Victorian Windfall Gains Tax – AS Residential - First WGT case decided in favour of taxpayer
In the first decision under the new Windfall Gains Tax (WGT), the Victorian Civil and Administrative Tribunal (VCAT)has decided in favour of the taxpayer in AS Residential Property No. 1 Pty Ltd as trustee for AS Residential Property No, 1 Trust v Commissioner of State Revenue [2026] VCAT 648.
The taxpayer was successful in overturning a $36.2 million Windfall Gains Tax Assessment by applying the transition rules to show that the Minister had approved the rezoning prior to the 15 May 2021 announcement of the new tax.
Windfall Gains Tax/WGT
WGT was introduced in 2021 as an Australian-first tax, imposing a tax on the rezoning of land of 50% of the uplift in land value after a rezoning.
The tax is imposed on the difference between the capital improved value (CIV ie rates valuation) before and after a rezoning. The tax applies at 62.5% of the uplift in value between $100,000 to $500,000 of gain and 50% on the full uplift above $500,000.
The case
AS Residential Property No. 1 Pty Ltd as trustee for AS Residential Property No, 1 Trust held a former golf course, which was rezoned by the Minister for Planning in September 2023 to residential use. The rezoning was under amendment C199king to the Kingston Planning Scheme.
The Commissioner of State Revenue issued an assessment in March 2024 with an uplift in value of following its rezoning of around $72.5 million with WGT of $36.2 million.
The decision turned on the application of the transition rules.
The judgement itself does not mention whether there was a challenge to the valuations used in calculating the gain.
While not in issue in this matter, challenges to valuations used in WGT assessments have been successful in reducing or eliminating the WGT payable.
The rezoning process
The taxpayer signed a contract to acquire the property in September 2014 which settled in 2019.
Between 2015 and 2018, there was an unsuccessful attempt to have the City of Kingston Council effect an amendment to the planning scheme to rezone the land to residential use. The Council abandoned that amendment in 2018.
By June 2020, the Minister for Planning had issued a direction that planning authorities must have regard to planning guidelines for the conversion of golf courses issued in May 2020.
Also in June 2020, town planners working for the taxpayer arranged a meeting with the Minister for Planning to progress the amendment to the planning scheme. The Minister was formally approached on 20 November 2020 to appoint himself as Planning Authority and Responsible Authority and prepare the planning scheme amendment. The C199king number was given to the proposed amendment in December 2020.
A formal brief drawn up by the Department of Environment, Land, Water and Planning was given to the Minister in April 2021 and on 9 May 2021 the Minister referred the matter to the “Golf Course Redevelopment Standing Advisory Committee”. The Standing Advisory Committee put the proposal on public exhibition in June to September 2021 and recommended that the amendment be approved in March 2022. The Minister approved the amendment in September 2023 (by then a different minister had been appointed).
The introduction of WGT
On 15 May 2021, WGT was announced as part of the Victorian state budget. The Windfall Gains Tax Act2021 (Vic) (the WGT Act)commenced on 1 July 2023 and applied to all rezonings after that date, unless the transition rules applied.
One of the transition rules apply where there was a contract of sale or option to sell a property entered into before 15 May 2021 which has not settled at the time of the rezoning (section 39 of the WGT Act).
However, the relevant transition rule for this matter was section 40.
This applies if:
the planning scheme amendment was prepared by a Council and a request for the amendment was created and registered in the Amendment Tracking Scheme by the Council before 15 May 2021 after the owner had approached the Council for the requested amendment; or
the planning scheme amendment was prepared by the Planning Minister and the Minister had agreed before 15 May 2021 to make the amendment after the owner had approached the Planning Minister.
In both cases, the owner had to have incurred costs before 15 May 2021 of $100,000 (or 1% of CIV before the amendment if lower).
Did the transition rules apply?
In this case, it was the second form of the transition rule (contained in subsection 40(2)) that was relevant.
The Commissioner argued for a narrow interpretation of “the Planning Minister agreed before 15 May 2021 to make the amendment” (in paragraph 40(2)(b)) as effectively requiring the Commissioner to either make a planning scheme amendment ready of actually producing the amendment by that date.
The Tribunal rejected this narrow construction as being inconsistent with the text, context and purpose of the amendment – in particular the use of the wording, which required the Minister to have agreed to prepare the amendment and which did not require that the amendment actually have been made by 15 May 2021.
It should be noted that the Commissioner’s position would seem to leave almost no operation to the provision. If the Minister had to have produced the amendment by 15 May 2021 but the tax only applied to rezonings from 1 July 2023, then it would seem unusual that there would be many rezonings that had not occurred in the over 2 years between the relevant dates.
Looking, then, at the question of whether there was evidence that the Minister had agreed to prepare the amendment by 9 May 2021 (the date when the Minister referred the matter to the “Golf Course Redevelopment Standing Advisory Committee”), the taxpayer argued that:
the registration of the C199king in the Amendment Tracking Scheme by the Minister’s department in December 2020;
the meetings between the Department and the town planners from August 2020; and
the actions of the Minister in approving the Departmental brief and referrals of the matter to the Standing Advisory Committee on 9 May 2020.
Ultimately, the tribunal considered that the referral on 9 May 2020 was sufficient to be tacit agreement to prepare the draft amendment as brief as part of that referral included a reference to the preparation of the draft amendment as part of the referral to the Standing Advisory Committee.
This was reinforced by the letter from the Minister to the taxpayer explaining that the draft planning scheme amendment would be prepared by the Department as a precursor to the referral to the Standing Advisory Committee.
On that basis, the Taxpayer was successful in overturing the WGT assessment – a saving of $36.2 million.
The other requirements of the transition rules were not in question (in particular, the financial commitment incurred before 15 May 2021 was above $100,000).
Lessons from this case
The Commissioner’s attempts to narrow the exemption were unsuccessful.
While specific to its facts, this does show that the tribunal will not take a narrow approach to interpreting the transition rules exemptions for windfall gains tax for planning scheme amendments already under way at 15 May 2021.
Taxpayers should not be concerned about taking forward WGT matters to the tribunal if objections against the imposition of WGT is not successful.
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Please contact us with any questions on windfall gains tax or any other State Tax issues.
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au
