Windfall gains tax to cost country jobs and force up new home prices

The new windfall gains tax will cost regional Victoria at least 2700 new homes, 9500 direct jobs and more than $2.7 billion in lost economic output.

Developers are warning a new government tax will add $250,000/ha to the cost of land released to new home buyers in regional Victoria.

The Victorian Opposition is making a last ditch bid to amend Andrews Government legislation before the Upper House that allows Treasury to take half the windfall gain a landholder makes from a rezoning decision.

“This is a big bad tax that will make homes more expensive for families, … especially in country Victoria,” Opposition Upper House Leader David Davis said.

He said the Opposition was preparing to introduce amendments to the Government’s windfall gains tax bill later this week, in a bid to wind the new tax back to the same level as the existing Growth Areas Infrastructure Contribution tax on new land brought into Melbourne’s urban growth boundary.

As it stands the windfall tax will add an average $250,000 to the cost of each hectare released to new home buyers in regional Victoria compared to just $108,000/ha under the GAIC, according to the Victorian division of the Urban Development Institute of Australia.

“It’s (the windfall tax) about 2.5 times the GAIC and an absolute body blow to development in regional Victoria,” Mr Davis said.

“(It) hits … at a time when people are making the move to regional Victoria.”

The Opposition also wants to amend the Government’s bill to ensure windfall taxes collect in regional local government areas stay in those areas to build local community infrastructure, not simply disappear into Treasury’s coffers, Mr Davis said.

Victorian UDIA chief executive Matthew Kandelaars said the new tax remained “bad policy” and would drive up the cost of housing across Victoria and cost thousands of jobs.

“The rezoning (windfall) tax is a blunt tool with major implications for Victoria’s regional housing markets,” Mr Kandelaars said.

“It will cost regional Victoria at least 2,700 new homes, 9,500 direct jobs and over $2.7 billion in lost economic output.

“This isn’t a question of whether regional Victoria remains affordable for the Melbourne tree-changer. It’s the nurses, teachers and tradies who have grown up in regional towns right across the state and dream of staying there who will be priced out of their own market.”

In introducing the windfall gains tax bill to the Upper House last month Attorney-General Jaclyn Symes said was an equitable means of delivering the benefits of rezoning gains back “to the community through greater government investments in services and infrastructure”.

Ms Symes also outlined how the Bill would imposes a 62.5 per cent tax on a gain of more than $100,000 in a property’s value resulting from rezoning, dropping to 50 per cent on windfalls of $500,000 or more.

It will be up to the Valuer-General Victoria to determine values before and after rezoning.

Landholders will be given the option of paying the WGT when the property is rezoned or deferring payment, until the property is sold or subdivided for up to 30 years.

But anyone who defers payment will incur interest charged at the 10-year Treasury Corporation of Victoria rate – currently 1.84 per cent.

The bill also includes “aggregation provisions” that restrict the $100,000 threshold applying only once to properties owned by the same owner or group of owners, shared corporations or trusts, as well as properties rezoned under the same planning scheme amendment.

Up to 2 hectares of residential land (including primary production land with a residence) will receive an exemption from the windfall gains tax where it is rezoned by the same planning scheme amendment.

Treasury anticipates the new tax will generate about $124m over four years.