Victoria's new Commercial Property Tax: what you need to know

Victoria's New Commercial Property Tax: What You Need to Know

As the new financial year begins, a significant change has been introduced in the Victorian commercial property tax system.

You may recall that stamp duty will be abolished for commercial properties and replaced with an ongoing tax… Well, we’ve broken down what is it and how it works.

If you purchase a commercial property on or after 1 July 2024, you will pay stamp duty one last time. Importantly, this will only apply to the first sale or transfer, and subsequent sales or transfers will not have stamp duty.

 Following the date of that first sale or transfer, the new tax begins 10 years after, regardless of who the owner is. 

Its called the Commercial and Industrial Property Tax, or CIPT.

The amount of CIPT will be calculated at 1% of the property’s unimproved (site) value, which can be found on your council rates notice. For example: if the site value of the property is $1 million, you will pay $10,000 a year in CIPT.

There are some technicalities to the tax:

1.     It only applies where 50% or more of the property is being sold or transferred.

2.     It has to have a qualifying commercial or industrial use, which means that it needs to fall within certain categories of “commercial or industrial use” set by the AVPCCs in the 2024 Valuation Best Practice Specifications Guidelines. 

There are limited exemptions, such as some transfers from deceased estates. 

Importantly, a commercial landlord:

  • cannot pass on the tax to their tenant under a retail lease in Victoria

  • cannot recover the tax from a buyer when selling the property

The Treasury Corporation of Victoria is offering a Transition Loans Program to assist with the payment of stamp duty.  

Understanding this new tax and its application to you can be challenging, particularly for more complex transactions.

If you are considering buying or selling a commercial or industrial property and would like to know more about how these changes will affect you, our business and property lawyers can assist. Contact Lachlan Edwards or Madison Donald (Trainee Lawyer) on 5445 1031.

 

Business LawMadison Donald (Trainee Lawyer)