Win for all Victorians! New legislation will stop landholders walking away with huge windfall profits from rezoning
The Victorian Government has announced it will introduce a tax on rezoning windfalls, something Prosper Australia has been encouraging for many years.
This means the Victorian community will now benefit from any zoning changes, not just private landholders and developers. It is also a win for integrity.
For too long a few well-connected or lucky people have benefited from massive profits simply as a result of owning land that has been rezoned. Often they sell as soon as the land is rezoned, meaning they make a profit without doing anything.
A rezoning tax means that all Victorians will now share in this massive windfall.
Prosper Australia spokesperson, Karl Fitzgerald, says:
“Victoria will no longer be giving out multi-million dollar handouts to landowners for free. The Planning Minister’s tick shouldn’t be a lottery win for developers and landowners. All Victorians deserve to share in any decisions made by the government in terms of how our cities grow.”
Prosper Australia’s research shows, for example, that the rezoning of the Fisherman’s Bend precinct in 2012 led to a huge 368% windfall gain per square metre.
A rezoning tax will also lead to a more productive, innovative Victoria. The current system is such a honeypot for land investors that investment in more productive sectors of the economy suffer, undermining innovation.
The rezoning tax will mean more money can be invested back into local infrastructure and other community projects.
Key elements of the new legislation include:
- The tax is on the difference between what the property was valued at BEFORE the rezoning and AFTER
- The increase in value (“uplift”) when a property or area is rezoned will be taxed up to 50%
- Exemptions are available for charities if the land is to remain used for charitable purposes
- Limited deductions will still be available but are being ironed out before the tax is introduced in July 2023
Under the previous system there were incentives for corruption and lobbying for zoning changes based on financial benefit rather than local needs.
“If we had the windfall gains tax in 2012, this would put a big dent in the infrastructure bill for an urban renewal project like Fishermans Bend. We give away each year in rezonings more than the Big Build’s $5.3bn social housing investment,” – Karl Fitzgerald
Prosper Australia Spokesperson, Karl Fitzgerald, is available for interviews. Karl holds a Bachelor of Economics from Monash and is the author of the Speculative Vacancies report.
For further information about why we support the new tax, you can watch this short explainer video (0:44)