- Exemptions and exclusions
- Rezonings and valuations
- Selling a property
- Deferring a windfall gains tax liability
- Paying your windfall gains tax liability
- Grouping and aggregation
Are there any exclusions or exemptions from windfall gains tax?
There are a number of exemptions and exclusions from the windfall gains tax, including:
- Residential land exemption
- Land entitled to a transitional exemption from windfall gains tax
- Land rezoned to or from the Urban Growth Zone within the Growth Areas Infrastructure Contribution (GAIC) area
- Charitable and university land
- Land rezoned to to a Public Land Zone
- Land rezoned to correct an obvious or technical error in the Victoria Planning Provisions or a planning scheme
- Land rezoned to a Rural Zone (other than the Rural Living Zone)
How is land rezoned?
Rezonings of land can occur a number of ways.
For example, you (as the landowner) may make a request to your local planning authority to have your land rezoned.
A rezoning can also occur as part of a broader change to the area promoted by a planning authority.
When does a rezoning occur?
A rezoning occurs when:
- it is approved by the Minister for Planning, and
- the Notice of Approval is gazetted in the Victorian Government Gazette, unless the notice provides for a different commencement day, in which case the rezoning takes effect on the commencement date specified in the notice.
How will I know if my property is going to be rezoned; can I oppose a rezoning?
How is the value of my land determined?
For the purposes of calculating windfall gains tax, we consider the capital improved value (CIV) of your land.
The CIV is:
- the total market value of the property including land and all improvements
- based on the most recent annual general valuation in force
- calculated by the Valuer-General Victoria
- used for other purposes, for example, for council rates.
How will the value uplift for windfall gains tax be determined?
The Valuer-General Victoria will be responsible for determining the value of the land before and after a rezoning.
These valuations will be based on the Capital Improved Value (CIV), i.e. the estimated market value of the land, including any improvements and ignoring any encumbrances.
General valuations are undertaken annually by the Valuer-General Victoria for the purposes of municipal rates, land tax and the Fire Services Property Levy.
Following a rezoning, we will request a supplementary valuation from the Valuer-General Victoria, which will assess the value of the land as if the new zone applied at the time of the last general valuation. This supplementary valuation will be compared to the last general valuation. The value uplift is the difference between the two.
This valuation process only captures the immediate value uplift from a rezoning decision. It does not capture any market movements in the value of the land, or the value of future improvements to the land.
Will I become liable for windfall gains tax when I sell my land?
Windfall gains tax does not apply to a contract to sell land. Rather, it applies to the rezoning of land.
A sale itself will not attract windfall gains tax.
However, if you already have a deferred windfall gains tax liability due to an earlier rezoning, the deferral ceases when you sell your land and the liability must be paid within 30 days.
My property was rezoned in January 2022 and I plan to sell in March 2024. Will there be a windfall gains tax liability for this land?
No. Windfall gains tax only applies to land that is rezoned after 1 July 2023.
If land is rezoned during the process of settling a contract of sale, who is responsible for the windfall gains tax?
If windfall gains tax applies the person liable will be the owner of the land at the time of the rezoning.
As the seller, if a rezoning occurs after contract but before settlement:
- you will still be the owner of the land at the time of the rezoning
- therefore, you will be liable for any windfall gains tax that applies.
An exemption may apply if your contract was entered into before 15 May 2021.
For windfall gains tax to apply, the value uplift as a result of the rezoning must be above a certain threshold.
The contract for the sale of my land has a long settlement period. The contract of sale was entered into in December 2020, but settlement will take place in December 2024. If the land is rezoned in early 2024, who is responsible for payment of the windfall gains tax?
Rezonings that occur while a long-term contract of sale remains uncompleted may be exempt from windfall gains tax.
For this exemption to apply the contract must have been entered into before 15 May 2021.
As this contract was entered into before 15 May 2021 and remained uncompleted at the time the rezoning occurred, you will be entitled to an exemption from windfall gains tax.
Can I request a property clearance certificate showing windfall gains tax?
An owner, purchaser or mortgagee of land can request a property clearance certificate from the SRO.
We will issue a certificate showing if there is any windfall gains tax (including any interest and penalty tax):
- due and unpaid
- deferred, or
- yet to be determined.
An application fee applies.
How does the property clearance certificate for windfall gains tax work?
A property clearance certificate for windfall gains tax works in the same way as property clearance certificates for land tax.
A windfall gains tax liability is a charge on land that runs with the land (i.e. a new owner will be liable for any unpaid liabilities of the previous owner). However, a genuine purchaser for value who obtains a property clearance certificate will not be required to pay any amount in excess of the amount set out in the certificate.
