The Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 recently received Royal Assent.
This law has introduced a new windfall gains tax (WGT) which will broadly apply in circumstances where Victorian land is rezoned.
The WGT will apply from 1 July 2023 in circumstances where Victorian land is rezoned and the taxable value uplift (i.e. the increase in the capital improved value (CIV) of the land as a result of the rezoning) is more than $100,000.
The owner of the land (or joint owners of jointly owned land) will be liable to the WGT.
There will be no WGT for rezonings:
Further exemptions and waivers from the WGT apply to:
A land owner must either pay the WGT by the due date on the notice of assessment received or can choose to defer the payment of up to 100% of the WGT and pay this amount within 30 days of the earliest of the following events occurring:
Any deferred WGT will be subject to interest at the Treasury Corporation of Victoria 10 year bond rate.
Further, if any part of the WGT that is not deferred is not paid on time, the whole of the WGT will become immediately payable (i.e. as if there was no choice made to defer payment of the WGT).
In certain circumstances, an acquirer of the land (transferee) may elect to pay any deferred WGT.
The WGT amount payable is calculated based on the quantum of the taxable value uplift:
As all landholdings are aggregated for WGT purposes, a land owner cannot claim multiple WGT-free thresholds for multiple rezoned properties that are commonly owned (e.g. if uplift on each property is less than $100,000).
The WGT is a significant additional tax that will be levied on land owners where the capital improved value of their land has increased as a result of a rezoning which they may or may not have any control over.
In addition, as the WGT is levied on unrealised gains, many land owners will be liable to pay the WGT even if they have not:
The WGT law is extremely complex, so advice should be sought in respect of any land owned or expected to be acquired that is likely to be subject to rezoning.
For assistance with WGT, please speak to your Crowe adviser or get in touch with the Tax Advisory team.