- The Victorian government has begun the process of legally implementing the Windfall Gains Tax (WGT) today, as it announces revisions to the policy parameters
- WGT aims to return a portion of the profits from rezonings to the community for critical infrastructures such as public transportation and schools
- The entire value uplift from a rezoning decision will be taxed at 50 per cent for windfalls above $500,000, with the levy sliding in from $100,000
- While welcoming changes, industry players call for tax to be cut, saying it ‘was the wrong tax at the wrong time’.
The Victorian government has today commenced the process to formally introduce the Windfall Gains Tax (WGT) as it announces changes to the policy parameters.
The windfall gains tax, which will be brought into Parliament this week, aims to return a portion of the profits from rezonings to the community for critical infrastructures such as public transportation and schools.
Property prices can skyrocket suddenly when governments make choices to rezone land. The state government claims it is critical that these earnings are distributed to communities and utilised to finance services and infrastructure.
Following feedback from industry bodies, the government has amended the policy.
As previously announced, the entire value uplift from a rezoning decision will be taxed at 50 per cent for windfalls above $500,000, with the levy sliding in from $100,000. The government claims this means that most rezoned landowners will be unaffected.
Residential land with a house, including holiday homes and investment properties, will be excluded from the tax. It will not apply to any other gains in value, such as property value appreciation over time.
Exemptions will also be granted to charities if the land is utilised for charity purposes for the next 15 years following a rezoning, while rezonings to and from the Urban Growth Zone inside current Growth and Infrastructure Contribution zones that are subject to GAIC will not be charged.
New transitional provisions will delay the tax’s implementation by a year, until July 1 2023, and will exclude proponent-led rezonings that were well underway by May 15 2021.
The windfall gains tax will be determined using valuations performed by the Valuer-General on pre-rezoning and post-rezoning capital-improved values of land, with the difference indicating the value uplift.
It will apply to any additional gains in value caused by property renovations or appreciation over time.
“It’s only fair that those making large windfall profits return a reasonable proportion to the community, so that we can provide the infrastructure needed to help invest in important community facilities,” Minister for Planning Richard Wynne said.
While welcoming changes, industry groups calls for tax to be cut
The Property Council of Australia, the Housing Industry Association, the Urban Development Institute of Australia (Victoria) and Master Builders Victoria have banded together to fight the Windfall Gains Tax, which was tabled in the Victorian Parliament today.
The group criticised the tax, claiming it would reduce supply, increase land prices and housing unaffordability, cost jobs and reduce economic output.
The Victorian Executive Director of the Property Council Danni Hunter said it was the wrong tax at the wrong time.
“We are calling on MPs from all sides to do the right thing by Victorian families, jobs and investors and oppose this tax so we can get on with our important economic recovery and get Victoria moving again,” she said.