22 November 2021
by Karli Connors
- Related topics
- Corporate Tax & Regulatory
The proposed legislation enacting the Windfall Gains Tax (WGT) has been introduced into the Victorian State Parliament. If enacted the WGT from 1st July 2023 will impact landowners in Victoria whose land is rezoned.
What is WGT and does it affect me?
First announced by the Victorian Government prior to its 2021-22 budget, WGT is now one step closer to implementation. Its commencement will result in landowners paying WGT when there is an uplift of more than $100,000 in the value of land due to a rezoning.
|Aggregated Taxable Value Uplift||WGT Rate|
|$0 to $100,000||Nil|
|$100,001 to $499,999||62.5% of uplift above $100,000|
|$500,000 or more||50% of total uplift|
The trigger event for the tax is a rezoning event (unless its specifically an excluded event) and therefore a taxpayer may not have the funds to settle the liability. WGT can be deferred (refer below) but it attracts interest at the 10 year bond rate.
Who is liable?
In circumstances where there is one owner at the time of rezoning, the sole owner is liable for WGT. In more complex ownership situations, the liability is as follows:
- Where land is owned by multiple persons, the owners will be jointly assessed for WGT without regard to the separate interest of each owner.
- Where land is held on trust, the trustee will be assessed for the WGT in relation to all land subject to the trust, without regard to land held by the trustee for any other trust or for the trustee’s own benefit.
- Where land is held by related corporations or trusts, members of a ‘related’ group are jointly and severally liable for WGT on all the land held by members of the group, that is rezoned by the relevant WGT event.
Do I have to pay WGT?
As noted above, a landowner will become liable for WGT at the time of the rezoning event which will be due at the date specified in the assessment notice. A deferral of WGT is possible, with it being payable at the earliest of:
- A dutiable transaction on the land;
- A relevant acquisition in respect of a landholder who is the owner of the land; or
- 30 years after the WGT event.
Like land tax, any unpaid WGT, accrued interest and penalty tax will be the first charge on the land in respect of which WGT is payable. This means that it will have priority over any other encumbrances over the land.
There are a number of proposed exemptions from WGT including a residential land exemption where the land is less than 2 hectares.
If you are a current or prospective landowner in Victoria and are concerned about how WGT may impact you, please reach out to your ESV Engagement Partner for more information.