A well-rounded Chartered Accountant and tax advisor, Rick thinks outside of the box and regularly collaborates with SW experts across the firm to deliver outstanding outcomes for our clients. He has deep experience in outsourced services, including outsourced CFO, and is the firm lead on software adoption, implementation and data analytics.

Rick Hemphill combines his passion for accuracy, creating efficiencies and true value for clients by tailoring cloud-based solutions via advanced management reporting systems. He works closely with his clients to ensure financial software solutions are bespoke to how the company operates and what each client needs from its reporting to provide efficient, adaptable and accurate real-time financial overview.

As a Certified Xero Advisor, WorkflowMax Advisor, Futrli Advisor and Power BI Advisor, Rick remains abreast of all the latest developments and capabilities of financial technology.

Outside of his passion area, Rick supports his clients by managing accounting, tax and compliance risks, and improving clients’ personal asset protection with family tax planning and tax efficiency measures.

Rick is a Partner of SW Audit and a Director of SW Accountants & Advisors Pty Ltd.

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Introduction of Bill includes a further exemption

State Taxation and Treasury Legislation Amendment Bill 2022 (part 8) provides an exemption from the Windfall Gains Tax for land owned by a university in certain circumstances. 

Background

The windfall gains tax (WGT) was announced in the 2021-22 Victorian Budget and the legislation received royal assent on 30 November 2021.  See our article on the Windfall Gains Tax and subsequent article on the charity land tax exemption for further detail.

The WGT will apply from 1 July 2023 and imposes a tax on land that receives an uplift in value as a result of rezoning at the following rates:

The Government wrote to universities in October 2021 to advise that charities would be exempt from the WGT where they owned and used the land for 15 years after the rezoning.  This exemption was included in the legislation that was passed in November 2021. 

Proposed WGT exemption for universities

The current bill has now proposed to provide an even broader exemption for universities than the 15 year charity exemption.  This broadening of the exemption is positive news, but universities should still understand that the exemption remains subject to the Commissioner’s approval and conditions.

Conditions for exemption

The proposed WGT exemption for universities will apply where it meets all of the following:

• the land is owned by a university
• the university is a charity, and
• the Commissioner is satisfied that any land revenue from the land will be used to further the university’s charitable purpose.

To access the exemption the university must provide to the Commissioner with a declaration as to:

• the nature of any land revenue form the land
• the intended application of the land revenue, and
• how the application of the land revenue will further the university’s charitable purpose.

Land revenue means any revenue arising from the sale or use of the land, including any of the following:

• sale proceeds from the sale of the land
• rental income from leasing the land
• licence fees from licensing the land.

How SW can assist

The SW Education team works closely with a large number of Victoria’s universities and has extensive experience in advising and assisting them to navigate financial complexities. Should your university be in the process of rezoning Victorian land and require any further advice on this issue please contact either Stephen O’Flynn or Steve Allan.

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Chris brings a diverse background in accounting, advisory and financial services which allows him to provide family wide holistic solutions for collaborative investment, asset allocation and structuring for complex family groups.

Chris’ clients value how reliable and dependable he is in delivering work for them. Chris takes the time to build trust and confidence with his clients so that he can tailor his service delivery to suit each individual client. As a result of adapting to his client’s preferences and always putting them first, Chris was nominated as a finalist in the beaton Client Choice Awards for Best Accountant.

Career highlights:

• Developing simple and complex financial strategies to help clients achieve their goals
• Providing advice on both managing and growing family wealth to investors small and large
• Helping SME clients develop strategies to transition business wealth to personal wealth and also transitioning that wealth between generations.

Chris is a Partner of SW Audit and a Director of SW Accountants & Advisors Pty Ltd.

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The recently released Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 has introduced Victoria’s new Windfall Gains Tax and included changes to the charity exemption for land tax.

This should be considered closely by Universities that hold land in Victoria as it will impose:

• land tax on certain land owned by Universities that has not historically been subject to land tax; and
• a significant new value capture tax where University land is rezoned (particularly where it is rezoned from public land to residential land).

Land Tax

The land tax exemption for charities has been narrowed so that it is now only available where land is:

• used and occupied by a charity exclusively for charitable purposes; or
• is vacant and has been declared by the University to be held for future use and occupation by a charitable institution exclusively for charitable purposes.

It is believed that this change was introduced to reverse the decision in University of Melbourne v Commissioner of State Revenue (Vic) which allowed the charity land tax exemption to apply to student accommodation located on the University of Melbourne Campus that is operated by a third-party student accommodation provider.

However, the amendment is likely to have a broader impact.

Universities will need to determine if land and buildings that they own but rent to or is used by third parties is ‘occupied’ by the University.

