NSW property tax reforms will hit the pocket

Are you optimistically waiting for your farm to be rezoned so that you can make a nice tidy profit? You might need to think again!

Proposed NSW property tax reforms may see the phasing out of stamp duty - no complaints there. Less popular will be the introduction of a windfall gains tax called the “infrastructure contributions system” which could dampen the spirits of some farmers. The new tax will apply to increased land values that occur through rezoning or government infrastructure investment.

A similar law came into effect in Victoria on July 1st. Under the Victorian law, the increase in land value as assessed by the Valuer-General after rezoning is taxed on a sliding scale. No tax is paid if the gain is less than $100,000. If the gain is between $100,000 and $500,000, a tax of 62.5% is paid. A 50% tax is paid if the gain is over $500,000.

Under the Victorian changes, if the Valuer-General changes the value of a holding from $1 million to $3 million after rezoning, the owner will pay 50% of the land value change; or $1 million in tax.

The proposed changes to NSW property taxes are in consultation until July 30th, but the new tax regime certainly appears likely to go ahead. We don’t know if the tax rates will mimic the Victorian system, but we can assume they will be similarly steep.

The Department of Planning, Industry and Environment indicates that farmers won’t need to pay the “infrastructure contribution” until the land is sold or developed. We can’t help but wonder if an unintended consequence might be a farmer having to pay the tax when they sell their farm, even if there is no intention to change the land use under the rezoning and a windfall is not realised?

If you have concerns regarding the proposed changes, we recommend you consult with your local State government member, or NSW Farmers representative. And don’t forget that the clock is ticking……

Posted on Tuesday, 20 July 2021
by Michael Guest in Latest News

infrastructure contribution property tax rezoning

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