Farewelling (some) Stamp Duty - Commercial and Industrial Property Tax

On 20 March 2024 the Victorian Government formally introduced its plans for a move away from stamp duty for commercial and industrial properties and put a bill into Parliament to give effect to the transition.

A copy of the Bill can be read here: https://www.legislation.vic.gov.au/bills/commercial-and-industrial-property-tax-reform-bill-2024

A copy of the Department of Treasury and Finance’s information sheet can be read here: https://www.dtf.vic.gov.au/funds-programs-and-policies/commercial-and-industrial-property-tax-reform

In a nutshell -

Commercial and industrial properties will become subject to the new regime from the first time they are sold after 1 July 2024.

That first such sale will incur stamp duty and will set a 10-year clock running. Once 10 years have passed the property will become subject to an annual 1% commercial and industrial property tax. The tax will be applied on the basis of the unimproved value of the property. Subsequent sales (even if falling within the ten years) will not incur stamp duty.

This would seem to create something of a two-tiered commercial real estate sales environment - properties that have already had their final stamp duty paid will, presumably, be seen as more attractive than properties that have yet to be transacted post-July 2024.

As a transitional measure the government will make a stamp duty loan available at commercial rates – the loan will set a fixed interest rate over a ten-year term and will need to be paid off before or on settlement of any subsequent sale.

The tax will operate similarly to land tax in that it will be applied to relevant properties based on ownership as at midnight on 31 December in each year, will not be capable of adjustment as between a purchaser and vendor and will not be able to be passed on by a landlord to a retail tenant.

The proposal is still to pass throughout parliament before it becomes law. The proposal will not apply to residential or primary production land.

We will update as more information comes to light (including when the bill passes Parliament).

Paul Nunan Director