In the 2023-24 State Budget, the Victorian Government announced that land transfer duty (stamp duty) on commercial and industrial property will be progressively abolished and replaced with the commercial and industrial property tax (CIPT).
Properties sold after 1 July 2024 will transition into the new CIPT scheme.
Stamp duty still applies to the first transaction that occurs after 1 July 2024 (known as an “entry transaction”). You can pay stamp duty:
- as a lump sum at settlement; or
- by obtaining a transition loan from the government (if you are eligible).
The transition loans are being provided by the Treasury Corporation of Victoria and will be on commercial terms including fixed marked-based interest rates. Annual repayments over 10 years will be set up-front and the loan will be secured by a first ranking statutory charge on the property. Further information about the loan’s eligibility criteria and terms and conditions is available from Treasury Corporation of Victoria.
CIPT is not payable immediately following the entry transaction. 10 years after the initial entry transaction, CIPT will begin to apply to the land at a flat rate of 1% of the land’s site (unimproved) value each year. CIPT is payable by the property owner and is payable in addition to Land Tax.
Does the “regional commercial, industrial and extractive industries property concession” still apply to the initial lump sum duty payment?
Yes, it does. A 50% stamp duty concession is available if you buy property in regional Victoria used for commercial, industrial or extractive industry purposes.
Can CIPT be passed onto Tenants or Purchasers?
CIPT can be passed onto tenants as an outgoing under a lease, except where the lease falls within the ambit of the Retail Leases Act 2003.
The Retail Leases Act applies to premises that are used wholly or predominantly for:
- the sale or hire of retail goods or provision of retail services (including in certain circumstances where the goods or services are sold to other businesses); or
- the carrying on of a specific business or a specified kind of business that the Minister determines, under section 5, based on the kind of business, tenant or lease.
CIPT cannot be adjusted between a Purchaser and Vendor at settlement of the sale of the property. Therefore the Vendor is liable for the full amount of CIPT, regardless of whether they sell the property during the relevant rating period.
What is the property is used for mixed purposes?
Land can only be entered into (and remain within) the CIPT scheme if it has a ‘qualifying use’. ‘Qualifying use’ means land that has been allocated an Australian Valuation Property Classification Code (AVPCC) in the following ranges:
- 200 – 299 (Commercial)
- 300 – 399 (Industrial)
- 400 – 499 (Extractive Industries)
- 600 – 699 (Infrastructure and Utilities)
Land that is used solely or predominantly for eligible student accommodation will also have a qualifying use.
Other land will not qualify. This includes land classified as used for residential, primary production, community or heritage purposes.
The AVPCC will be determined by the Valuer General and can generally be found on your Council rates assessment.
If land has been allocated more than one AVPCC, and one or more of the codes is outside the ranges listed above, the land will have a ‘qualifying use’ if it is solely or primarily used for a purpose described in the AVPCC ranges listed above.
If you are considering buying or selling commercial or industrial property please contact us on 03 5176 1345 or email [email protected] to determine whether the property is caught by these changes.