Windfall Gains Tax (WGT) is a tax imposed on landowners in Victoria, which came into effect from 1 July 2023. WGT aims to capture a portion of the increased land value resulting from government planning decisions, ensuring that the benefits of rezoning contribute to public infrastructure and services.
When is windfall gains tax payable?
The WGT applies to any contracts entered into after 15 May 2021 and to commercial decisions made from 1 July 2023.
WGT is applicable to all rezoned land in Victoria that exceeds two hectares, with very limited exemptions. The tax is payable within 30 days of assessment, though there is an option to defer payment, with interest, for up to 30 years.
What is rezoning?
Rezoning involves an amendment to a planning scheme (clauses 32-37 of the Victoria Planning Provisions, VPP) that changes the land's designated zone. This process, governed by the Planning and Environment Act 1987 (Vic), is not controlled by the landowner.
For WGT purposes, changes between schedules within a zone are not considered rezoning and will not trigger the tax.
The taxable uplift value is the difference in the Capital Improved Value (CIV) of the land before and after rezoning, as determined by the Valuer-General Victoria.
How is windfall gains tax calculated?
WGT is calculated based on the uplift in land value due to rezoning. The Government may prescribe deductions to reduce the taxable value uplift, although no specific deductions have been prescribed to date.
WGT amounts payable
- For an uplift between $100,000 and $500,000, WGT is applied at a marginal rate of 62.5% on the uplift above $100,000;
- For uplifts of $500,000 or more, a 50% tax rate applies to the entire uplift.
Scenarios for windfall tax calculations
Example 1
- Joe owns land in Victoria, which has been rezoned, resulting in an uplift value of $300,000.
- Joe's WGT would be $125,000 - $300,000 - $100,000 x 62.5%.
Example 2
- Jane owns land in Victoria, which has been rezoned, resulting in an uplift value of $600,000.
- Jane's WGT would be $300,000 - $600,000 x 50%.
Exemptions to windfall gains tax
Certain types of land and landowners are exempt from WGT, including:
- residential land exemption;
- land entitled to a transitional exemption from WGT;
- land rezoned to or from the Urban Growth Zone within the Growth Areas Infrastructure Contribution (GAIC) area;
- charitable and university land;
- land rezoned to Public Land Zones;
- land rezoned to correct an obvious or technical error in the Victoria Planning Provisions or a planning scheme; and
- land rezoned to a Rural Zone (excluding the Rural Living Zone).
Objections to a windfall gains tax notice
If you receive a WGT notice and wish to object, you have a strict 60-day time limit to submit your objections to the State Revenue Office.
Don't Get Caught Out! If you believe your property might trigger a windfall gains tax event, contact our office for professional advice today.
Things to consider if windfall gains tax impacts you
Financial planning
Property owners should factor WGT into their financial planning when considering buying, selling, or developing land.
Market dynamics
The introduction of WGT may influence property market dynamics, potentially affecting land prices and development activity.
Deferred payment option
Deferring payment with interest provides flexibility for property owners, especially for those who may not have immediate liquidity to cover the tax.
Get help from a property and commercial lawyer
The windfall gains tax can catch some property owners out. For more information or specific advice tailored to your unique situation, speak with a member of our team.
Contact David Davis Lawyers
Phone: 03 9014 1299
Email: admin@ddavis.com.au
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