On Tuesday 23 May 2023 the Victorian Treasurer, Tim Pallas, delivered the 2023-24 State Budget announcing a landmark reform to abolish stamp duty for commercial and industrial properties and introduce a new annual property tax. These changes are expected to take effect from 1 July 2024.
Stamp duty to be replaced with annual property tax for commercial and industrial properties
The Victoria Government has announced a transition away from stamp duty for commercial and industrial properties from mid-2024 to a new annual property tax system and this reform includes the following:
- Stamp duty (land transfer duty) on commercial and industrial properties will be abolished and replaced with a new annual property tax. There will be a transition period that is to commence from 1 July 2024.
- Commercial and industrial properties sold after 1 July 2024 will transition to this new annual property tax system and the annual property tax will be payable from 10 years after the sale.
- The first purchaser of the commercial or industrial property after the introduction of the reform will choose to pay the commercial or industrial property’s final stamp duty liability as an upfront lump sum or opt to pay fixed instalments over 10 years equal to the stamp duty plus interest associated with a Government facilitated transition loan.
- The annual property tax for commercial and industrial properties will be 1 per cent of the property’ unimproved land value.[1]
This reform will not apply to any current owners of commercial and industrial properties that were purchased before 1 July 2024 and will begin to apply once the property transacts.
What does this mean?
At this stage, the Victorian Government has announced that they will commence targeted consultation in the coming months with business and industry and accordingly, further detail and changes in relation to this reform are likely to be provided by the end of the year.
The introduction of the reform is expected from 1 July 2024.
Importantly, these changes do not apply to residential property.
It is our view that this new reform will have a significant impact on purchasers, landlords and tenants of commercial and industrial properties. If you wish to discuss this reform further, please do not hesitate to contact our Property Team.
[1] https://www.premier.vic.gov.au/stamp-duty-reform-boost-business-industry-and-jobs
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