By Jack Nevile & Anna-Nikol Vladimirova
Tax reforms are usually about as predictable as Melbourne weather. However, in recent years, a few things have become fairly certain – the government is going to tax everything that doesn’t vote, and they’re going to tax where the money is. The big pot of gold in Australia is our national pastime of property, and the non-voters are foreigners and commercial property owners.
The Commercial and Industrial Property Tax Reform Bill 2024 was introduced to into the Victorian Parliament earlier this month.
This bill will introduce a new tax system for all commercial and industrial properties sold after 1 July 2024. Once a commercial property has sold and settled after this date, a 10-year countdown begins. This the transition period before the new tax is raised against the property.
At settlement, the purchaser can choose to pay the stamp duty in one of two ways:
- Pay the property’s stamp duty liability as an upfront lump sum.
- Make repayments which are equivalent to the upfront stamp duty liability over the next 10 years, plus interest.
Regardless of which option the purchaser chooses, this will be the final stamp duty payable on the transfer of that particular property.
Following the initial settlement after 1 July 2024, no stamp duty is payable on future transfers of the commercial or industrial property.
Time’s Up
After the 10-year transition period for that property has elapsed, the new Commercial and Industrial Property Tax will be levied. This tax will operate like land tax and be set at a flat 1% of that property’s unimproved land value, unless you are a Build-to-Rent developer, in which case your mates in government have given you a sweetheart 0.5% tax rate.
What if I sell the property within the transitionary period?
If the property is transferred within that 10-year transition period, then no stamp duty is payable on settlement.
However, if the previous purchaser is repaying the final stamp duty liability in instalments, then all outstanding amounts must be paid prior to the settlement.
Once settled, the new purchaser resumes the countdown and begins paying the Commercial and Industrial Property Tax once the 10-year transition period has expired.
But what if…?
We understand that these changes may be confusing. If you would like more information or advice on tax implication tailored to your specific circumstances, please contact our office today.
Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.
