Important changes coming to stamp duty for Victorian commercial properties

You are currently viewing Important changes coming to stamp duty for Victorian commercial properties

In 2023, the State Government announced its intention to abolish stamp duty for commercial and industrial properties. Under these plans, properties sold from 1 July 2024 will be transitioned to an annual property tax.

Commercial and Industrial Property Tax commencing 1 July

The Commercial and Industrial Property Tax Reform Bill was introduced to Parliament in March and is expected to be made into law before coming into effect on 1 July 2024. It progressively abolishes duty on the sale of commercial properties and replaces the lost revenue with an annual Commercial and Industrial Property (CIP) Tax.

The regime will apply to commercial and industrial property with contract and settlement dates after 1 July 2024. At settlement, stamp duty will apply to the transfer (any relevant duty exemptions will still be available). This is the last time that the property will be subject to stamp duty. Future transfers of the property will be exempt from duty provided the property continues to be used for commercial and industrial purposes.

Once a commercial or industrial property is transferred and duty paid, the land is now subject to the tax reform scheme. A ten year ‘transition period’ will commence. On the expiration of this transition period, CIP Tax will then apply to the property each year.

Exemptions and other details

CIP Tax will be charged at the rate of 1% of a property’s unimproved value. CIP Tax is in addition to land tax. Exemptions that apply to land tax will also apply to CIP Tax.

Property will generally be subject to the regime if it is commercial or industrial property. This includes property used as student accommodation. CIP Tax may cease to apply if the property is converted to a non-qualifying use (e.g. if the property is converted to a private residence), however if the owner of that property did not pay duty on its acquisition because that land was already in the tax reform scheme, ‘change of use duty’ may apply.

Complicated rules regarding subdivisions and mixed-use properties will apply.

Transition Loans

Transition Loans may also be available to assist purchasers to pay the final duty assessment. Details are to be determined, but loans would likely be for 10 years and repayable in annual instalments. Interest will apply. Foreign persons will likely be ineligible for the loans.

Call Aintree Group Legal

This is an important and complicated change to Victoria’s transfer duty and land tax systems.

Aintree Group Legal will be happy to discuss your purchase with you further. Contact us today.