The new Commercial and Industrial Property Tax reform that progressively abolishes stamp duty on commercial and industrial property from 1 July 2024 is one of the most significant Victorian property tax reforms in the past 30 years. Anyone looking to buy or sell commercial or industrial property will be impacted.
On 14 May 2024, the Commercial and Industrial Property Tax Reform Bill 2024 (Vic) (the CIPT Bill) (first introduced on 20 March 2024) passed the Legislative Council with only seven weeks to go until the new regime commences.
Those looking to acquire commercial or industrial properties or plan restructures within existing groups should consider the impact of the new Commercial and Industrial Property Tax regime.
How does the Commercial and Industrial Property Tax regime work?
Under the new regime:
the first sale of commercial and industrial property after 1 July 2024 will still be subject to standard stamp duty at the standard rates up to 6.5% - this brings the property into the new tax regime;
subsequent transactions will be exempt from stamp duty; and
a new annual 1% Commercial and Industrial Property Tax will apply to a property’s site value (the unimproved land value) – payable from 10 years after the transaction that first brings a commercial or industrial property into the new tax regime.
A transition loan provided by the Treasury Corporation of Victoria will be available for the final stamp duty payable on the first sale of a commercial or industrial property after 1 July 2024, where the purchase price of the property is $30 million or less.
See our earlier Sladen Legal commentary on the new system here and here for more detail on the operation of the new Commercial and Industrial Property Tax, including what types of transactions trigger transition into the regime, when stamp duty on the first sale on or after 1 July 2024 applies, interaction with existing taxes and application to mix use properties and changes of use.
Are there any amendments in the CIPT Bill?
The CIPT Bill passed without any changes. Important amendments to be introduced in a Spring Tax Bill, however, were flagged in State Parliament by the Victorian Attorney-General, Jaclyn Symes.
These are likely to cover stamp duty exemptions for properties that have entered the reform (i.e. the one final stamp duty liability has been paid after 1 July 2024) and where there is a subsequent transaction for economic entitlements or transfers of dutiable fixtures and goods used or held in connection with land.
The Attorney-General is committed to working with industry to develop amendments to exempt these transactions.
In the meantime, the Victorian State Treasurer has indicated that he would consider ex gratia relief for any stamp duty payable.
Action required
Investors that invest in commercial and industrial property should:
consider whether existing or planned acquisitions (or divestments) of commercial or industrial property will be impacted by the 1 July 2024 changes;
review any planned restructuring within existing corporate or family groups to determine if it will be impacted by the changes; and
seek advice from their State Tax advisors as required.
The application of the new Commercial and Industrial Property Tax is likely to become increasingly more complex over time.
Please contact us with any questions in relation to these proposed changes or any other State Tax issues.
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au
Meera Pillai
Associate
T +61 3 9611 0179
E mpillai@sladen.com.au