The certificate provides a mechanism for a purchaser of land to be put on notice of any windfall gains tax liabilities attached to the land.
It also assists parties to clear any unpaid windfall gains tax liabilities attached to the land before the property is transferred, if they choose to do this.
When can a payment of a windfall gains tax liability be deferred?
A taxpayer liable for windfall gains tax has the option to defer payment of the tax until:
- a dutiable transaction occurs in respect of the land, or
- a relevant acquisition occurs in respect of the landholder who owns the land, or
- 30 years after the rezoning event
whichever occurs first.
Certain dutiable transactions and relevant acquisitions will not cease deferral. A dutiable transaction that occurs as a result of the sale of the land will generally always cease deferral.
Where deferral ceases, full payment must be made within 30 days.
Deferral of windfall gains tax attracts interest at the applicable 10-year Treasury Corporation of Victoria bond rate.
Which dutiable transactions will not cease the deferral?
Some dutiable transactions will not cease the deferral:
- a dutiable transaction for no consideration
- a dutiable transaction to a legal personal representative of a deceased
- a dutiable transaction that arise 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, where there is a dutiable transaction that is of a kind that will not cease deferral, the transferee must elect to assume the windfall gains tax liability, including any accrued interest, for the deferral to continue. In such cases, the windfall gains tax liability, including any accrued interest, rolls over to the new owner.
A relevant acquisition in the landholder who owns the land can cease deferral. However, a relevant acquisition that is only of a further interest in the landholder or is the result of a pro-rata increase in the interests of all unitholders or shareholders in the landholder will not cease deferral.
Can part of a windfall gains tax liability be deferred?
Yes, part of a windfall gains tax liability can be deferred. Similarly, a part payment of a windfall gains tax liability (or deferred windfall gains tax liability) can be made at any time.
How long can a windfall gains tax liability be deferred?
A windfall gains tax liability can be deferred for up to 30 years.
However, if a ‘cessation event’ occurs earlier, deferral will cease on the happening of that event.
A ‘cessation event’ is typically a dutiable transaction, such as when you sell the land.
Once deferral ceases you will have 30 days to make full payment.
Will subdivision trigger payment of any deferred windfall gains tax?
No, where land with a windfall gains tax liability is subdivided, the windfall gains tax liability (including any accrued interest) is apportioned to each child lot created under the subdivision. The liability of the parent title is apportioned to each child lot by reference to the size of all lots created under the plan of subdivision.
Any road, reserve or common property is ignored for the purpose of this exercise, with no liability apportioned to that land.
The terms of the original deferral continue in respect of the child lot. The 30-year deferral limit does not restart.
If a Plan of Subdivision creates both lots and reserves, how will windfall gains tax be apportioned?
The total windfall gains tax liability, including any interest, is apportioned only to the lots created under a subdivision. No liability is apportioned to other land that may be created under a subdivision such as a reserve, road or common property.
Land with a $10m deferred windfall gains tax liability is subdivided to create:
- 2 reserves of 5 hectares each, and
- 5 lots of 18 hectares each.
The windfall gains tax will be apportioned to the 5 lots only, by reference to the size of each lot compared to all lots created. Because each lot is the same size, the $10M deferred liability is apportioned equally between the 5 lots. As a result, $2m of the deferred liability will be apportioned to each lot.
Does a deferred windfall gains tax liability accrue interest?
Yes, interest accrues on a deferred windfall gains tax liability. The interest rate is the relevant 10-year Treasury Corporation of Victoria bond rate.
My land will be rezoned in 2024, and I want to defer payment of the windfall gains tax. I am planning to subdivide the property and sell 4 lots. When does the windfall gains tax need to be paid?
Upon the rezoning occurring in 2024, you can choose to defer all or part of your windfall gains tax liability for up to 30 years or until a cessation event, whichever occurs first.
When you register the plan of subdivision, any deferred windfall gains tax 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.
Sale of a child lot will cease deferral for:
- the liability that was apportioned to that lot, plus
- any accrued interest for that lot.
This means that windfall gains tax must be paid on any lot which is sold, while the deferral may continue on other lots. This process can accommodate the ‘staged payment’ of windfall gains tax in certain scenarios.
What triggers the windfall gains tax?
Windfall gains tax applies when a rezoning (other than an excluded rezoning) occurs.
After a rezoning decision, we ask the Valuer-General Victoria to undertake a valuation of the land to determine if this decision has resulted in a value uplift.
Windfall gains tax will only apply where the total value uplift of all land owned by an owner or group and rezoned by the same planning scheme amendment is above $100,000.
Who is liable to pay the windfall gains tax?
