Reforming Victoria's Windfall Gains Tax

Victoria's property sector has been burdened by a decade of compounding taxes. Since 2015, the state has introduced a string of new levies — from foreign purchaser duties and absentee owner surcharges to the vacant residential land tax — culminating in the Windfall Gains Tax (WGT), which came into effect in July 2023. The WGT applies to property owners who receive value increases above $100,000 following government rezoning, with a rate of 50% on uplifts above $500,000 and no cap. The cumulative effect of Victoria's property tax regime has made Melbourne the most expensive major city in Australia for development. Developer taxes and charges now account for 18% of total development costs in Melbourne — double the equivalent burden in Sydney (9%) and well above Perth (15%), Adelaide (13%), and Brisbane (11%).

The WGT sits at the centre of this problem. Because buyers can substitute away from projects that incur high tax costs, the burden falls on developers in the form of reduced margins. On the average Victorian project, the WGT reduces returns by approximately 3 percentage points — pushing the typical project margin from 15% down to 12%, below the industry-standard feasibility threshold. Projects falling below this threshold are cancelled, scaled back, or delayed.

The damage extends beyond finances. The report identifies three compounding problems with the WGT: financial burden, unpredictability, and policy misalignment. On unpredictability, developers cannot obtain reliable WGT estimates before committing to projects, making feasibility assessments highly speculative. On policy alignment, the tax actively discourages investment in land held for future development and undermines the Victorian Government's own Development Facilitation Program. Industry confidence has deteriorated sharply as a result: the PCA Confidence Index shows Victoria has fallen 30 points behind Queensland, with 63% of Victorian respondents in September 2025 citing property taxes and charges as the most critical issue facing the industry.

Mandala's modelling finds that removing the WGT entirely could unlock $1.4 billion in additional annual investment in Victoria — equivalent to 3,100 new homes and 2,700 jobs supported per year, contributing $370 million in additional gross value added annually by 2030. The report also sets out nine targeted reforms across three pillars: financial relief (including crediting works-in-kind contributions and reducing tax rates), predictability (clarifying transitional exemptions and introducing binding pre-assessment liability), and policy alignment (ensuring consistency with government facilitation programs and allowing exemptions for significant projects). Together, these measures would restore investor confidence while giving the government flexibility on revenue objectives.

Read the full report here.