In line with the 2021/22 Victorian Budget announcements and following targeted consultations with various stakeholders, the Victorian Government has recently tabled a Bill to introduce the windfall gains tax - Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 (Bill). While the Bill has passed its first reading, the second reading debate has been adjourned to 27 October 2021.
The Victorian Government has implemented some variations to the design of the tax since its announcement. These changes contain some concessions and exemptions that were not previously announced. In particular, this includes the delay of the introduction of the measure (to 1 July 2023) and grandfathering some land from the regime.
Key changes to policy parameters
The key changes to the tax from its original announcement include:
Commencement date postponed by a year to 1 July 2023.
Transitional arrangements to exempt rezonings which meet the following as at 15 May 2021:
Certain types of agreements to transact land (or options to transact land) which settle after rezoning occurs
Land with a planning scheme amendment that had obtained a tracking number in the Amendment Tracking System administered by the Department of Environment, Land, Water and Planning or the Minister for Planning has agreed to prepare the rezoning and where significant costs have been incurred by the landowner to support the amendment, being an amount not lesser of $100,000 or 1% of the pre-rezoning valuation.
An exemption for residential land which includes a dwelling fit for occupancy at the time of the rezoning, with the exemption applying for up to 2 hectares of residential landholdings.
Charities will not pay any Windfall Gains tax on their landholdings, so long as the land continues to be used for charitable purposes for a 15-year period after the rezoning event.
Windfall gains tax liabilities may be deferred until the next dutiable transaction or until 30 years elapses, whichever occurs first. A subdivision of land will not cease deferral arrangements.
The tax will be based on value uplifts measured at the point of the rezoning event on a Capital Improved Value basis rather than a Site Value basis.
An exemption for land that is rezoned to a Rural Zone, other than the Rural Living Zone.
Landowners will also have the right to object to pre-rezoning and post-rezoning valuations after the tax assessment is made.
Further clarification
In addition to the key changes outlined above, the Victorian Government has also further clarified the following matters:
Rates and thresholds previously announced remain unchanged.
Rezonings previously announced to be exempt (ie rezonings to Public Land Zones, rezonings to and from Urban Growth Zone within the Growth Areas Infrastructure Contribution) will remain to be exempt.
As announced previously, movements between schedules within a zone will not constitute a rezoning event for the purposes of Windfall Gains Tax.
Questions
In the coming days and weeks, we will be providing further updates on a more in-depth level on various aspects of the new tax.
In the meantime, if you have any questions about how windfall gains tax should apply in your circumstance, please contact our specialist team at:
Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au
Victor Di Felice
Principal
M +61 419 515 010 | T +61 3 9611 0162
vdifelice@sladen.com.au