The owner of the land at the time of the rezoning is liable for the windfall gains tax.
How will landowners know if they have a windfall gains tax liability?
If your land is subject to a rezoning (other than an excluded rezoning) that increases its value by more than $100,000, we will issue you with an assessment.
You will then have the option to pay the assessment or defer (all or some) of the liability.
To defer some or all or some of your windfall gains tax liability, you must do this before the assessment payment due date. In some circumstances, the Commissioner may accept a late deferral request
How and when do landowners have to pay their windfall gains tax liability?
You will be issued with an assessment, which will include payment methods and a due date. You will also have the option to defer payment of any liability until a cessation event or until 30 years after the rezoning event, whichever occurs first. The sale of the land will generally always cease deferral.
If you want to defer some or all of your windfall gains tax liability, you must elect to defer before the assessment payment due date. In some circumstances, the Commissioner may accept a late deferral request.
What are my obligations if there are errors or omissions in my assessment?
You must notify us of errors or omissions in your assessment, including:
- if you own land that is rezoned by the same planning scheme amendment and that land is not included in your assessment
- if you represent a company or trust that is part of a group and another group member also owned land that was rezoned by the same planning scheme amendment and that land is not identified in your assessment.
The failure to notify the Commissioner of an error or omission is a notification default under the Taxation Administration Act 1997. Penalties apply for notification defaults.
How does the windfall gains tax affect joint owners?
You will be assessed for windfall gains tax on the aggregated taxable value uplift of all the land you own that is rezoned under the same planning scheme amendment. Any negative taxable value uplifts are ignored.
Joint owners of land will be jointly assessed for tax on land they own as if the land were owned by a single landowner.
How will grouping of related parties apply?
Grouping provisions apply to ensure that the windfall gains tax is assessed on the aggregated taxable value uplift of all the land owned by members of a group that is rezoned under the same planning scheme amendment.
Grouping applies to corporations that are ‘related corporations’ and to corporations where the same person/s have controlling interests, e.g. hold more than 50% of all issued shares in each of the corporations.
Grouping also applies to trustees of trusts if the trusts are related trusts. Trusts are related trusts if the same person has, or the same persons have together, a controlling interest in each of the trusts (i.e. can control the appointment of the trustee, or are entitled to more than 50% of the income or capital of the trust) For the purpose of the related trust definition and discretionary trusts, the Commissioner may determine that person/s are entitled to 50% of the income or capital of the trust even though those persons have no present entitlement.
A corporation and trustee of a trust can be part of a group if the same person/s have a controlling interest in the corporation and trust.
Is there an obligation to notify the Commissioner of group members?
You must notify the Commissioner if:
- you represent a company or are a trustee of a trust that is part of a group, and
- another group member owns land that was rezoned by the same planning scheme amendment, and
- that land is not identified in your assessment.
Failure to notify the Commissioner of an error or omission is a notification default under the Taxation Administration Act 1997. Penalties apply for notification defaults.
Can I object to the valuations used to determine the value uplift of my land?
Yes, you have the right to object to the valuations used for the pre-rezoning (CIV1) and/or post-rezoning value of your land (CIV2).
You must lodge your objection within 2 months of receiving your windfall gains tax assessment.
How can I object to a valuation used as the basis for my windfall gains tax assessment?
You must lodge your objection in writing with the Commissioner of State Revenue.
Your objection must:
- set out the grounds for the objection
- be received within 2 months of the date you received your windfall gains tax assessment.
We will forward objections that are lodged on time to the Valuer-General for determination.
If there is an undetermined objection, can the land be sold?
The sale of land can occur while there is an undetermined objection in respect of a windfall gains tax assessment.
The landowner at the time of the rezoning remains liable to pay the windfall gains tax, even though the taxable amount may vary depending on the outcome of the objection.
If the windfall gains tax has not been paid by completion of the sale, the tax liability will remain payable by the vendor. However, unpaid windfall gains tax is secured by a charge on the land to which it relates. Accordingly, the amount outstanding is also secured by a charge against the land.
Purchasers will be able obtain a property clearance certificate to be informed of any windfall gains tax liability attached to the land.
Parties to a transfer may make their own personal arrangements about a tax liability that affects land being sold. However, the person who was the owner of the land at the time of the rezoning remains liable. In the event that a person liable does not make full payment before selling the land, we may enforce the charge over the land, which will only then affect a purchaser.
Am I allowed to make any deductions against my windfall gains tax liability?
The windfall gains tax provisions allow the Government to prescribe deductions that can reduce the taxable value uplift, however, at this stage, the Government has decided not to prescribe any allowable deductions.