This would include not just student accommodation facilities rented to students, but any other buildings or facilities that are leased to businesses to provide services to students on campus such as banks, travel agents, cafes, etc.

Windfall Gains Tax

For a summary of the new Victorian Windfall Gains Tax please refer to our Windfall gains tax alert.

Relevantly for universities where land is rezoned it will be subject to Windfall Gains Tax unless the 15-year charity waiver applies.

The waiver is available where the land is continued to be held for 15 years after rezoning by the charity.

This waiver can continue to be available where the rezoned land is transferred to another charity and the new charity elects to receive the land with the deferred windfall gains tax liability and any accrued interest and commits to the land being used by a charity exclusively for charitable purposes.

How can SW assist?

If you believe that you will be affected by the WGT or have any questions on how to navigate these changes, please contact us – either your usual SW contact or any of our key contacts.

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Threshold and rate

WGT only applies to aggregate taxable value uplifts in in excess of $100,000.

Grouping and aggregation provisions apply so that the $100,000 threshold applies to the aggregate of all properties owned by the same owner or group of owners that are rezoned under the same planning scheme amendment.Excluded rezoning

Excluded rezoning includes the following:

• a rezoning between schedules in the same zone
• a rezoning that causes land to be brought within the Growth Area Infrastructure Contribution (GAIC) area within the Planning and Environment Act 1987
• the first rezoning after 1 July 2023 of land that was in the GAIC contribution area immediately before that date
• a rezoning that causes land to be included a public land zone, or that causes land that was in a public land zone to be in a different public land zone.

Transitional measures

WGT will not apply where:

• a sale of land was negotiated prior to announcement on 15 May 2021 where the sale is completed after the rezoning. This is to recognise that parties would not have anticipated this tax when negotiating the terms of the deal
• an option to purchase land was entered into before 15 May 2021 where either:
  • the option has not been exercised before the rezoning
  • the option has been exercised but the contract of sale has not been completed before the rezoning.

The terms of the contract of sale must have been settled at the time the option was granted. A right of first refusal or similar options where the price and other terms of the sale have not been settled is not covered.

Uplift in value

The taxable value uplift is the difference in the capital improved value (CIV) of the land immediately before and after the rezoning takes effect (CIV2 – CIV1).

The uplift is less any deductions to be prescribed by the regulations. It is not known at this stage what deductions might be prescribed.

The former value (CIV1) is the most recent valuation in force for the land while the latter (CIV2) is determined through a supplementary valuation certified by the Valuer-General. The supplementary valuation values the land as at the same date as CIV1, but as if the rezoning was in place at that time. In this way, it only captures the value uplift arising from the rezoning.

Multiple occupancies/titles

Land is based on a single title.

If land has been valued based on multiple occupancies, the Commissioner may determine the value of the land by adding the various occupancy valuations relating to that land.

Where an occupancy spans more than one title, the occupancy valuation can be apportioned to obtain a valuation of the land (i.e. the land on each title).

Grouping

Broad grouping provisions apply with grouping of corporations based on the grouping provisions in the Land Tax Act 2005. These include related companies and companies subject to common control.

Land held on Trust

If land is held on trust, the trustee is to be assessed for windfall gains tax on the aggregated taxable value uplift of all the land that is subject to each separate trust. However, related trusts are grouped.

Trusts are related trusts if the same person or persons have a controlling interest in each trust.

A person or persons together control a trust if they have:

• the ability to control the appointment of the trustee
• an entitlement to more than 50% of the income or capital of the trust.

In the case of a discretionary trust the Commissioner may determine that a person is, or persons together are, entitled to more than 50% of the income or capital.

Deferral of liability

The WGT becomes payable when the rezoning takes effect under the Planning and Environment Act 1987.

The owner may elect to defer up to 100% of the payment for up to 30 years. Interest accrues at the 10-year bond rate applying from time to time.

Unpaid or deferred WGT will constitute a first charge on the land, and the WGT liability will be included on property clearance certificates issued under the Taxation Administration Act 1997.

The deferral will generally cease when a dutiable transaction occurs under the Duties Act, such as transfer of the land, or a relevant acquisition in a landholder. Where there is a relevant acquisition in a landholder, 100% of the WGT becomes payable although the interest acquired in the landholder may be as low as a 20% interest.

Deferral will not cease if an excluded dutiable transaction occurs including:

• the acquisition of an economic entitlement in relation to land under the Duties Act 2000
• a transfer to a legal personal representative of a deceased
• a no consideration transaction where the transferee elects to assume the liability to pay the whole of the deferred windfall gains tax and any accrued interest payable
• a relevant charitable land transaction where the transferee charity elects to assume the liability.

A no consideration dutiable transaction means one where there is no monetary or non-monetary consideration. The election must be made on or before the date of completion of the dutiable transaction.

