Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021
12/10/2021
On Tues 12.10.21, the Victorian Treasurer issued a media release summarising the Bill he was about to introduce to enact the proposed windfall gains tax. It also summarised the Bill. It will (broadly) be a 50% flat tax on ‘windfall gains’ of over $100,000 on rezoning of land – deferrable for up to 100% for up to 30 years – secured over that time as a first charge on the land. There will be limited exemptions, including for residential land up to 2 hectares, and for charities. What follows is an extract from the ‘Explanatory Memorandum’ that accompanied the Bill.
The Bill establishes a new Principal Act to be titled the Windfall Gains Tax Act 2021 to impose a windfall gains tax on the increase in the value of land resulting from a rezoning.
- Commencement – The windfall gains tax, which comes into operation from 1 July 2023, applies to uplifts in land value resulting from amendments to planning schemes within the meaning of the Planning and Environment Act 1987 that take effect on or after that date.
- General – The windfall gains tax is payable by the owner of the land when the liable rezoning (WGT event) occurs. A small number of rezonings are excluded from the scope of the tax, such as rezonings relating to Growth and Infrastructure Contribution areas and rezonings to public land zones.
- Transitional Arrangements – The Bill provides for transitional arrangements for certain contracts, option arrangements and proponent-led rezonings that were underway when the windfall gains tax was announced on 15 May 2021.
Imposition of Tax – Windfall gains tax applies when the taxable value uplift of all land owned by an owner or group that is rezoned by the same planning scheme amendment is above $100 000.
- Taxable value uplift is the difference in the capital improved value of the land before and after the rezoning takes effect less any deductions. The former value is drawn from the most recent valuation in force for the land under the Valuation of Land Act 1960 while the latter is determined through a supplementary valuation certified by the Valuer‑General.
- $100,000 threshold – Windfall gains tax only applies to taxable value uplifts in excess of $100 000.
- Flat 50% rate – where the taxable value uplift is $500 000 or more, the rate of windfall gains tax is a flat 50% of the taxable value uplift. 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 owners and rezoned under the same planning scheme amendment.
- 62.5% ‘shade in’ rate up to $500,000 gain – Where the taxable value uplift is more than $100 000 but less than $500 000, the rate is 62·5% of that part of the taxable value uplift that exceeds $100 000. Because of the tax-free threshold that applies under this rate, the effective tax rate is less than 50%.
Exemptions
- Up to 2 hectares of residential land (including primary production land with a residence) will receive an exemption from the windfall gains tax where it is rezoned by the same planning scheme amendment.
- In addition, charities will not pay any windfall gains tax on land they own that has been rezoned, so long as the land is used and occupied by a charity exclusively for charitable purposes for 15 years after the rezoning.
- Correct obvious or technical errors – An exemption is also provided in relation to rezonings to correct obvious or technical errors in the Victoria Planning Provisions or a planning scheme.
Deferral of Payment
- Up to 100% for up to 30 years – Owners of land liable to pay the windfall gains tax may defer payment of up to 100% of the tax for up to 30 years or until:
- a dutiable transaction in respect of the land (that is not an excluded dutiable transaction) or
- relevant acquisition (that is not an excluded relevant acquisition occurs in the landholder, whichever occurs first.
- A dutiable transaction for no consideration is an excluded dutiable transaction and therefore will not cease deferral.
Administration – The windfall gains tax will be administered by the Commissioner of State Revenue (Commissioner) as a taxation law under the Taxation Administration Act 1997. Rights of objection are provided to the valuations used in the calculation of windfall gains tax.
First Charge on Land – Unpaid or deferred windfall gains tax will constitute a first charge on the relevant land, with provision to include windfall gains tax liability information on property clearance certificates issued under the Taxation Administration Act 1997.
The Bill makes consequential amendments to the Taxation Administration Act 1997 and the Valuation of Land Act 1960 for the purposes of windfall gains tax.
The Bill also amends various taxation and other Acts.
Commentaries
There have been a good many commentaries issued, including, form: Premier’s Office; Dept of Treasury & Finance, FactSheet*; SRO; Pitcher Partners; Corrs; Clayton Utz*; Collin Biggers & Paisley*; Hall & Wilcox; HWL Ebsworth and Tax Controversy Partners. *Extra detail
[Tax Month – October 2021 – Previous Tax Month] 26.10.21