15 Dec 2023
1 min read
15 Dec 2023
Commercial and industrial properties in Victoria will no longer be subject to upfront stamp duty (land transfer duty) from July 1, 2024 as announced in the 2023-24 Victorian Budget.
On 11 December 2023 the Victorian Government announced the final design of the Commercial and Industrial Property Tax Reform.
The tax reform is designed to boost economic activity by encouraging businesses to invest in Victoria and generate further job opportunities through the reduction in the initial cost of purchasing commercial and industrial properties.
The new Commercial and Industrial Property Tax (C&IP Tax) will apply to commercial and industrial property (C&I) transactions with both a contract and settlement dated on or after 1 July 2024.
Under the new system, commercial and industrial property transactions will trigger stamp duty for the last time and the C&IP Tax will be payable 10 years after the final stamp duty payment. Crucially, once a property is subject to this new tax, stamp duty will no longer apply, even if the property changes ownership, as long as it continues to be used for commercial or industrial purposes.
The timeline depicts an example of when duties are payable in the new tax system for a commercial property sold after 1 July 2024.
The key features of the new tax is summarised below:
Eligible purchasers will also have the option to access a government-facilitated transition loan. This loan, provided by the Treasury Corporation of Victoria on commercial terms with a fixed interest rate, will enable businesses to fund their last stamp duty payment, thereby freeing up capital for expansion or hiring more workers.
Additional details on the transition loan, including eligibility criteria and terms, will be communicated by the Victorian Government before July 1, 2024.
Foreign owners will not be eligible to apply for the transitional loan.
These reforms will not affect the following properties used for:
It is important to note that the C&IP Tax, while of similar flavour to land tax, will be separate to land tax. That is, the C&IP Tax does not infringe or amend any land tax liabilities, concessions or exemptions that apply to a particular commercial and industrial property.
Properties that will have a mixed use will only enter into the new C&IP Tax regime based on the sole or primary use test.
Under the sole or primary use test, if it shows that a particular property is qualifying, then the C&IP Tax will apply to the entire property.
The sole and primary use test is to be determined with reference to factors such as land or floor area of each use, relative intensity, economic and financial significance of each use, length of time of each use and other factors.
Note: Student accommodation will be included as a qualifying use for the purpose of the reform. Land which is solely or primarily used as commercial residential premises and that is used solely or primarily for providing accommodation to tertiary students will be considered commercial property.
The application of the new C&IP Tax to properties which have a change of use are broadly summarised below:
Change-of-use-duty is intended to apply where no stamp duty was paid on a recent property transaction(s) and when the property is converted to a non-qualifying use such that no C&IP Tax would apply.
If you are unsure about how these changes will impact your investment or business, we can provide clear and reliable advice.
Our experienced taxation lawyers have deep knowledge of tax law and practical experience in handling matters with the State Revenue Offices across Australia and the Australian Taxation Office.
Disclaimer: This article has been prepared for general information purposes and may not apply to your situation. This information should not be relied upon for legal, tax or accounting advice. Your individual circumstances will alter any legal advice given. The views expressed may not reflect the opinions, views or values of PCL Lawyers and belong solely to the author of the content. © PCL Lawyers Pty Ltd.
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