Bid to dump windfall gains tax: VFF warns farmers could be caught out

A punitive 62 per cent slug following rezonings could strangle farm businesses, landholders fear.

Rezoning may inadvertently trigger the windfall gains tax on rising property values from July 1 next year. Picture: Zoe Phillips

Victorian farmers want the State Government to dump plans for a 50 per cent tax on any landholder’s windfall gain in property value from a rezoning decision.

In a submission to Victorian Treasurer Tim Pallas, Victorian Farmers Federation president Emma Germano warned the Government risked creating “tax liabilities on the balance sheets of farm businesses, impeding their ability to borrow money to grow or maintain their business”.

The Government has kept relatively quiet on the tax since it was first flagged in the 2021 May Budget, but property developers and farmers have been worrying about its impact ever since.

Legislation is due to be introduced to parliament next month empowering the Government to collect the windfall gains tax from July 1 next year, which is expected to generate $40 million annually.

“The Government is looking to legislate the tax as soon as possible to provide certainty to the market, balanced against the need to consult with industry,” Mr Pallas’ spokesman said.

The Victorian State Revenue Office has already stated the WGT will be applied at a rate of 62.5 per cent for rezoning that lifts values by $100,000 to $499,999 and at 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 and landholders will be given the option of paying the WGT when the property is rezoned or deferring payment, which will incur interest, until the property is sold or subdivided.

The VFF also fears rezoning decisions that have no impact on land values may still trigger the tax, simply due to market growth.

Over the past five years the median farmland price in the Macedon Ranges has risen at a compound annual rate of 25.2 per cent to reach $15,659/ha, which the VFF estimates added $184,128 to the value of a 100ha property in the past 12 months.

Given the Macedon Ranges Shire is proposing to rezone some areas from Farming Zone to Rural Conservation Zone and visa-versa, the VFF is concerned the tax could still be triggered, even though the rezoning has no impact on values.

Mr Pallas’ office said the Government would “continue to work with stakeholders on the implementation of these (WGT) measures, which ensure everyone pays their fair share to support jobs, new housing and Victoria’s economic recovery”.

Macedon Ranges farmer and real estate lawyer Randall Gerkens said the Government was happy to demand “a piece of the action” from rezoning windfalls, but offered nothing to compensate landholders right to build a house on more than 40ha it wanted to extinguish.

Mr Gerkens has led a campaign against Planning Minister Richard Wynne’s bid to dump the current right farmers have to build a house on 40ha or more without a planning permit.

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