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WINDFALL GAINS TAX TAKES EFFECT FROM 1 JULY 2023 From 1 July 2023, where the value of land increases by more than $100,000 as a result of a rezoning, the new Windfall Gains Tax (WGT) will kick in.
Lucy Eastoe Senior Associate Arnold Bloch Leibler
contribution area within the meaning of section 201RC of the Planning and Environment Act 1987 This aspect of the Planning and Environment Act 1987 deals with the Growth Areas Infrastructure Contribution (GAIC). GAIC was established to help provide infrastructure in Melbourne’s expanding fringe suburbs. It is a one off-contribution, payable on certain events, usually associated with urban property developments, such as buying, subdividing, and applying for a building permit on large blocks of land. • the first rezoning after 1 July 2023 of land that was in the contribution area within the meaning of section 201RC of the Planning and Environment Act 1987 immediately before that date. • a rezoning that causes land that was not in a public land zone to be in a public land zone. This scenario would not generally affect private landowners. Public Land Zones are primarily used for government authorities. • a rezoning that causes land that was in a public land zone to be in a different public land zone. For example, a rezoning from a Public Use Zone 1 to Public Use Zone 2. • a rezoning that causes land to be in a zone declared under subsection (2)(a) to be an excluded zone. This provides the ability for Treasurer, by notice published in the Government Gazette, may declare a zone to be an “excluded rezoning”. • a rezoning of land that, immediately before the rezoning, was in a zone declared under subsection (2)(b). It is worth noting that a number of the Excluded Rezonings carve out land to which GAIC applies, thereby avoiding a double-dipping or exclude land used for public purposes.
The introduction of the WGT stems from legacy events where the rezoning of land has resulted in a ‘windfall gain’ that hasn’t been captured and invested for the benefit of the community. One of the examples often cited is the rezonings approved by the former Minister for Planning in Fisherman’s Bend in 2012. The WGT is forecast to collect $40 million in FY2023-24, $59 million in FY2024-25 and $84 million in FY2025-26. In the context of the Growth Areas Infrastructure Contribution (GAIC) which is expected to derive $328 million in FY2023-24, $336 million in FY2024-25 and $344 million in FY2025-26 , the expected gains from the WGT sound relatively modest. What’s more, while the WGT has been on the horizon for some time, it remains to be seen whether the changes in land values will deliver the uplifts in taxation revenue anticipated. What is a rezoning? A rezoning is “an amendment of a planning scheme that causes land to be in a different zone from the zone that it was in immediately before the amendment” . Zone means “a zone under a planning scheme”. A rezoning can sometimes be anticipated, particularly an amendment that’s initiated by a landowner/developer or prepared by a local council following extensive consultation. Landowners considering pursuing a planning scheme amendment or purchasing land which may be subject to an amendment will need to carefully consider the implications of a WGT event. Not all rezonings will result in a WGT. The following are considered Excluded Rezonings and will not give rise to a WGT event: • a rezoning between schedules in the same zon e For example, a rezoning from a General Residential Zone Schedule 1 to General Residential Zone Schedule 2. • a rezoning that causes land to be brought within the 1 Victorian Budget 2023-24 Statement of Finances. 2 Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) section 3. 3 Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) section 3. 4 Excluded Rezoning being defined in the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic).
5 Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) section 9. 6 Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) section 37. 7 Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) section 38. 8 Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) section 39. 9 Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic) section 40
10 –July / August 2023
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