The days of super profits reaped when land on the edge of the urban growth corridor is zoned residential is about to end with the State Government due to introduce a windfall gains tax from July 1 next year.

The new tax will apply to land that is subject to a government rezoning resulting in a value uplift of $100,000 or more.

If the taxable value uplift is more than $100,000 but less than $500,000, the tax will apply at a marginal rate of 62.5 per cent on the uplift with the first $100,000 tax free.

If the uplift is $500,000 or more, a tax rate of 50 per cent will apply.

KR Peters Director Peter Nicolls says the taxable value uplift is the difference in the capital improved value of the land before and after the rezoning takes effect, less any deductions.

The Valuer-General Victoria is responsible for determining the value of the land before and after a rezoning and it is the owner of the land subject to the rezoning who will pay the windfall gains tax.

The owner can defer part or all of the tax liability for a maximum of 30 years.  Interest will be imposed on the deferred tax and the deferral ends when the land is sold.

Mr Nicolls says the new tax will "hurt" and believes the marginal rates are excessive.

He said the rates should be closer to the company tax rate, which is 25 - 30 per cent depending on the company.

He also fears the new tax will have complicated GST implications.

"It will be interesting to see how the State Government calculates the GST. If they take 50% of the profit and calculate GST in the standard manner they will effectively be double dipping. To date the government has made no announcements on the GST issues," Mr Nicolls said.

He said the tax won't deter land owners from selling to developers but the days of huge windfalls are gone.

"It is just going to be a revenue raiser for the government."

Mr Nicolls said more land needed to be rezoned on the fringe of Melbourne and in regional areas if the Federal Government's vision for a huge boost in affordable housing, laid out in the October mini-budget, is to be realised.

"The government has come out and announced it wants to bring on more affordable housing but you still need land. Land is the most critical component and there is just not enough of it," Mr Nicolls said.

“Precinct Structure Plans (PSP) need to be streamlined to bring more land onto the market. The government has proved it can be done, an example - Pakenham East. They need to do it everywhere."