Our office has been very interested by all of the commentary from various media sources following the announcement that the upcoming 2021/22 Victorian State Budget will include a new tax called the ‘Windfall Gains Tax’ which is slated to come into effect on 1 July 2022.
The purpose of the new tax is exactly as per its name – to tax landowners and developers who have windfalls and make ‘overnight’ gains as a result of the rezoning of land. Certainly there is no possibility for the Government to be accused of trying to be secretive with this one!
Although there are limited details at this stage it has been suggested that the tax will kick in once any gain exceeds as little as $100,000, with the maximum tax rate being as much as 50 percent for gains over $500,000.
The Victorian Government has suggested that the tax would ensure that gains made from land rezoning would be invested back into the community to pay for public transport, schools and other vital infrastructure.
While there is obviously benefits to fast tracking infrastructure programs in new housing areas, the proposed quantum of the tax could have significant negative results to the release/availability of land particularly in the rapidly growing regional centres across Victoria.
We note that in the case of the Sandown Racecourse, a rezoning which would create a new suburb with as many as 7,500 homes has been paused while further clarification is sought regarding the new tax.
While the details at this stage are light on, it will be very interesting to see the legislation once drafted/released to see the details and how it is proposed to be implemented. We will keep you informed of developments.