THOUSANDS of landholders on Melbourne's urban fringe will be hit with a $95,000 a hectare tax if they sell, subdivide or develop their properties.

The Victorian Government has decided to collect the tax on the sale of land, greater than 0.4ha, rezoned for urban growth.

So far, about 2675 landholders have received letters from Melbourne's Growth Area Authority outlining the new charge, which will apply if their land is rezoned as part of major review covering 50,820ha of rural land.


The letter states the tax will "apply at a flat rate of $95,000 per hectare to land brought into the urban growth boundary after 2 December 2008".

The Weekly Times understands many more landholders are yet to be notified they could be liable for the tax.

A spokesman for Planning Minister Justin Madden said land rezoned for urban growth increased significantly in value, delivering a windfall gain to landholders.

"The Growth Area Infrastructure Contribution (tax) aims to tap into a portion of that value uplift to contribute and help share the cost of building community infrastructure more fairly," the spokesman said.

The Government estimates land rezoned for urban growth is worth $300,000 to $400,000 a hectare. But farmers, other landholders and real estate agents say the infrastructure contribution is nothing more than an inequitable "vendor tax" that fails to recognise they cannot realise Mr Madden's "uplift" in value.

Victorian Farmers Federation horticulture group president Peter Cochrane said it may be years before a developer showed any interest in someone's land, especially smaller landholders.

In the meantime, landholders would be stuck in a stagnant market.

"This tax will lock these landholder in, given it'll only be developers and speculators who are willing to pay the high prices needed to cover the $95,000/ha tax," Mr Cochrane said.

The GAA is also preparing to tax landholders whose properties were brought into the urban zone in November 2005, the last time the urban growth boundary was extended. However, land rezoned in 2005 will be taxed at $80,000 a hectare, subject to indexation, if it was sold after December 2 last year.

Officer landholder John Howard said the tax was devastating for older landholders such as himself.

"I'm 61, but I doubt I'll be able to sell it, given I'm facing a $960,000 tax bill on my 11.8ha," Mr Howard said.

"For people like me it means being locked in for 15 years waiting for developers while councils cane us on rates."

Property consultant Michael Hocking said applying a flat tax of $95,000/ha was absurd given land values varied dramatically.

He said that land close to existing residential developments on Melbourne's fringe could realise $200,000/ha.

But Mr Hocking said developers weren't going to be interested in clusters of smaller lots, or those far from existing boundaries, roads or services.

"I had one woman ring whose property is impacted by a flood overlay, so you can't develop the whole site, yet the charge (tax) will apply to the gross area," Mr Hocking said.

"People just won't be able to sell their properties." Mr Hocking said it was more sensible for developers to pay the tax at the "structure plan" stage, nearer its release for sale.

"By then the developer has a good idea of the yield and it can be based on the land's real worth," he said.

Mr Hocking said NSW had adopted such a scheme, which was based on the value of the land at sale to the homebuyer.

However, GAA chief executive Peter Seamer said making developers pay the infrastructure contribution would simply mean it was passed straight on to suburban homebuyers.

"We're trying to reduce the impact on homebuyers," Mr Seamer said.

As for variation in prices across urban areas, Mr Seamer said it was not significant.

But Mr Cochrane accused Mr Seamer of "having rocks in his head" if he believed the tax would not be passed on to homebuyers.

"These guys (within the GAA) have no comprehension of what's happening in the real world," Mr Cochrane said.

The review areas include:

  • Melton, where 11,524ha is under review, with 4080ha required.
  • Wyndham, where 8351ha is under review, with 5375ha required.
  • Hume-Mitchell-Whittlesea, where 25,385ha is under review, with 10,500ha required.
  • Casey-Cardinia, where 5560ha is under review, with 2900ha required.

The Government plans to introduce the new charge, via legislation, later in the year.