Our article dated 10 January 2023 set out some of the basic concepts around the new Windfall Gains Tax (“WGT”) set to be introduced from 1 July 2023.
In this short update we highlight some more detail on the WGT.
The taxable value uplift is the difference in the capital improved value of the land before rezoning (CIV1) and the capital improved value of the land after rezoning (less any allowed deductions if any) (CIV2). CIV2 will be carried out by way of a supplementary valuation. The Valuer-General Victoria determines the CIVs. There will be mechanisms in place for objecting to the value of both CIV1 and CIV2.
The difference between CIV1 and CIV2 is going to determine the quantum of WGT payable. Commercial logic therefore dictates two things. First, landowners may well consider it worthwhile objecting to the CIV1 valuation on the basis that it is too low. Lifting the value of CIV1 will mean the difference between CIV1 and CIV2 is narrower resulting in less WGT being payable. Of course, one thing affects another and so any increase in CIV1 will likely result in higher municipal rates and land tax. So a detailed assessment may be required of the relative benefits of reduced WGT versus increased municipal rates and land tax.
Second, landowners will likely wish to take very particular notice of CIV2 in an Assessment. The incentive here is to determine if there are any grounds to object to CIV2 as being too high – a reduction in CIV2 will mean the difference between CIV1 and CIV2 is narrower resulting in less WGT being payable.
However, it is very important to note that when issued with an Assessment for WGT, any objection must be lodged within 60 days and there is no discretion for the Commissioner to extend that date. If you wish to object to a WGT assessment it is vital that you act quickly and submit your objection with the 60 day time limit. If you miss the deadline your opportunity to object is lost.
The taxable value uplift is defined in the Act as the value uplift less any deductions prescribed by regulations. We are still waiting for the regulations to be issued.
Finally we emphasise again, for those selling land that has been recently re-zoned, or could be rezoned after contract, but before settlement (more likely with long settlement contracts), the importance of including in the contract the necessary provisions to deal with WGT. Unless otherwise provided in the contract, the vendor will be liable for the WGT!
More is yet to come no doubt.
If you’re looking to sell or rezone land which could be affected by these changes, contact our Property Team for assistance.
