THERE is plenty of confusion amongst the farming community about the Victorian Government's proposed windfall gains tax which is earmarked to come into effect next year.
That's fair enough, because since its announcement in this year's state budget there has been zero detail given over how the tax will operate.
What we know so far is the tax would apply to all land (that) is subject to a rezoning decision, except for land on the edge of Melbourne subject to the existing growth areas charge.
The value uplift will be determined on the annual valuations taken immediately before and after the rezoning event.
Where the value of the land increases by more than $100,000, any additional value uplift will be taxed at 62.5 per cent, whilst all value uplift greater than $500,000 will be taxed at 50pc.
This tax couldn't come at a worse time for regional Victoria.
The VFF is deeply concerned the implications of this tax have not been thought through and the government doesn't even know how much revenue it will actually take away from regional communities.
Anytime farmland is rezoned, a tax liability will be created on the balance sheets of farm businesses, impeding their ability to borrow money to grow or maintain their business.
This will happen even if there is no desire to sell the farm.
What's more, the tax will capture the entire value uplift of land that is subject to a rezoning decision, rather than only the value uplift that is attributable to that decision.
This is manifestly unfair given the market for farmland is at record highs. Instead of taxing windfalls gained from the sale of a property, this tax will effectively create a windfall for the government by capturing value that has nothing to do with rezoning.
