Windfall Gains Tax

From 1 July 2023, many Victorian landowners whose land value increases due to the government’s decision to rezone will face the prospect of paying a significant and new tax to the State Revenue Office, called the “Windfall Gains Tax”.

The Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 received Royal Asset on 30 November 2021.

The government has confirmed the implementation of a windfall gains tax (WGT) in Victoria. Any land in Victoria that is rezoned is subject to the WGT if the rezoning results in an increase in the value of the land of more than $100,000. The tax is to take effect from 1st July 2023 and the liability of this tax will be payable by landowners at the time when the rezoning occurs.  

The amount of windfall gain tax is levied upon all landholdings on aggregated taxable value uplift and is payable by the owner of the land when the rezoning occurs. This means if any owner/s hold multiple land subject to rezoning, the owner/s will be taxed at the rate equivalent to the combined amount of the total taxable value uplift. Members of group are jointly and severally liable for the tax. 

Tax Rate

What is a Windfall Gain Tax (WGT) Event?

A rezoning under the Planning and Environment Act 1987, however does not include rezoning:

• Between schedules in the same zone (i.e. GRZ Schedule 1 –> GRZ Schedule 4)
• Urban growth zone within a GAIC (growth areas infrastructure contribution) area or first rezoning after 1 July 2023 of land in the GAIC area before that date
  • Note:  Given that not all land in the urban growth boundary (UBG) is subject to GAIC, it should not be taken as an indication that WGT will not apply to land within UGB.
• Causing land to be in a public land zone or between public land zones
• Otherwise declared by the Treasurer to be excluded rezoning in the Government Gazette

What is the Taxable Value Uplift (TVU)?

Value uplift of the land less any deductions prescribed by the regulation. Taxable uplift is broadly equal to the increase in the Capital Improved Value (CIV) of the land as a result of WGT event.

Other Exemptions and Waivers:

• Residential Land (up to 2 hectares with a fixed dwelling on land)
• Charitable land (continuously for 15 years after WGT event)
• Rezoning errors (rezoned to correct obvious or technical errors)
• Contracts entered into or an option to enter into Contract before 15 May 2021
• Rezoning occurred (and registered) before 15 May 2021

WGT Payable

A landowner will become liable for WGT at the time of the WGT Event and will be issued a notice of assessment by the State Revenue Office for the WGT liability. It is up to you to notify the SRO Commissioner if there are any errors or omissions within 60 days of the issuance of the notice. You may also elect to defer payment of up to 100% of the WGT until certain circumstances arises.

It is unknown at this stage whether there are any tax deductions on the federal tax level.

If you would like to discuss its potential effects in further detail, please contact us.

Disclaimer

Any article published over our website is intended to provide commentary and general information only. It is not intended to and should not be relied upon as legal advice. Formal legal advice should be sought in each individual matter and based on personal circumstances. D Y & Co Lawyers is not responsible for consequences arising from any reliance on any article published.