Victorian Windfall Gains Tax – A material new tax obligation for Victorian Land Developers

Tax Insights

The Victorian Government introduced the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 that, among other amendments, will impose a significant new tax on unrealised gains arising from the rezoning of land in Victoria.

If enacted, the provisions relating to windfall gains tax (WGT) will apply from 1 July 2023. Some transitional arrangements are applicable for certain contracts, option arrangements and rezoning events underway as at 15 May 2021.

Land rezonings that are excluded from the WGT are:

  • A rezoning between schedules in same zone
  • A rezoning that causes land to be bought within the contribution area within meaning of s. 201RC of Planning and Environment Act 1987 (Vic). Very broadly, this provision relates to land bought within a growth area, urban growth boundary and an urban growth zone as provided for under this Act
  • Rezoning after 1 July 2023 of land that was in a contribution area within the meaning of s. 201RC
  • A rezoning that causes land to be in a public land zone
  • A rezoning affecting a public land zoneThe Victorian Government introduced the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 that, among other amendments, will impose a significant new tax on land windfalls arising from the rezoning of land in Victoria.

Rezoning events affecting residential land of less than 2 hectares are exempt from the tax.

A liability for WGT arises when a non-excluded land rezoning occurs, is imposed and due and payable on assessment on the owner of the land.

The WGT is imposed at the following rates:

Windfall Gains Tax Victoria

The Taxable Value Uplift (for rateable or non rateable leviable land) is the difference between Capital Improved Value of the land prior to and after the rezoning event, less prescribed deductions.

Taxable Value Uplifts for a rezoning event are aggregated for 50% or greater company and trusts groups owning land affected by a rezoning event.

An owner may elect to defer a WGT payment if this occurs prior to the payment date. A deferred WGT is payable:

  • within 30 days of a dutiable transaction
  • within 30 days of a relevant acquisition, being the acquisition of an interest in a landholder that is subject to landholder duty under the Duties Act 2000 (Victoria)
  • 30 years from the rezoning event

Deferred WGT is subject to deferred interest calculated at the government’s 10 year bond rate.

There will be a charge over the land for any deferred WGT and interest. The deferred WGT and interest on land that is subdivided after a rezoning event is apportioned between the subdivided land holdings.

For more information

Please contact your local RSM adviser if you would like to get advice about the Victorian Windfall Gains Tax and its application to a specific landholding.

RSM in Sydney - providing accountanting, auditors and consultants for sydney Businesses