Transaction tax

New rezoning taxes coming soon for property owners in Victoria and NSW | Queensland Country Life


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Australian farmers are hopeful that a new shock tax grab in Victoria does not pass in other states, while New South Wales looks poised for a whole new set of taxes on property transactions.

On July 1, Victoria lifted the stamp duty rate for properties valued at over $ 2 million and plans to charge individual farmers millions of dollars in taxes on “windfall gains” when their properties are rezoned to. from July 1 of next year.

At the same time, the NSW government is revising its property taxes, openly examining what it calls the “infrastructure contribution system”.

It is designed to tax part of the increase in property values ​​that results from the rezoning of land by councils, which is called “increasing property value capture” in political circles.

How it works

The new Victorian tax is about the “windfall gain” or “increase in property value,” which is the difference that rezoning makes to the value of a property. If, for example, a farm worth $ 3 million is revalued to $ 9 million by Victoria’s Appraiser General after being dezoned from rural to residential, the exceptional gain or recovery is $ 6 million. dollars.

If this exceptional gain is less than $ 100,000 it will not be taxed, but if it is $ 100,000 to $ 500,000, the government will take 62.5%. For more than $ 500,000, it will take half.

So, in our example, the Victorian landowner would have to pay $ 3 million in taxes.

Timing is everything

Because rezoning does not instantly provide this windfall, the Victorian government notice states that taxpayers will have the option to defer payment of liability until the land is sold or subdivided.

“This alleviates cash flow problems for some property owners when the tax liability is incurred at the time of rezoning,” the notice said.

It will always be difficult for farmers to take ownership of the subdivision for settlement, said Craig Whatman, executive director of Pitcher Partners and property tax expert.

“When the subdivision of this land occurs, the landowner still does not receive any income because the subdivision can take years before actually settling the lots and getting the income from the buyers of this land,” he said. .

“On the subdivision, this liability could crystallize and there is no way the farmer has the money to pay for this liability, so this is a big issue.

“It’s an absolute nightmare for a tax the government is putting in and they really don’t understand how it’s going to work its way through the supply chain to real estate prices for the regular buyers who buy these lots.”

There is also another trap. Although the Victorian government notice does not mention it, the current proposal in consultation suggests that interest should be paid on the deferred tax bill.

Land rezoned across Victoria will be captured by the Windfall Gains Tax, with the exception of properties in the Urban Growth Zone around Melbourne.

NSW “contribution”

The NSW government is less clear on the process it will follow in its parallel proposal, which it calls the “infrastructure contribution system”.

However, he has already indicated that he “will apply a legal charge on the land at the time of rezoning which requires the payment of a land contribution or will require the contribution at the time of the sale of the land or of a request for subdivision development. , whichever comes first. ”

A spokesperson for the Ministry of Planning, Industry and Environment said the system would not impact farmers until land use changed.

“Although the royalty is applied at the time of rezoning, it is only payable on the sale or development of the land,” said the spokesperson.

“There are no annual advance payments.”

Although NSW’s proposal is also under consultation, it appears that boards will be allowed to change the way the infrastructure contribution is applied.

“Boards will have more choice and control over how they charge for these contributions,” the department spokesperson said.

“They can either impose a general development tax at one to three percent of the cost of construction, or a detailed contribution plan based on the specific infrastructure needed that determines the rate to be paid.”

VFF left in the dark

Victorian Farmers Federation president Emma Germano said the state’s farmer lobby has largely remained in the dark about windfall tax.

“We immediately requested a briefing and got some rough notes on it, but no decent consultation,” she said.

“We certainly haven’t seen any paper or anything to say ‘this is what we think’ or been asked about the implications.”

Ms Germano said rising interest costs, coupled with rising municipal rates, could be crippling for farmers.

“The unintended consequences of this tax could mean that farmers are forced off their land and we are losing prime farmland,” she said.

“On the other hand, it could be that, where we want to open up development zones, the increase in the tax will make it impossible.

“None of the consequences have been thought through.”

Farmers in New South Wales

NSW Farmers President James Jackson is not opposed to the concept of contributing to infrastructure.

“I think the idea of ​​leveraging windfall gains from dezoning or infrastructure development to help pay for infrastructure is a reasonably modern way to fund some of these infrastructure projects that we need,” Mr. Jackson.

“The principle that all beneficiaries should participate is probably sound.”

But to gain the support of the farmers’ lobby, the system will need to be free from unintended consequences for farmers near regional cultivation centers.

“If the intention is just to help pay for critical infrastructure, there is probably merit,” Jackson said, “but if the intention is to tax people who have a block on the outskirts of the city ​​and the substantial change in the value of those properties is not tied to a specific piece of infrastructure, I probably wouldn’t agree with that, ”Jackson said.

“The devil is in the detail of the exact extent of the tax.”

The Story Massive zoning tax shocks first appeared on Farm Online.

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