The Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 received Royal Assent on Tuesday 30 November 2021. The Act introduces changes to several Acts, and includes revenue and tax relief initiatives announced as part of the 2020-21 and 2021-22 Victorian budgets.
Key changes include:
- introduction of a new windfall gains tax which takes effect from 1 July 2023
- amendments to land tax exemptions for private gender-exclusive clubs and charities
- the build-to-rent land tax concession
Mental Health and Wellbeing Payroll Tax Surcharge
The Mental Health and Wellbeing Payroll Tax Surcharge commences from 1 January 2022 to provide additional funding for Victoria’s mental health system. The surcharge will apply to Victorian employers and groups whose annual Australian wages exceed $10 million. These employers will commence paying the surcharge when they lodge their January 2022 monthly return in PTX Express, due on 7 February 2022.
The surcharge is a revenue mechanism that will provide a stable and dedicated form of additional funding for the mental health system. Revenue collected will be spent on the provision of mental health services.
Who pays the surcharge?
You must pay the surcharge if you pay Victorian taxable wages and your Australian wages exceed the first annual threshold of $10 million, with a first monthly threshold of $833,333.
You must also pay the additional surcharge if you pay Victorian taxable wages and your Australian wages exceed the second annual threshold of $100 million, with a second monthly threshold of $8,333,333.
If you are a member of a group, these thresholds apply at the group level.
These annual thresholds are adjusted proportionately if you are not an employer for a full financial year. In respect of the period from 1 January 2022 to 30 June 2022 (transitional period), the respective annual thresholds are $5 million and $50 million.
Wages that are subject to Victorian payroll tax will also be subject to the surcharge and any wages exempt from payroll tax (such as wages paid or payable to an employee who is taking primary or secondary caregiver leave or who is absent from work to volunteer as a firefighter or respond to other emergencies) will also be exempt from the surcharge.
How much is the surcharge?
The surcharge is 0.5% of Victorian taxable wages over $10 million and an additional 0.5% of Victorian taxable wages over $100 million. For the transitional period, the respective annual thresholds are $5 million and $50 million.
If you are a member of a group, these thresholds apply at the group level and are claimed by the designated group employer. These thresholds are adjusted proportionately if you are an employer for only part of a financial year, or if you are also liable to pay wages in another Australian jurisdiction.
Windfall Gains Tax
Landholders can accrue significant windfall gains when the value of their land increases due to the actions of government. From 1 July 2023, these landholders will pay a windfall gains tax (WGT), this tax applies to land that is subject to a government rezoning resulting in a value uplift to the land of more than $100,000.
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. The taxable value uplift is the difference in the capital improved value (CIV) of the land before and after the rezoning takes effect, less any deductions. The Valuer-General Victoria will be responsible for determining the value of the land before and after a rezoning. These valuations will be based on the CIV of the relevant land.
How much is the windfall gains tax?
For a rezoning of land that results in a taxable value uplift:
- more than $100,000 but less than $500,000: the tax will apply at a marginal rate of 62.5% on the uplift above $100,000
- $500,000 or more: a tax rate of 50% will apply to the total uplift.
Are there any exemptions?
Exemptions are available for:
- land that is capable of being used for residential purposes at the time of the rezoning, up to a maximum of 2 hectares of such residential land, owned by the same owner or group and rezoned by the same planning scheme amendment
- in relation to rezonings, to correct obvious or technical errors in the Victoria Planning Provisions or a planning scheme.
A waiver is also available for land owned by a charity if the land is used and occupied by a charity exclusively for charitable purposes for 15 years after the rezoning.
Who pays WGT?
The owner of the land that is subject to the rezoning pays WGT.
Grouping and aggregation provisions can apply so that the $100,000 threshold applies only once to properties owned by the same owner or group of owners and rezoned under the same planning scheme amendment.
When does WGT have to be paid?
Owners of land liable to pay WGT will be issued with a WGT assessment with a due date for payment.
They will have the option to defer payment of any liability until the next dutiable transaction (or relevant acquisition) occurs, or until 30 years after the rezoning event, whichever occurs first. Certain excluded dutiable transactions and relevant acquisition will not cease deferral.
Who administers the WGT?
WGT will be administered by the Commissioner of State Revenue (Commissioner) as a taxation law under the Taxation Administration Act 1997 (TAA), which provides rights of objection to the valuations used in the calculation of WGT.
Unpaid or deferred WGT will constitute a first charge on the relevant land, with provision to include WGT information on property clearance certificates issued under the TAA.
Land tax for private gender-exclusive clubs
The Land Tax Act 2005 has been amended to remove the land tax exemption for not-for-profit club land from private gender-exclusive and gender-restrictive clubs from the 2022 land tax year. Subject to a determination of the Commissioner of State Revenue (Commissioner), the exemption may be reinstated for gender-exclusive or gender-restrictive clubs that demonstrate a community benefit, or for gender-restrictive clubs, that have genuinely opened their membership to all sexes and gender identities.
Build-to-rent land tax benefits
The Land Tax Act 2005 has been amended to provide eligible build-to-rent developments with a 50% discount on the taxable value of the development land and an exemption from the absentee owner surcharge in respect of that land. These benefits commence from the 2022 land tax year and may apply for up to 30 years if certain requirements are met.
Please reach out to our team if you have any questions and we will do our best to assist.
The Team at Rose Partners
