This article is from the Australian Property Journal archive
THE Victorian Parliament has passed landmark reforms to the tax system, meaning developers would pay a windfall tax if they benefitted from rezoning decisions.
The Windfall Gains Tax will see the total value uplift from a rezoning decision tax at 50% for windfalls above $500,000, with the tax phasing in from $100,000 – ensuring most land holders of rezoned land won’t be affected.
Residential land which includes a home – including holiday homes and investment properties – will be exempted from the tax. It will not apply to any other increases in value, such as appreciation in property value over time.
Primary production land that contains a home will also be exempted up to two hectares. Rezonings to most rural zones, or to a Public Land Zone, will be exempted.
Exemptions will also be provided for charities if the land continues to be used for charitable purposes for the next 15 years after a rezoning. The tax will start on 1 July, 2023.
The windfall gains tax will be calculated based on valuations undertaken by the Valuer-General on the pre-rezoning and post-rezoning capital-improved values of land.
Treasurer Tim Pallas said the new system means developers will pay taxes on properties which have sharp value rises overnight after planning decisions to rezone land. The profits can then be shared with Victorian communities and are used to fund the services and infrastructure these communities need.
“We want to ensure Victoria has a fairer tax system, with revenue from the windfall gains tax going back into Victorian schools, hospitals and public transport.
“This change will make the system more transparent and ensure the profits land bankers get from huge value increases are shared with the community.” Pallas said.
Minister for Planning Richard Wynne said it is only fair that those making large windfall profits return a reasonable proportion to the community.
“This change won’t affect residential homes – just those who receive massive windfall gains from re-zoning decisions.”
The Property Council of Australia said it was disappointed the government has decided to proceed with this new tax.
“The passing of the Bill means, once it has received Royal Assent, the Windfall Gains Tax Act 2021 will be established and the WGT will begin on 1 July 2023, become the 19th new property tax introduced since 2014.
“We continue to believe will increase housing prices and the cost of doing business in Victoria, and provide uncertainty to investment at a delicate time of economic recovery,” the PCA said.
Meanwhile the PCA has welcomed the government’s changes to spur the build to rent sector.
Under the reforms, eligible developments completed and operational between 1 January 2021 and 31 December 2031 will receive the 50% land tax discount and full exemption from the Absentee Owner Surcharge (AOS) for up to 30 years.
“We again congratulate the government on the delivery of this initiative to support the growth of the Victorian BTR sector.”
