Windfall gains tax residential land exemption
An exemption applies to eligible residential land.
Key information
When land is rezoned and windfall gains tax applies, you may get an exemption for residential land. For each planning scheme amendment that rezones land, up to 2 hectares of residential land owned by the same owner or group is exempt.
Residential land can include primary production land with a residence on it.
You do not need to live on the land for it to be exempt. Your home, as well as investment properties or secondary homes, are eligible for the exemption.
We determine whether this exemption applies when the windfall gains tax event occurs. The assessment tells you what to do if there is an error on your assessment, such as a missing exemption.
Residential land definition
For windfall gains tax, residential land means:
- land (including primary production land) with a building on it, which:
- is designed and constructed primarily for residential purposes, and
- may lawfully be used as a place of residence
- land on which a residence is being constructed or renovated if:
- the land previously had a residential dwelling, and
- it could be lawfully used as a place of residence before construction or renovation started or had become unable to be lived in.
The land cannot have been vacant or never used for residential purposes.
For the exemption to apply, we must be satisfied the land is primarily used for residential purposes, unless it is primary production land with a residence.
Primary production land
For primary production land with a residence, the land does not need to be used primarily for residential purposes if the farming activity meets the definition of primary production.
Not all farmland is considered primary production land. Primary production is defined as:
- cultivation for the purpose of selling the cultivated produce in a natural, processed or converted state
- maintaining animals or poultry for the purpose of selling them or their offspring or bodily produce
- keeping bees for the purpose of selling their honey
- commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear
- cultivating or propagating plants, seedlings, mushrooms or orchids for sale.
This means primary production land with a residence is residential land, even if most of that land is used for primary production purposes.
- Where the land is more than 2 hectares, only 2 hectares can be exempt.
- Adjoining land on a separate title without a residence is not residential land, even if it forms one farm owned by the same owner as the primary production land with a residence on it.
Vacant land
Vacant land is not exempt.
Land is not residential land if the only residence on it is a movable home like a caravan.
Commercial residential land
Commercial residential premises – such as hotels, residential care facilities, supported residential service and retirement villages – are not residential land.
However, a separately owned residence held on a separate title within the commercial residential premises is residential land. For example, an apartment in a serviced apartment complex owned separately to the other apartments used for the business.
Commercial or industrial land
Commercial or industrial land with a small dwelling is not exempt if:
- the building is designed and constructed primarily for commercial or industrial purposes, or
- the primary use of the land is commercial or industrial purposes.
Land exceeding 2 hectares
If you own more than 2 hectares, only 2 hectares can be exempt. Windfall gains tax applies to land exceeding 2 hectares.
The percentage of the total land exceeding 2 hectares is the percentage of the taxable value uplift that is taxed. You cannot choose which 2 hectares are exempt.
Example 1
You have 5 hectares of residential land that is rezoned by a planning scheme amendment. Two hectares (40% of the land) is exempt.
Therefore, windfall gains tax is calculated on 60% of the taxable value uplift of the land.
Examples of the exemption for multiple titles
Example 2
You own 1500 square metres (0.15 hectares) of land that is rezoned by a planning scheme amendment. The total value uplift of your land would make you liable for windfall gains tax.
Your land has 3 suburban residential homes. Each home has its own title and is only used for residential purposes.
The land would be exempt from windfall gains tax because:
- all land is residential land (as each title has a habitable dwelling)
- the total area is under 2 hectares.
Example 3
You own land that is rezoned by a planning scheme amendment. The total value uplift of this land would make you liable for windfall gains tax.
Your land is made up of:
- 2 suburban residential homes, each with its own title, on 800 square metres
- a corner shop with a small living space at the rear, on a separate title, on 400 square metres.
The corner shop is not residential land, so it is not exempt:
- The building is not designed and constructed primarily for residential use – it was primarily designed for commercial purposes as a shop.
- The land is not used primarily for residential purposes – it is primarily used for retail.
The land with the 2 homes is exempt because:
- the land is residential land
- the total is less than 2 hectares.
You must pay a windfall gains tax on the taxable valuable uplift for the land with the corner shop.
Example 4
You own 24,000 square metres (2.4 hectares) of land that is rezoned by a planning scheme amendment. The total value uplift would make you liable for windfall gains tax.
Your land has 24 suburban residential homes, each with its own title.
Two hectares of the 2.4 hectares are exempt from the tax.
The liability is calculated on 16.67% (0.4 out of 2.4 hectares) of the total value uplift.
Example 5
You own 800 square metres of land that is rezoned by a planning scheme amendment. The total value uplift would make you liable for windfall gains tax.
This land has a derelict house which is uninhabitable. It is not considered residential land and is not exempt.
Examples of the exemption for primary production land
Example 6
You own a farm on a single title of 10 hectares, which includes your home.
Nine hectares of the land is used to grow crops for sale and is primary production land.
The land is rezoned by a planning scheme amendment. The total value uplift would make you liable for windfall gains tax.
Two hectares of the land is exempt. Because it is primary production land, it must have a residence on it but it does not need to be primarily used for residential purposes.
It does not matter that less than 2 hectares is used for your home.
The liability would be calculated on 80% (8 out of 10 hectares) of the total value uplift.
Example 7
You own 6 hectares of land:
- one hectare that includes your home on one title, next to
- 5 hectares of primary production land on a separate title that is used to grow crops.
The land is rezoned by a planning scheme amendment. The total value uplift would make you liable for windfall gains tax.
The one hectare that includes your residence is exempt.
The 5 hectares of primary production land on a separate title does not have a residence. Therefore, it is not entitled to a residential land exemption.
You will have to pay windfall gains tax on the taxable value uplift of the 5 hectares of primary production land.
Example 8
You own 5 hectares of land, which is rezoned by a planning scheme amendment. The total value uplift would make you liable for windfall gains tax.
Your land is made up of 3 titles:
- one hectare of land that includes your home
- one hectare of land that includes another residence
- 3 hectares of primary production land, with no residence.
The 2 titles with residences are exempt.
The 3 hectares of primary production land are not exempt. Primary production land without a residential dwelling is not entitled to the residential land exemption.
You will have to pay windfall gains tax on the taxable valuable uplift of the 3 hectares of primary production land.
Example 9
You own 5 hectares of land, which is rezoned by a planning scheme amendment. The total value uplift would make you liable for windfall gains tax.
Your land is made up of 3 titles:
- one is 1.5 hectares of land that includes your home
- one is 1.5 hectares of land that includes another residence
- one is 2 hectares of primary production land, with no residence.
The two titles with residences are eligible for the residential land exemption. But only 2 hectares can be exempt. One hectare of residential land is not exempt.
The 2 hectares of primary production land are not exempt. Primary production land without a residential dwelling is not entitled to the residential land exemption.
The liability is calculated on 60% (3 out of 5 hectares) of the total value uplift.