Defer a windfall gains tax liability
How subdivisions and future transactions affect deferred tax.
Key information
If you are liable for windfall gains tax, you can defer paying the tax until the earliest of:
- a dutiable transaction occurs in respect of the land (other than an excluded dutiable transaction), or
- a relevant acquisition occurs in respect of the landholder who owns the land (other than an excluded relevant acquisition), or
- 30 years after the rezoning event.
If deferral ceases, full payment is due within 30 days.
You can defer part of a windfall gains tax liability.
You can pay a windfall gains tax liability (including part of a liability or a deferred liability) at any time.
Deferred windfall gains tax amounts attract interest at the applicable Treasury Corporation of Victoria 10-year bond rate.
A dutiable transaction that occurs because of the sale of the land (i.e. a transfer for consideration) will generally cease deferral. Certain dutiable transactions and relevant acquisitions are excluded from ceasing deferral.
Dutiable transactions that do not cease deferral
Some dutiable transactions will not cease deferral, such as:
- a dutiable transaction for no consideration
- a dutiable transaction to a legal personal representative of a deceased person
- a dutiable transaction that arises because of the operation of the economic entitlement provisions
- a dutiable transaction relating to land that is used and occupied exclusively for charitable purposes (if the land is relevant charitable land).
Generally, when one of these dutiable transactions occurs, the transferee must elect to assume the liability (including any interest) for the deferral to continue. In such cases, the liability (including any interest) rolls over to the new owner.
A relevant acquisition in the landholder who owns or is taken to hold the land can cease deferral. However, the following relevant acquisitions will not cease deferral:
- a further interest in the landholder, or
- a pro-rata increase in the interests of all unitholders or shareholders in the landholder.
Subdivisions
Subdivision does not trigger payment of any deferred windfall gains tax.
If land with a windfall gains tax liability is subdivided, the liability (including any interest) is apportioned to each child lot created under the subdivision. The tax is apportioned based on the size of each lot compared to all lots created. No liability is apportioned to any road, reserve or common property.
The terms of the original deferral continue for the child lot. The 30-year deferral limit does not restart.
Lots and reserves
If a plan of subdivision creates both lots and reserves, the total windfall gains tax liability (including any interest) is apportioned only to the lots created under the subdivision.
No liability is apportioned to other land that may be created under the subdivision, such as a reserve, road or common property.
Example 1
100 hectares of land with a $10 million deferred windfall gains tax liability is subdivided to create:
- 2 reserves of 5 hectares each
- 5 lots of 18 hectares each.
The windfall gains tax will be apportioned to the 5 lots only, based on the size of each lot compared to all lots created.
Because each lot is the same size, the $10 million deferred liability is apportioned equally between the 5 lots: $2 million to each lot.
Example 2
A landowner’s land will be rezoned next year, and they want to defer paying windfall gains tax that arises because of the rezoning. After the rezoning, they plan to subdivide the property and sell 4 lots.
When the rezoning occurs, they can choose to defer all or part of their liability for up to 30 years or until a cessation event, whichever occurs first.
When they register the plan of subdivision, any deferred windfall gains tax (and deferral interest) on the parent property will be apportioned to each lot created under the subdivision, based on the relative size of the lots.
The subdivision itself does not cease the deferral. The deferral continues for each child lot.
Selling a child lot will cease deferral for:
- the liability apportioned to that lot, plus
- any accrued interest attributed to that lot.
This means windfall gains tax must be paid on any lot which is sold. Deferral can continue for liabilities attached to the other lots. This process can accommodate the staged payment of windfall gains tax in certain scenarios.
Elect to defer your liability
To request a deferral, complete this form.