Victorian Windfall Gains Tax bill passed

Lowe Lippmann Chartered Accountants

Victorian Windfall Gains Tax bill passed


During May 2021, the Victorian State Budget first announced new measures to impose a windfall gains tax on the increase in value of land resulting from a rezoning.


The bill outlining the legislative framework for these measures has now passed through the Victorian parliament and received royal assent on 30 November 2021.


What is a windfall gains tax?


Broadly, the windfall gains tax (WGT) is a tax on unrealised property value gains which arise as result of a rezoning or amendment to a planning scheme (ie. the “taxable value uplift”) and occurs at the time land is rezoned (ie. a WGT event). The WGT is not a duty, nor is it a form of land tax.


Where an entity owns multiple parcels of land that are impacted by the same rezoning, WGT is levied on the aggregate taxable value uplift of the land, ignoring any decreases in taxable value.


Grouping and aggregation provisions are applicable so that the $100,000 threshold applies only once to properties owned by the same owner or group of associated entities and rezoned under the same planning scheme amendment.


The WGT will apply when the taxable value uplift of all land owned by an owner (or group) resulting from the same planning scheme amendment (ie. rezoning) exceeds $100,000, as follows:



Taxable Value uplift.... Windfall gains tax rate....
Less than $100,000 Nil
between $100,000 and $500,000 of 62.5% on the uplift in excess of $100,000
exceeding $500,000 of 50% on the whole uplift

Who pays WGT and when?


The owner of the land at the time of the rezoning is liable for the WGT.  Taxpayers will be issued with a notice setting out their WGT liability and the date by which payment must be made.


Landowners liable to pay WGT will be able to defer payment of up to 100% of the tax until the earlier of:

  • 30 years after the rezoning;
  • a dutiable transaction (other than an excluded dutiable transaction) occurring in relation to the rezoned land; and
  • a relevant acquisition (other than an excluded relevant acquisition) occurring in respect of a landholder who is the owner of the rezoned land.


When a liability is deferred, it will continue to accrue interest daily at the 10-year bond rate.


Although responsibility for the WGT is the landowner’s, and would ordinarily be triggered upon the sale of the WGT land, it is possible for a purchaser of affected land to assume liability for the WGT where the transaction involves no consideration and the transferee elects to assume the liability.


In these circumstances, the 30 year deadline (above) for the payment of the WGT does not reset; it remains 30 years from the WGT event (or rezoning).



Are there any exemptions?


Exemptions will apply in specified circumstances for up to 2 hectares of residential land (used primarily for residential or primary production purposes), land used exclusively for charitable purposes and land rezoned to correct technical errors.


Rezoning in relation to Growth and Infrastructure Contribution (GAIC) areas and public land zones will be excluded from the scope of the tax.


Certain exemptions and exclusions have been inserted to ensure that projects commenced before the announcement of the WGT will not be caught by these new provisions.  For example, WGT is not imposed where a contract of sale was executed before 15 May 2021, but a WGT event occurs after 1 July 2022 but before the land has been transferred.



When will these new rules start to apply?


The tax will apply for amendments to planning schemes that take effect on or after 1 July 2023. Transitional arrangements will apply for certain contracts, option arrangements and rezonings that were underway when the WGT was announced on 15 May 2021.


The WGT is a new tax imposed when a WGT event occurs, this being the time land is rezoned. When rezoning occurs, and provided no exemption applies, the taxpayer will be liable for WGT on the taxable value uplift, calculated as the difference in the capital improved value of the land before and after the rezoning.



Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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