From 1 July 2023, the new Rezoning Tax will become law and commence action after the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 was passed in the Legislative Council, despite strong opposition from Master Builders Victoria and other key industry bodies.

There is a significant concern that the tax was announced without adequate consultation or modeling. It will potentially have a significantly damaging effect on project viability, housing affordability, the creation of employment precincts, and economic activity throughout Victoria.

It will disproportionately affect housing supply and affordability in regional Victoria and limit urban regeneration throughout Melbourne’s inner and middle-rings.

Master Builders Victoria is disappointed that our members and industry will be burdened with another tax that disregards the contribution our members make to the State and that will increase house prices even more.

Even though the Bill will become law, MBV’s efforts have not been ineffective.

Members will be aware that MBV advocated strongly to Government from when the tax was revealed in May, to oppose it and otherwise to alleviate its negative consequences.

This tax will be levied on unrealised which brings enormous uncertainty and affects the viability of new housing projects and employment activity across Victoria.

However, the Victorian Government has agreed to several key improvements including:

  • Significantly limiting the scope of any uplift in value, ensuring that the pre-rezoning valuation (V1) is the most recent statutory valuation, and the post-rezoning valuation (V2) is taken at the same date
  • Deferring the Commencement Date by twelve months to 1 July 2023
  • Several transitional arrangements to exempt rezonings
  • Exemptions for certain taxpayers
  • Expanded objection rights
  • A deferral regime under which the tax will become payable upon the next dutiable transaction or after 30 years, whichever is sooner
  • Provision for a deductions regime to be outlined in regulations
  • Following the introduction of the legislation, the Government has also confirmed that the Bill's transitional provisions will be expanded (Clause 40(1)(c) of the Bill, will be taken to read "any person acting on behalf of an owner).

Through its consultation process, the Government stated that the tax will capture the economic value "created by a Government decision". A Government rezoning decision releases the value that is most often created by the significant time and expense incurred by a developer to bring a site to the point of rezoning, at significant commercial risk. Developing a project takes several years, cost millions of dollars in holding, remediation, land clearing, and planning costs.

For these reasons, remediation and land clearing works must be made allowable deductions when Regulations are made.

Master Builders Victoria in collaboration with other leading industry bodies will continue to work with the Government with the objective of improving the regulations to benefit our members and the wider building and construction industry.