New Windfall Gains Tax 1 July 2023

Do you own land near a town or suburb? Is it possible that it could be rezoned into residential land which you could subdivide and sell? Then congratulations, the value of your land may double or even triple in value overnight; what a windfall!

The not so exciting news is that the government will now tax you on your windfall. The new Windfall Gains Tax (WGT) applies to most land in Victoria rezoned after 1 July 2023 with some limited exceptions for specific types of property and / or rezonings.

Liability to pay WGT is incurred when the rezoning occurs but can be deferred for up to 30 years. There is a strict 60-day time limit to object to an assessment for WGT.

The WGT is calculated by determining the difference in value of the property as a result of the rezoning. If the land has been valued for rating or levy purposes, the last assessment before the rezoning occurred is used as the pre-rezoning value. A supplementary valuation is then done as at the same date as the previous valuation – but as if the rezoning had hypothetically occurred on that date. If there is an increase in the value as a result of the rezoning, this is called the ‘value uplift’.

The ’taxable value uplift’ is the value uplift less any available deductions and is used to calculate the WGT. Only taxable value uplifts of $100,000 or more attract WGT. If the value uplift is between $100,001 to $499,999 the WGT rate is 62.5% and if the uplift value if more the $500,000 the WGT rate is 50%. If an owner has more than one property that is affected by the rezoning, those are jointly assessed on the aggregate taxable value.

It is always advisable to seek specific legal advice and financial advice before entering into any contract of sale for a property. Once a contract for the sale of land is signed, it is very difficult, if not impossible, for the purchaser to set it aside.