A windfall tax is coming to Victoria
Tony Nunes and Lakmini Mahipala
by Tony Nunes and Lakmini Mahipala
The Victorian government has recently introduced a windfall gains tax (WGT) that will commence from 01 July 2023. Any owner of land in Victoria may become liable to pay WGT where the land they own gets an uplift in value due to a rezoning of the land. The uplift, referred to as the taxable value uplift (TVU) must be greater than AUD 100,000.
What is the TVU?
Broadly speaking, the TVU is the increase in the value of the land before and after the rezoning, less any deductions prescribed by the regulations. The value of the land before and after rezoning is determined by the Valuer-General Victoria.
What is the WGT rate?
Astronomical! Where the TVU is AUD 100,000 to AUD 499,999, the rate is 62.5 percent. Where the TVU is AUD 500,000 or more, the rate is 50 percent.
The WGT is based on the aggregated TVU of all the land owned by the taxpayer that has been rezoned. Grouping provisions also apply, and members of a group are assessed for WGT on the aggregated TVU of all the land they own that is rezoned.
Who is liable for the tax?
The owner of the land.
When is the tax payable?
If a WGT liability arises, the owner of the land will be issued with a WGT assessment. The due date for payment will be specified on this assessment. However, a taxpayer may elect to defer 100 percent of their WGT liability until the earlier of the following:
A dutiable transaction occurs in relation to the land (e.g. the land is sold);
A relevant acquisition occurs with respect to a landholder who is the owner of the land; or
30 years after the rezoning.
Interest is payable on any WGT that is deferred in whole or in part, calculated on a daily basis.
The election must be made to the Commissioner in an approved form before the WGT is payable.
Are there any exclusions?
WGT does not apply where the rezoning is an excluded rezoning (e.g. between schedules in the same zone or to public land).
Are there any exemptions?
There are only limited exemptions available for residential land or where land is rezoned to correct an error in the Victoria Planning Provisions.
A sign of things to come?
While similar legislation has not been enacted elsewhere in Australia, it could be a sign of things to come. States are experimenting with additional land taxes – recently the Queensland government introduced and then deferred significant changes to the way land tax was to be calculated for land located in Queensland.
Purchasers of land in Australia should be aware of this possible future additional impost on their investments.
Kelly + Partners Chartered Accountants is a specialist chartered-accounting business that assists private businesses, private clients, and families to manage their business and personal financial affairs. The Kelly + Partners Tax Consulting Practice is respected as one of the foremost tax advisory firms in Australia and offers a full range of direct, indirect, and international tax services.
GGI member firmKelly + Partners Chartered AccountantsSydney, AustraliaT: +61 2 9933 8866
Advisory, Auditing and Accounting, Corporate Finance, Tax, Fiduciary and Estate Planning
Tony Nunes has over 25 years’ experience in providing tax advice to clients, especially on issues affecting cross-border transactions, acquisitions and restructures, and on all aspects of structuring the ownership and financing of corporations and their operations. Contact Tony.
Lakmini Mahipala has over 5 years’ experience advising clients, ranging from private family groups to ASX listed companies, on a variety of issues including cross-border transactions (such as acquisitions, disposals, and restructures), thin capitalisation, controlled foreign company provisions, and permanent establishments. Contact Lakmini.
