17 Dec Windfall Gains Tax
Significant windfalls can accrue to landholders’ value of their land increase due to the actions of the government.
This was identified during the rezoning of Fishermans Bend. Overnight, the land values in the area increased significantly, providing owners massive windfall.
A number of policy parameters are proposed to be varied in response to current conditions and these include:
- Commencement date postponed by one year to 1 July 2023.
- Transition arrangement to exempt rezonings which meet the following as at 15 May 2021:
- certain types of arrangements to transact land (or options to transact land) already in place at the time of the rezoning decision.
- 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 incurred by the landowner to support the amendment, being the lesser of $100,000 or 1 percent of the pre-zoning valuation.
- An exemption for residential land which includes a dwelling fit occupancy at the time of the rezoning, with the exemption applying for up to two hectares of residential landholdings, regardless of whether the dwelling is the landowner’s principal place of residence.
- Charities will not pay any Windfall gains tax liability on the 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 land will not cease deferral arrangements.
- The tax will be based on value uplift measured at the point of the rezoning event on a Capital Improved Value basis rahter than a site value basis.
Tax Rates
| Aggregated Taxable Value Uplift | WGT Rate |
| $0 to $100,000 | Nil |
| $100,000 to $499,999 | 62.5% of uplift above $100,000 |
| $500,000 or more | 50% of total uplift |
The pre-zoning value will be based on the most recent annual general valuation, which is used for other purposes including the calculation of council rates is calculated as at 1 January. The post-rezoning value will be based on a supplementary valuation of the land-based on the new rezoning and will also be valued as at 1 January of the same year.The windfall gains tax will be calculated based on valuations undertaken by Valuer-General Victoria on pre-zoning value and the post-rezoning value of the land, with the difference between the two representing the value uplift of the land. This calculation will be based on the Capital Improved Value of the land.
This approach allows the value uplift to be calculated at a point in time, such that any growth in value before or after the rezoning is not in the calculation of the Windfall gains tax.
When does tax apply?
The WGT will be imposed on amendments to planning schemes that take effect on or after 1 July 2023. Importantly, transitional arrangements will apply for certain contracts, option arrangements, and proponent-led rezonings that were underway when the WGT was announced on 15 May 2021.
For more information please contact
Inder Singh
P +61 3 9853 3007
E: inder@aspirepartners.com.au