Victorian Government Announces Commercial And Industrial Property Tax Reform – Property Taxes

As part of the 2023-24 State Budget, the Victorian Government
announced significant reform to stamp duty for commercial and
industrial properties that will take effect from 1 July 2024. In
December 2023, the Government provided further details on the
proposed Commercial and Industrial Property Tax (CIPT) Reform.

Overview

From 1 July 2024 onwards, transactions that involve Victorian
commercial and industrial property will trigger one final round of
stamp duty. Following this, the property will enter the new CIPT
system, and no stamp duty will be payable on any future
transactions of that property, provided that the property continues
to have a commercial or industrial use. Instead, the CIPT will be
payable on an annual basis, commencing 10 years after the initial
transaction. CIPT will be calculated at a rate of one percent of
the property’s unimproved land value, and payable in addition
to any land tax ordinarily payable.

Entry into CIPT system 

A property will enter into the CIPT system if:

• a contract of sale of the property is entered into on or after
  1 July 2024;

50 percent or more of In detail

• the property transacts—either via a direct dealing in the
  property, or indirectly, such as by way of an acquisition of a
  company or trust that owns the property;




• there is a stamp duty liability (i.e. no exemptions are
  available); and




• the property has a qualifying commercial or industrial
  use.

Stamp duty concessions continue to apply to the transaction, and
the property will enter the system provided that other conditions
are also met. For example, a sale of qualifying property that is
eligible for the regional, commercial and industrial concession
will enjoy a 50 percent reduction on the final stamp duty payment,
and the property will subsequently enter the system. 

A property will not enter the CIPT system if:

• the transaction is exempt from stamp duty—i.e. deceased
  estate transfers, transfers between spouses/ partners and purchases
  by charitable ،isations; or




• the transaction triggers duty under a particular excluded or
  complex transaction—i.e. transaction that is eligible for
  corporate consolidation concession, economic en،lement
  provisions, sub-sale provisions or dutiable leases.

Anti-avoidance provisions will be put in place to support the
integrity of the reform, alt،ugh details of these are yet to be
released by the government.

What types of properties will be affected?

CIPT will apply to Victorian land that has a qualifying
commercial or industrial use. This includes:

• land that the Valuer-General has allocated an Australian
  Valuation Property Cl،ification Code (AVPCC) that falls within
  the commercial or industrial categories; or




• land that is qualifying student accommodation—i.e. it is
  primarily used as “commercial residential premises” for
  goods and services (GST) purposes and is used solely or primarily
  for providing accommodation to tertiary students, excluding
  accommodation provided in connection with a university.

The CIPT system will not apply to land coded by the
Valuer-General as residential, primary ،uction, community
services or sport, heritage and culture purposes.

Government loan for upfront duty

For purchases of qualifying commercial or industrial property on
or after 1 July 2024, taxpayers will have a c،ice of paying the
final stamp duty in respect of the property as an upfront payment,
or by using a Victorian Government facilitated transition loan with
a 10-year repayment term.

The transition loan is available for applicants w، are:

• Australian citizens or permanent residents, or Australian
  businesses;




• the first purchaser of a commercial or industrial property
  where settlement occurs for contracts entered into on or after 1
  July 2024;




• purchasing the property for a price which does not exceed $30
  million; and




• approved for finance for the property by an aut،rised
  deposit-taking ins،ution or other approved lender.

Foreign owners will not be eligible to apply for the transition
loan.

The loan will be issued by the Treasury Corporation of Victoria
with a fixed interest rate, which will be a commercial market-based
rate calculated at the s، of the loan.

Annual loan repayments will be set upfront to provide borrowers
with certainty, and the first repayment will be due 12 months after
settlement of the property purchase.

Treasury Corporation of Victoria will have a first ranking
statutory charge over the interest in the land in relation to the
loan, which will be registered on ،le to inform prospective
purchasers.

Originally published by 27 February, 2024

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.