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SKY UPDATE | VICTORIAN COMMERCIAL AND INDUSTRIAL PROPERTY TAX 

May 30, 2024

In a significant move announced in the 2023-24 Budget, the Victorian Government is set to progressively abolish Stamp Duty on commercial and industrial properties, replacing it with an annual ‘commercial and industrial property tax’.  

The Commercial and Industrial Property Tax Reform Bill 2024 to give effect to this measure received Royal Assent on the 21st of May.  

The key features of the new system are: 

  • Contracts entered and settled involving dutiable transactions (eg sale/transfer) on or after 1 July 2024 will cause the property to move into the new system; 
  • A final Stamp Duty assessment will be raised for that transaction and the purchaser will have a choice to either: 
    • Pay that Stamp Duty upfront in the traditional way; or 
    • Finance the stamp duty over 10 years through a government facilitated ‘transition loan’. 
  • At settlement, a 10 year transition period will commence after which the annual commercial and industrial property tax will start to be levied. 
  • As long as the property continues to have a commercial or industrial use, no additional Stamp Duty will be levied on subsequent transactions arising after 1 July 2024. 
  • The new tax does not replace, and will be payable in addition to Land Tax.  

Owners of commercial and industrial property acquired prior to 1 July 2024 will not be subject to the new tax. 

The Commercial and Industrial Property tax will be levied at 1% of the unimproved land value with no tax-free threshold. 

Properties primarily used for residential, primary production, community services, sports, heritage, and culture purposes will not be subject to the tax. 

Special rules are incorporated into the system to handle complex situations that are expected to arise.  For example: 

  • mixed-use properties; 
  • change of use (eg developing commercial or industrial property into residential); and 
  • fractional interest transfers and transactions involving landholder entities. 

‘Transition Loans’ will be issued through the Treasury Corporation of Victoria (TCV) to qualifying purchasers, being Australian citizens/permanent residents or an Australian business, where they are: 

  • the first purchaser of a commercial or industrial property where settlement occurs for contracts entered into on or after 1 July 2024; and 
  • purchasing property up to a maximum purchase price of $30 million; and 
  • approved for finance from an Authorised Deposit-taking Institution or other approved lender for the subject property. 

The loans will be subject to a fixed rate of interest being the TCV’s bond rate plus a credit risk margin. 

Principal & interest repayments on the loan will be required over the 10 year loan period.   

Where a property is sold within 10 years, the loan will be repayable in full at the time of settlement. 

The Victorian Commercial and Industrial Property Tax Reform Bill 2024 marks a significant change in how property transactions are taxed in Victoria. 

It is essential that both buyers and sellers are across the application of the new tax in order to assess the impact on any intended transactions. 

For more information, check-out the SRO’s website materials.  You may also consider booking in for one of the their upcoming webinars. 

And as always, you are most welcome to contact us if you have any questions or if you wish to discuss your situation. 

Sky Accountants Ballarat

Phone: 03 5332 8855

Office Address: 902 Howitt Street, Wendouree, Victoria 3355, Australia

Postal Address: PO Box 2234, Bakery Hill, Victoria 3354

Sky Accountants Gisborne & Macedon Ranges

Phone: 03 5428 1400

Office Address: 45 Hamilton Street, Gisborne, Victoria 3437, Australia

Postal Address: PO Box 270 Gisborne Victoria 3437