A Bill containing the 2023–24 Victorian Budget measure to replace stamp duty with an annual commercial and industrial property tax is now law.
The Commercial and Industrial Property Tax Reform Bill 2024 (Vic) received assent as Act No 16 of 2024 on 21 May 2024. The Act will establish a tax reform scheme for eligible commercial and industrial property from 1 July 2024. Broadly, when land with a qualifying use is sold after 1 July 2024, it will transition into the new system with stamp duty payable one last time on that property. After a transition period of 10 years starting on the date the land entered the scheme, commercial and industrial property tax will begin to apply to the land.
Land with a qualifying use
The scheme will apply to land with a qualifying commercial or industrial use, as determined by the Australian Valuation Property Classification Code (AVPCC) allocated to the land as part of the valuation process under the Valuation of Land Act 1960 (Vic). Land allocated an AVPCC in the ranges 200–499 or 600–699 will be subject to the scheme, as well as certain land used for student accommodation.
Owners of residential, primary production, community services, sport, heritage or cultural properties will not be affected by the scheme.
Entry into the scheme
Land with a qualifying use will enter the scheme upon certain dutiable transactions or relevant acquisitions under the Duties Act 2000 (Vic) happening in respect of that land, and on certain subdivisions and consolidation of land already in the scheme. Generally, a transaction brings land into the scheme if the transaction is not fully exempt from land transfer duty or landholder duty, and the transaction relates to an interest of at least 50% in the land.
Once land has entered into the scheme, exemptions from land transfer duty and landholder duty will apply to eligible subsequent transactions where the land still has a qualifying use. If land in the scheme undergoes a change of use to a non-qualifying use, duty may be payable on a dutiable transaction or relevant acquisition of the land that received an exemption from duty.
Eligible purchasers will have the option of accessing a government-facilitated transition loan on commercial terms to fund the payment of duty on transactions that result in land entering the scheme. The transition loan program will be administered by the Treasury Corporation of Victoria.
Commercial and Industrial Property Tax
Commercial and Industry Property Tax will begin to apply 10 years after land enters the scheme. The property tax will be assessed on a calendar year basis on land owned as at midnight on 31 December, calculated at a flat rate of 1% of the site value of the taxable land.
Land that is exempt land under the Land Tax Act 2005 (Vic) will not be subject to the property tax.
The Act contains amendments to the Taxation Administration Act 1997 (Vic) to provide for the administration of the scheme and the property tax by the Commissioner of State Revenue. Amendments will also be made to the Treasury Corporation of Victoria Act 1992 (Vic), Heritage Act 2017 (Vic), Property Law Act 1958 (Vic), Retail Leases Act 2003 (Vic), Sale of Land Act 1962 (Vic) and the Valuation of Land Act 1960 (Vic).
Article Source: Commercial and Industrial Property Tax Reform Bill 2024, Victorian Legislation website, 21 May 2024, accessed 22 May 2024.
Contact DFK Nugents for further insight
The enactment of the Commercial and Industrial Property Tax Reform Bill 2024 marks a significant shift away from stamp duty for eligible commercial and industrial properties in Victoria.
If you would like to understand what these changes mean for you and your property, please get in touch with DFK Nugents.
