Updated 30 November 2021
The Victorian Government has created a new Act known as the Windfall Gains Tax Act 2021 to establish the windfall gains tax. The Act, which was passed on 30 November 2021, will see landowners pay tax on windfall gains accrued when the value of their land increases by more than $100,000 due to the actions of government, including government decisions to rezone land.
The commencement date for the tax, initially proposed to be next year, has been postponed one year and will begin on 1 July 2023.
A Windfall Gains Tax Factsheet has been issued by Government that explains in more detail how the tax will work, which we outline below.
This information is important for landowners and land developers who are affected by this tax.
The rates and thresholds previously announced remain unchanged (see below), as do the rezoning types that remain exempt, which covers rezonings to Public Land Zones and rezonings to and from the Urban Growth Zone within the Growth Areas Infrastructure Contribution area. Landowners will also have the right to object to pre-rezoning and post-rezoning valuations after the tax assessment is made.
A tax-free threshold of $100,000 will apply.
|Value uplift||Tax payable|
|$100,000 to $499,999||62.5% of uplift above $100,000|
|$500,000+||50% of total uplift|
The windfall gains tax will be calculated based on valuations undertaken by the Valuer-General Victoria on the pre-rezoning value and the post-rezoning value of land, with the difference between the two representing the value uplift of the land. This calculation will be based on the Capital Improved Value of the land.
The pre-rezoning value will be based on the most recent annual general valuation, which is used for other purposes including the calculation of council rates and is calculated as at 1 January. The post-rezoning value will be based on a supplementary valuation of the land based on the new rezoning and will also be valued as at 1 January of the same year.
This approach allows the value uplift to be calculated at a point in time, such that any growth in value before or after the rezoning is not captured in the calculation of the windfall gains tax.
A landowner becomes liable for the windfall gains tax at the time of the rezoning event but may choose to defer payment of the liability until the next dutiable transaction, when cashflow to meet the liability will be generated. To ensure liabilities are not deferred indefinitely, there will be a 30 year limit on deferrals. This means a deferral will cease on the next dutiable transaction or after 30 years, whichever happens first.
If you have any questions about the windfall gains tax or how it may affect you, contact Damien Palmer on 03 5443 0344 or email email@example.com