A taxpayer liable for windfall gains tax has the option to defer payment of the tax until:
- a dutiable transaction occurs in respect of the land, or
- a relevant acquisition occurs in respect of the landholder who owns the land, or
- 30 years after the rezoning event
whichever occurs first.
Certain dutiable transactions and relevant acquisitions will not cease deferral. A dutiable transaction that occurs as a result of the sale of the land will generally always cease deferral.
Where deferral ceases, full payment must be made within 30 days.
Deferral of windfall gains tax attracts interest at the applicable 10-year Treasury Corporation of Victoria bond rate.
Deferring your windfall gains tax liability
To request a deferral, you will need to complete a form on the SRO website.
This form will be available shortly on the SRO website.
Subdivisions
Will subdivision trigger payment of any deferred windfall gains tax?
No, where land with a windfall gains tax liability is subdivided, the liability (including any accrued interest) is apportioned to each child lot created under the subdivision. The liability of the parent title is apportioned to each child lot by reference to the size of all lots created under the plan of subdivision.
Any road, reserve or common property is ignored for the purpose of this exercise, with no liability apportioned to that land.
The terms of the original deferral continue in respect of the child lot. The 30-year deferral limit does not restart.
If a Plan of Subdivision creates both lots and reserves, how will windfall gains tax be apportioned?
The total windfall gains tax liability, including any interest, is apportioned only to the lots created under a subdivision. No liability is apportioned to other land that may be created under a subdivision such as a reserve, road or common property.
Example
100 hectares of land with a $10m deferred windfall gains tax liability is subdivided to create:
- 2 reserves of 5 hectares each, and
- 5 lots of 18 hectares each.
The windfall gains tax will be apportioned to the 5 lots only, by reference to the size of each lot compared to all lots created. Because each lot is the same size, the $10M deferred liability is apportioned equally between the 5 lots. As a result, $2m of the deferred liability will be apportioned to each lot.
Windfalls gains tax deferrals - frequently asked questions
Which dutiable transactions will not cease the deferral?
Some dutiable transactions will not cease the deferral:
- a dutiable transaction for no consideration
- a dutiable transaction to a legal personal representative of a deceased
- a dutiable transaction that arises because of the operation of the economic entitlement provisions
- a dutiable transaction relating to land that is used and occupied exclusively for charitable purposes (if the land is ‘relevant charitable land’).
Generally, where there is a dutiable transaction that is of a kind that will not cease deferral, the transferee must elect to assume the windfall gains tax liability, including any accrued interest, for the deferral to continue. In such cases, the windfall gains tax liability, including any accrued interest, rolls over to the new owner.
A relevant acquisition in the landholder who owns the land can cease deferral. However, a relevant acquisition that is only of a further interest in the landholder or is the result of a pro-rata increase in the interests of all unitholders or shareholders in the landholder will not cease deferral.
Can part of a windfall gains tax liability be deferred?
Yes, part of a windfall gains tax liability can be deferred. Similarly, a part payment of a windfall gains tax liability (or deferred windfall gains tax liability) can be made at any time.
How long can a windfall gains tax liability be deferred?
A windfall gains tax liability can be deferred for up to 30 years.
However, if a ‘cessation event’ occurs earlier, deferral will cease on the happening of that event.
A ‘cessation event’ is typically a dutiable transaction, such as when you sell the land.
Once deferral ceases you will have 30 days to make full payment.
Does a deferred windfall gains tax liability accrue interest?
Yes, interest accrues on a deferred windfall gains tax liability. The interest rate is the relevant 10-year Treasury Corporation of Victoria bond rate.
My land will be rezoned in 2024, and I want to defer payment of the windfall gains tax. I am planning to subdivide the property and sell 4 lots. When does the windfall gains tax need to be paid?
Upon the rezoning occurring in 2024, you can choose to defer all or part of your windfall gains tax liability for up to 30 years or until a cessation event, whichever occurs first.
When you register the plan of subdivision, any deferred windfall gains tax (and deferral interest) on the parent property will be apportioned to each lot created under the subdivision, based on the relative size of the lots.
The subdivision itself does not cease the deferral. The deferral continues for each child lot.
Sale of a child lot will cease deferral for:
- the liability that was apportioned to that lot, plus
- any accrued interest for that lot.
This means that windfall gains tax must be paid on any lot which is sold, while the deferral may continue on other lots. This process can accommodate the ‘staged payment’ of windfall gains tax in certain scenarios.
