What’s Windfall Gain Tax?
Here’s everything you need to know about Victoria’s latest property tax, Windfall Gain Tax (WGT).
What is WGT?
WGT is a new Victoria State Government based tax occurring on rezonings after 1st July 2023 (originally drafted start date was 1st July 2022). The tax is aimed at land which results in a taxable value uplift to the land of more than $100,000.
The taxable value uplift is based on the capital improved value that evaluates both the land and any improvements including buildings if applicable – in contrast to land tax, which looks at site value alone.
For example
You have an industrial zone land package valued at $400,000 immediately prior to rezoning. The land is rezoned to be a neighbourhood residential zone and your land package is now valued at $600,000 at the same date.
This uplift of $200,000 is what will be liable to WGT.
How much will I be taxed for WGT?
When will WGT be payable?
Triggered at the time of rezoning, the State Revenue Office will issue an assessment notice with payment details within 30 days of issue. Opportunity within this 30-day payment period to elect to defer your tax in full or partially to meet your cash flow needs.
Deferral will be up until 30 years or upon a sale or transfer of the land. Please note, there will be interest applicable on deferred payment.
What land will be subject to WGT?
Any land in Victoria that is rezoned will be subject to WGT. There are a range of exemptions and exclusions but the main two that may apply to you are:
- Residential land exemption: land that has a building on it which is primarily designed as a place of residence
- Primary production land that is capable of commercial farming activities whilst simultaneously having a residence attached to it
The rezoning must be changed between schedules not within the same zones. Refer back to our previous example of industrial zone to neighbourhood residential zone – rather than another scenario like neighbourhood schedule 1 to neighbourhood schedule 2 zones.
What if I don’t agree with the valuation for WGT?
Within two months of receiving the notice of assessment you can lodge a valuation objection.
Timing is crucial! The Commissioner does not have discretion to allow late valuation objections.
Issues to note:
- This currently only applies to Victoria, but other states and territories are anticipated to follow suit!
- Deferred windfall gains tax will become the first charge on the land which may be impactful to lender providers. i.e. If the property is sold the SRO will be the first in line to receive the proceeds
- Grouping rules are very broad, unlike land tax discretionary trusts which can be grouped together
If you feel this may be applicable to you, there’s no time like the present to contact us to evaluate your situation. Get in touch here.
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