the purchaser to pay an amount for or towards the tax payable under the windfall gains tax liability.

Implications of Provisions

This section will render void a provision in a contract of sale of land which requires the purchaser to pay an amount towards an existing windfall gains taxability and prohibits a vendor from granting an option to purchase or enter into a contract which purports to require the purchaser to pay an existing windfall gains tax liability. Penalties of up to sixty (60) units for individuals and three hundred (300) units for companies may apply.

This provision does not apply to contracts entered on or before 31 December 2023. In accordance with this change, a clause has now been included in the standard LIV conditions stating that the adjustment no longer includes land tax or windfall gains tax. Vendors with an existing windfall gains tax liability must factor this into the sale price and remains payable by the vendor in full at settlement.