The Commercial and Industrial Property Tax Reform Bill 2024 was introduced into the Victorian Parliament in March 2024. The full text of the Bill can be found on the Victorian Legislation website.
Treasurer's media release: Stamp Duty Reforms To Back Victorian Businesses.
Further information
Information on the final design of the reform is provided below.
Transition loan
From 1 July 2024, eligible first purchasers of a commercial or industrial property entering the reform will have the option of accessing a government-facilitated transition loan to finance the final upfront stamp duty liability on their purchase. The transition loan will be issued by the Treasury Corporation of Victoria.
Further information on the government-facilitated transition loan is provided below, including an illustrative interest rate. The interest rate is equal to a base rate (based on government borrowing costs) plus a risk margin determined annually by the Treasurer (set at 2.25 per cent for 2024-25).
Further information on the transition loan, such as the application process and loan terms and conditions, will be published by the Treasury Corporation of Victoria prior to the commencement of the reform on 1 July 2024.
For further enquiries on the Commercial and Industrial Property Tax Reform or the transition loan, please contact information@dtf.vic.gov.au.
Commercial and Industrial Property Tax Reform Q&A
1. What is the Commercial and Industrial Property Tax Reform?
2. Who will this apply to? Will I have to pay the Commercial and Industrial Property Tax if I currently own a commercial or industrial property?
3. How will a commercial or industrial property enter the reform?
4. How will the Commercial and Industrial Property Tax be calculated and when will it commence?
5. What exemptions and concessions will be made available?
6. Why is the government offering a transition loan and do I need to apply for one?
7. What happens if I change the use of a commercial or industrial property to another purpose?
8. When is stamp duty being abolished for commercial and industrial properties?
9. Does this reform apply to residential properties?
10. What further information will be provided on the reform ahead of the start date of 1 July 2024?
1. What is the Commercial and Industrial Property Tax Reform?
Currently, when you buy or acquire a commercial or industrial property in Victoria you pay land transfer duty, also called stamp duty. The upfront cost of stamp duty can discourage businesses from investing, expanding or relocating their operations – impeding growth and productivity.
Reforming stamp duty has been recommended by numerous inquiries over recent decades – including the Henry Tax Review, the Productivity Commission and the Grattan Institute.
The Victorian Government is progressively abolishing stamp duty for commercial and industrial properties that have contracted and settled from 1 July 2024, with stamp duty to be replaced for these properties by a new Commercial and Industrial Property Tax.
There are approximately 265,000 commercial and industrial properties in Victoria, and removing upfront costs on these types of property purchases will accelerate business growth and boost jobs.
Further information on the reform is contained in the Information Sheet on this website.
2. Who will this apply to? Will I have to pay the Commercial and Industrial Property Tax if I currently own a commercial or industrial property?
The reform will not apply to the following:
- Property primarily used for residential purposes.
- Property primarily used for primary production, community services, sport, heritage, or culture purposes.
- Transfers of commercial or industrial property that receive an exemption from stamp duty, for example due to being a transfer from a deceased estate, or a transfer between spouses or partners.
- Commercial and industrial property purchased prior to 1 July 2024 (unless 50 per cent or more of the property is transacted after this date).
3. How will a commercial or industrial property enter the reform?
A commercial or industrial property will only enter the reform if a contract of sale is entered into on or after 1 July 2024 and the resultant dutiable transaction at settlement meets certain conditions.
Further details on these conditions are outlined in the Information Sheet on this webpage. This includes information on the qualifying use definitions required for a property to enter the reform.
Properties that receive a stamp duty exemption do not enter the reform.
For property that has multiple uses on the one land title (e.g. part commercial and part residential) its sole or primary use must be commercial or industrial to enter the reform. The sole or primary use test does not apply if those multiple uses are on separate and distinguishable land titles.
4. How will the Commercial and Industrial Property Tax be calculated and when will it commence?
The Commercial and Industrial Property Tax will be calculated at one per cent of the property’s unimproved land value. Exemptions and concessions for this tax will also apply.
Further details on the concessions and exemptions that will apply are detailed in the Information Sheet found on this webpage.
The Commercial and Industrial Property Tax will start 10 years after the first eligible transaction of a commercial or industrial property on or after 1 July 2024.
