Insights Library
Charitable Waiver for Windfall Gains Tax in Victoria
Why does the charitable waiver matter?
For charities, the introduction of the Windfall Gains Tax Act 2021 (Vic) (Act) raised concerns that valuable resources could be diverted away from charitable purposes to meet unexpected tax bills. Section 41 of the Act addresses this by providing a charitable land waiver. Where land is owned and used exclusively for charitable purposes for 15 years after rezoning, the Commissioner of State Revenue must waive the Windfall Gains Tax (WGT) liability.
This means charities that continue to pursue their mission on rezoned land can avoid the tax altogether, but only if strict conditions are met and maintained.
How does the charitable waiver operate?
- Ownership test – the land must be owned by a charity or held on trust for charitable purposes.
- Use test – the land must be used and occupied exclusively for charitable purposes. Passive ownership or commercial leasing generally will not qualify.
- Continuity test – the charitable ownership and use must be continuous for at least 15 years after the rezoning event.
The waiver is not automatic. A charity must apply to the SRO within the timeframe for payment of the assessment (usually within 60 days of receipt of the Assessment Notice), and the WGT liability is then placed in deferral. At the end of 15 years, if the conditions have been satisfied, the Commissioner will extinguish the tax and any interest.
What happens if conditions are not met?
- Ceasing charitable use – if the land stops being used for charitable purposes, the waiver no longer applies. The WGT remains deferred but must be paid at the next dutiable transaction or at 30 years, with interest.
- Sale to a non-charity – the WGT becomes payable on settlement.
- Sale to another charity – the new owner may elect to assume liability and continue the 15-year period. Without such an election, the seller must pay.
- Partial land use – the waiver can apply proportionately where only part of the land remains charitable.
Why was the Windfall Gains Tax introduced?
The charitable waiver can only be understood in the context of the WGT itself. The tax was introduced to capture a share of the unearned uplift in land value caused by rezonings. A well-known example is Fishermans Bend, where rezoning reportedly increased land values by more than $4 billion. The Government’s policy is that such windfalls should help fund infrastructure and services rather than accrue solely to private landowners.
How is WGT calculated?
The tax applies to rezoning events from 1 July 2023. The Valuer-General determines the capital improved value of the land immediately before and after rezoning. The difference is the taxable uplift.
Rates are applied as follows:
| Item | Taxable value uplift | Rate of windfall gains tax |
| 1 | Not more than $100 000 | Nil |
| 2 | More than $100 000 but less than $500 000 | 62·5% of that part of the taxable value uplift that exceeds $100 000 |
| 3 | $500 000 or more | 50% of the taxable value uplift |
The landowner at the time of rezoning is liable, and the liability attaches as a charge on title until paid.
How do charities apply for the waiver?
- Timing – lodge an application before the due date on the assessment.
- Evidence – provide proof of charitable ownership (constitution, ACNC registration, trust deed) and evidence of charitable use (statutory declarations, activity details, financial statements).
- Intention – confirm that the land will continue to be used exclusively for charitable purposes.
Whilst the supporting evidence may vary in each case, some of the common documents required by the Commissioner are (not an exhaustive list):
- details of the ownership of the land, including the governing document of the charitable institution and aims, objectives and rules of the charity;
- details of the activities conducted on the land (present and future uses); and
- financial statements.
The Commissioner may seek additional material, and charities should maintain annual records for the 15-year period to demonstrate compliance.
What risks do charities face?
- Strict compliance – ‘exclusive’ charitable use is interpreted narrowly. Mixed commercial uses can disqualify the waiver.
- Interest accrual – if the waiver is lost, the deferred liability plus interest becomes payable, often many years later.
- Change of status – loss of charitable endorsement (e.g. deregistration with the ACNC) during the 15 years will end eligibility.
- Future boards – leadership changes can inadvertently trigger liability if the waiver conditions are not understood.
Practical steps for charities before and after rezoning:
- Review land use prior to rezoning to ensure it clearly qualifies as charitable.
- Apply early and elect to defer the liability once an assessment is issued.
- Document annually how the land is used.
- Plan strategically – if future sale is likely within 15 years, the waiver may not be beneficial.
- In transactions – if selling to another charity, ensure the buyer elects to assume liability before or at settlement.
SRO guidance
The SRO has confirmed that the waiver follows the same principles as the land tax charitable exemption and can apply to part of a landholding. Charities must be proactive. Missing the application window or failing to preserve charitable use risks a large and unexpected tax bill.
Key takeaways
- The charitable waiver is a critical exemption protecting charities from the impact of WGT.
- It requires ownership and exclusive charitable use for 15 continuous years after rezoning.
- The waiver is not automatic. Charities must apply and provide evidence.
- Sales to another charity can preserve the waiver if liability is assumed.
- Continuous compliance and governance are essential to avoid unexpected liability.
How Best Hooper can assist
At Best Hooper, we advise charities, developers and landowners on all aspects of the Windfall Gains Tax, including eligibility for the charitable waiver under section 41. Our team assists with preparing and lodging applications, structuring land use to maintain compliance, and guiding transactions such as charity-to-charity transfers to preserve the waiver. We also support developers and landowners more broadly with WGT strategy, from assessing exposure and negotiating contracts to ensuring due diligence and compliance in complex projects.
Our lawyers provide strategic advice to boards and executives to manage long-term compliance and risk. Given the complexity and strict conditions of the WGT regime, experienced legal guidance is invaluable. If your organisation owns or intends to acquire rezoned land, contact Jonathan Hourigan, Partner, or Lauren Cullen, Associate, at Best Hooper Lawyers.
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This article is intended as general information only and is not legal advice. You should seek specific advice tailored to your circumstances before acting on any of the matters discussed.