Subdivided land

If land that is subject to deferred WGT is subdivided, the tax and interest are rolled over to each child lot created by the subdivision. The liability of the parent title is apportioned to each child lot by reference to the size of all lots created by the subdivision. The whole liability that the parent title was subject to is apportioned only to the lots created by the subdivision. No liability is attributed to areas contributed to public land, roads, reserves or common property.

Exemptions

Residential land

Up to 2 hectares of residential land on single title (including primary production land with a residence) is exempt from the WGT, regardless of whether it is a principal place of residence.

Residential land is land that has a building that is designed and constructed primarily for residential purposes. It also includes land where a residence is being constructed.

Primary production land with a residence on it or where a residence is being constructed or renovated is residential land, notwithstanding that the primary use of the land is primary production. However, only land on the single title with the residence is residential land.

Residential land does not include commercial residential premises, a residential care facility, a supported residential service or a retirement village.

If the residential land (on one or more titles) exceeds 2 hectares, the WGT is assessed on the land on each title based on an adjusted taxable value uplift calculated in accordance with a formula. This spreads the benefit of the 2 hectare exemption across all titles by reducing the taxable value uplift of each title in proportion.

Charities

Charities will not pay any WGT on land they own that has been rezoned, so long as the land is used and occupied by a charity exclusively for charitable purposes for 15 years after the rezoning.

Errors

Rezoning to correct errors in the Victoria Planning Provisions or a planning scheme is exempt.

Rezoning already commenced

Exemption applies where the owner of land can establish to the Commissioner’s satisfaction that the owner requested the planning amendment before 15 May 2021, the request was created and registered in the Amendment Tracking System by the council before 15 May 2021, and the owner of the land incurred costs above a threshold amount (see below).

An exemption also applies where the owner requested the Planning Minister to make the planning amendment before 15 May 2021, the Minister agreed before 15 May 2021 to prepare the amendment, and the owner of the land had incurred costs above the threshold amount.

The threshold amount means the lesser of:

1. 1% of the capital improved value of the land immediately before the WGT event
2. $100 000.

Note that the costs must have been incurred by the owner. It would not appear to cover costs incurred by a developer, where the developer incurs costs relating to land subject to an option or a conditional contract.

How SW can assist

If you believe that you will be affected by the WGT or have any questions on how to navigate these changes, please contact us – either your usual SW contact or any of our experts below.

Get in touch

Stephen O’Flynn

E soflynn@sw-au.com

Abi Chellapen

E  achellapen@sw-au.com

James Ye

E jye@sw-au.com

Robert Parker

E  rparker@sw-au.com

The post Windfall gains tax appeared first on SW Accountants & Advisors.

Build to Rent (BTR) projects which will in turn ensure Victorians have access to more rental homes and a greater range of housing options.

BTR Benefits will be introduced to promote Victorian BTR projects. The BTR Benefits will comprise of:

• A 50% reduction in land tax for eligible BTR projects;and
• Exemption from Absentee Owner Surcharge for eligible BTR projects.

Both benefits will be available for a period of up to 30 years.

The concessions will only apply to eligible BTR developments. A BTR development is one or more buildings that are constructed or substantially developed for the purpose of providing multiple dwellings for lease under residential rental agreements.

An eligible BTR development must meet the following requirements for a continuous period of 15 years from the occupancy date:

• It must provide for at least 50 self-contained dwellings
• It is owned by the same owners
• It must be managed by a single management entity (except affordable housing or social housing projects)
• It must be suitable for occupancy after 1 January 2021 and before 1 January 2032; and
• It must be rented or available for rent under a residential rental agreement. The tenant must have an option of at least a 3 year fixed term rental but may elect a shorter term.

The owner of the land must apply to the Commissioner for the BTR Benefits.

A land owner must notify the Commissioner within 30 days if it has claimed a BTR Benefit and there is a change in circumstance that results in the land no longer being eligible. The land owner may then be liable for BTR special land tax which effectively claws back the concessions for all prior years together with interest.

The BTR benefits are largely similar to the concessions introduced in NSW with one noticeable difference being that the Victorian concessions do not provide an exemption from the Foreign Purchaser Additional duty. Instead, landowners will need to specifically apply for an exemption for this additional duty if applicable.

What action needs to be taken?

The BTR concessions are only available to eligible projects. A review should be undertaken of proposed projects to determine eligibility.

How SW can help

Our team can assist with this review and the application to the Commissioner. Reach out to one of our property experts below for support.

Get in touch

Matt Birrell

E mbirrell@sw-au.com

Abi Chellapen

E achellapen@sw-au.com

James Ye

E jye@sw-au.com

Robert Parker

E rparker@sw-au.com

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