First VCAT Decision Provides Practical Guidance on Victoria’s Windfall Gains Tax Transitional Exemption

AS Residential Property No. 1 Pty Ltd (ACN 601 592 661) as Trustee for AS Residential Property No. 1 Trust v Commissioner of State Revenue [2026] VCAT 648 (AS Residential Property No. 1 Pty Ltd) is the first substantive VCAT decision considering the operation of an exemption under the Windfall Gains Tax Act 2021 (Vic) (WGT Act).

The decision provides important guidance on the transitional exemption in section 40 of the WGT Act and adopts a relatively broad and practical interpretation of when a rezoning process is sufficiently advanced to qualify for relief from the windfall gains tax. For landowners, developers and advisers involved in long-running rezoning projects, the decision may expand the circumstances in which an exemption can be claimed.

Victoria’s Windfall Gains Tax Regime

The WGT Act imposes windfall gains tax on the increase in the value of land resulting from a rezoning occurring from 1 July 2023 onwards. Liability arises when a rezoning constituting a WGT event takes effect under the Planning and Environment Act 1987 (Vic). The owner of the land at that time is liable for the tax.

Where the taxable value uplift exceeds $500,000, the tax rate is generally 50% of the uplift.

Recognising that some rezonings were already well advanced before the tax was announced on 15 May 2021, Parliament included a number of transitional exemptions in section 40. In broad terms, section 40 exempts certain rezonings where substantial work and expenditure had already occurred before the announcement date and where the relevant planning authority had taken sufficient steps to progress the amendment.

AS Residential Property No. 1 Pty Ltd

The case concerned the rezoning of former Kingswood Golf Course at Dingley Village.

The rezoning generated an uplift in value of approximately $72.5 million, resulting in a WGT assessment of approximately $36.2 million. The taxpayer contended that the transitional exemption in section 40(2) applied. The Commissioner accepted that all elements of the exemption were satisfied except one: whether the Planning Minister had “agreed before 15 May 2021 to prepare the amendment”.

Timeline of events

In deciding if the transitional exemption applies to the rezoning, the timing of the key events was central to whether the transitional exemption applied:

Transition exemption

Section 40(2)(b) provides an exemption where the Commissioner is satisfied that “the Planning Minister agreed before 15 May 2021 to prepare the amendment”.

The Commissioner argued for a narrow interpretation. In effect, the Commissioner contended that the Minister had not agreed to prepare the amendment before 15 May 2021 and that referral of the proposal to the SAC merely deferred any ultimate decision about whether the amendment would proceed.

The taxpayer argued that the Minister’s actions on 9 May 2021, viewed in context, demonstrated sufficient agreement to commence the amendment process.

The Tribunal’s Decision

The Tribunal set aside the assessment and held that the exemption applied.

A key aspect of the decision was the Tribunal’s interpretation of the phrase “agreed to prepare”. The Tribunal rejected the Commissioner’s narrow construction and instead adopted an ordinary and practical meaning. It held that an agreement to prepare an amendment is logically anterior to the actual preparation of the amendment and does not require a final decision on the merits of the rezoning.

The Tribunal concluded that:

• the Minister did not need to formally approve the final amendment before 15 May 2021;
• the amendment did not need to be prepared to any particular statutory stage;
• agreement could be inferred from conduct and surrounding circumstances; and
• ministerial actions could demonstrate a tacit understanding that the Department would formulate and progress the amendment on the Minister’s behalf.

The Tribunal placed considerable weight on the Minister’s approval of the briefing recommendations on 9 May 2021, the referral of the matter to the SAC and the subsequent steps directed to progress exhibition and consideration of the draft amendment. Those actions demonstrated that the Minister had formed the requisite state of mind before the critical date.

Accordingly, the Tribunal found that section 40(2) applied and no WGT liability arose.

Implications of the decision on broader windfall gains tax exemptions

The Tribunal expressly rejected an interpretation requiring a formal ministerial commitment or finalised amendment before 15 May 2021. Instead, the focus is on whether the Minister had reached a sufficient understanding or consensus that the amendment process would proceed.

This means the Minister would have likely “agreed to prepare” in the circumstances where the rezoning application has been reviewed by the Minister and the Minister has taken an action towards progressing the application, without any further formal steps being taken.

Other exemptions available under the WGT Act such as rezoning error exemption, where the Commissioner is satisfied that the WGT event is caused by an amendment to correct an obvious or technical error in a planning scheme, may also follow broad interpretation of what ‘obvious or technical error in a planning scheme’ means and may be available for current zoning anomalies that require more appropriate rezoning.

How we can help

Our Property & Development and Tax Law teams work closely with landowners and developers to navigate any land rezoning or property development projects from strategy to implementation in the most practical and tax effective ways.

Contact us

For further information please contact Corporate & Commercial Senior Associate, Peter Azam on 03 5273 5273 or email info@coulterlegal.com.au.