In line with land tax, the Commercial and Industrial Property Tax will be assessed against the owner of the property as at midnight 31 December in the year preceding the tax year. This tax will only apply to commercial and industrial properties that have entered the reform and ceases to apply if the property is converted to a use that is not commercial or industrial.
5. What exemptions and concessions will be made available?
Existing concessions and exemptions available for stamp duty on commercial and industrial property will continue to be available when the reform commences.
However, properties that receive stamp duty exemptions will not enter the reform. Subsequent transactions of these properties that are liable for stamp duty enter the reform and incur that property’s final stamp duty payment.
Transfers of qualifying properties which are eligible for the Regional Commercial and Industrial Duty Concession will enter the reform and continue to receive a 50 per cent reduction on their final stamp duty payment.
Existing land tax exemptions will apply to the Commercial and Industrial Property Tax. For a full list of exemptions currently available for land tax, please visit the State Revenue Office website.
6. Why is the government offering a transition loan and do I need to apply for one?
The upfront nature of stamp duty adds to the cost of purchasing commercial and industrial property and may discourage businesses from expanding or relocating.
To help free up capital for businesses to invest in expanding and employing more workers, purchasers will have the option to take up the transition loan to as an alternative to making an upfront lump sum payment and transition to an annual repayment from the time of purchase.
When a commercial or industrial property is bought with a purchase price of $30 million or under, and is contracted and settled for the first time after 1 July 2024, eligible purchasers will have the option of accessing a government-facilitated transition loan to finance the upfront stamp duty liability on the purchase.
Further details:
- The loan will be available to eligible purchasers who are Australian citizens/permanent residents or an Australian business
- The loan will be issued by Treasury Corporation of Victoria at a commercial interest rate
- The interest rate will be fixed over the 10-year term of the loan, and will be paid off in annual principal and interest repayments
- The first repayment will be due 12 months after settlement
- Early repayments will be allowed but break fees will apply
- If the property is sold before the end of the 10-year term, the balance of the loan will be paid off from the proceeds of the transaction
- The loan cannot be novated or transferred to a subsequent purchaser.
The transition loan is optional and taxpayers can alternatively choose to pay upfront stamp duty liability in full at settlement, as per current arrangements, if preferred.
Further details on the transition loan will be announced in 2024.
7. What happens if I change the use of a commercial or industrial property to another purpose?
If a property that has entered the reform changes to a non-qualifying use (e.g. residential), the taxpayer must notify the Commissioner of State Revenue within 30 days of the change of use.
The property will not be liable for the Commercial and Industrial Property Tax for future assessments while it continues to have a non-qualifying use. However, stamp duty will be payable on the property if it is sold with a non-qualifying use.
If a stamp duty exemption is obtained on the basis that the property acquired had entered into the reform on an earlier transaction, any change of use of the property to a non-qualifying use will result in 'change-of-use duty'. Further information on change-of-use duty is available in the information sheet on this webpage.
8. When is stamp duty being abolished for commercial and industrial properties?
A commercial and industrial property will be exempt from stamp duty after the first dutiable transaction of that property from 1 July 2024. Once stamp duty is paid one final time, all subsequent transactions of that property will be free from duty if they continue to have a commercial and industrial use.
9. Does this reform apply to residential properties?
This reform only applies to commercial and industrial property consistent with the Government’s objective to encourage investment in Victorian business, support jobs and improve productivity.
However, the Government is committed to making housing more accessible for all Victorians and other targeted assistance is available to support residential property ownership. This was recently underpinned by the release of Victoria’s Housing Statement, which has set a target of building 800 000 homes in Victoria over the next decade supported by a range of reforms.
Further, the Government has:
- abolished land transfer duty for first home buyers on homes up to $600,000, with a further concession on homes up to $750,000
- increased the size of the Victorian Homebuyer Fund to $2.1 billion, a shared equity scheme to help Victorians own a home. The Victorian Government will provide a contribution of up to 25 per cent of the acquisition price, in exchange for an equivalent share in the property.
For further information on the support available to home buyers please visit the State Revenue Office’s website:
10. What further information will be provided on the reform ahead of the start date of 1 July 2024?
Legislation to facilitate this reform is expected to be introduced into Parliament in the first half of 2024, ahead of the 1 July 2024 start date.
Further information on the transition loan, such as to how to apply and the final terms and conditions, will be published by Treasury Corporation of Victoria (TCV) on an application web portal prior to the commencement of the reform on 1 July 2024.