Windfall Gains Tax - New Laws from 1 July 2023

Windfall Gains Tax (WGT) is a new tax introduce by the State Revenue Office to tax profits made as a result of rezoning of land, which will come into effect as of 1 July 2023.

Who does it effect

Windfall Gains Tax will affect sellers and purchasers of land in Victoria.

The types of vendors and purchasers most likely to be affected include developers, people applying for re-zoning and purchasers of off-the-plan property, as it is possible for vendors to include clauses to pass on any WGT liability.

When is it payable

The tax is payable within 30 days of the following (known as WGT events) – section 32(1):

1. a dutiable transaction, for example the sale or purchase of land; or
2. a relevant acquisition of an interest in the WGT land occurs, for example for land held in a unit trust scheme; or
3. the day that is 30 years after something known as ‘the WGT event’, for example rezoning of the land.

There are some options for deferral of payment of the tax. Forty Four Degrees' Property Team can advise you if you are eligible for deferral.

Exclusions

Certain land is excluded from WGT consideration, including rezonings to correct an error (s38), sale of land contracts entered into prior to 15 May 2021(s39), rezonings underway prior to 15 May 2021 (s40) and Charitable land (s41).

It will be important for purchasers and vendors of off the plan land to consider the exemption in Section 39 before amending any contracts of sale as this could trigger a WGT liability.

Calculation

Windfall Gains tax is calculated on the basis of the value uplift, which is calculated as the difference between the capital improved value prior to rezoning less the capital improved after the re-zoning (Section 10).

Then the tax rate is established based on the ‘value uplift’(Section 9):

• Not more than $100,000 = Nil;
• More than $100,000 but less than $500,000 62.5% of the taxable value uplift in excess of $100,000;
• $500,000 or more 50% of the taxable value uplift (is lower because it keeps in mind the $100,000.00 tax-free threshold)

If you, a friend, or family member would like to know more, have any questions, or require legal assistance, please contact our Property Team at Forty Four Degrees on 1300 892 237 or via [email protected]