Victoria phases out stamp duty on commercial and industrial properties

A proposed new provision to replace stamp duty on the purchase of commercial and industrial properties with an annual property tax instead is expected to be passed by the Victorian Government soon.

The Commercial and Industrial Property Tax Reform Bill 2024 was introduced to the Victorian Parliament in March 2024 and is consistent with an announcement made in the 2023/24 Victorian State Budget. While the Bill has yet to be passed into legislation, it is anticipated that the Bill is to be passed shortly.

Under the proposed legislation, stamp duty will be payable on the next sale transaction that occurs on the property after 1 July 2024.  Thereafter, however, commercial and industrial properties will cease to be subject to stamp duty on any further sale transactions and will instead commence to be subject to an annual property tax equal to 1% of the unimproved land value of the property.  Importantly, the annual property tax will only commence, 10 years after the final dutiable sale transaction occurs.

For example, if a property that is characterised as a commercial or industrial property and which was purchased on 1 January 2024 is sold on say 31 May 2029, the purchaser of the property will be subject to stamp duty.  However, thereafter, the property will not be subject to any further stamp duty on any further sale transactions.  Instead, the property will commence to be subject to an annual property tax from 31 May 2039.

As part of transitional arrangements, the provisions introduce an optional loan scheme to help taxpayers fund the final stamp duty impost that occurs on the sale of commercial and industrial properties. The loan scheme only applies to properties valued at less than $30 million and the loan is interest bearing.

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Wondering how this change might affect you? Contact your BG Private advisor or contact our Tax Advisory Partner, Tim Olynyk, on +61 3 9810 0700 or t.olynyk@bgprivate.com.au

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