Victorian land transfer duty has undergone a significant reform, however it will be some years before the full effects are felt.
Overview
The Commercial and Industrial Property Tax Reform Act 2024 progressively abolishes land transfer duty on commercial and industrial land and replaces it with an annual property tax known as the commercial and industrial property tax (CIPT).
From 1 July 2024, commercial and industrial properties will enter the CIPT scheme when there is an eligible transaction, which is generally a sale, a subdivision, or consolidation of title. These events are defined in the Act as entry transactions.
Transfer duty still applies to an entry transaction, and any applicable transfer duty concessions also apply, such as the 50% concession for a transfer of eligible commercial and industrial property in regional Victoria. Eligible purchasers will have the option of accessing a government loan through Treasury Corporation of Victoria for the duty payment on the entry transaction. The loan will be secured by a first ranking statutory charge on the applicable land.
Ten years after an entry transaction, CIPT will begin to apply to the land at a flat rate of 1% of the land’s unimproved capital value, assessed annually.
Generally, transactions after the entry transaction will be exempt from land transfer duty if the property continues to be used for commercial and industrial purposes.
CIPT will not apply to any property until it has an entry transaction. Properties that stay in the same ownership will not become liable for CIPT.
Exemptions and concessions
Transactions under a contract entered into before 1 July 2024 are not affected by the scheme.
If, after entry into the CIPT scheme, a property changes ownership in circumstances where a land transfer duty exemption applies, the transaction will generally also be exempt from CIPT. This applies, for example, to transfers from a deceased estate, or between spouses.
For a build-to-rent property that has entered the CIPT scheme, a reduced CIPT rate of 0.5% applies.
By Lawyers updates
Updates to the By Lawyers Conveyancing (VIC) publications reflecting these changes to land transfer duty include: