Announced in the Victorian Budget 2023-24, the Government has finalised the changes following consultation with business and industry stakeholders, including Victorian Chamber advocacy.

The Commercial and Industrial Property Tax Reform Bill 2024 will be introduced to parliament, abolishing the upfront cost of stamp duty and replacing it with a Commercial and Industrial Property Tax.

From 1 July 2024, stamp duty will be paid one last time for such properties, with the Commercial and Industrial Property Tax to be payable 10 years after the last stamp duty payment.

When these properties are next sold, stamp duty will not apply – if the property continues to be used for commercial and industrial purposes.

The Commercial and Industrial Property Tax will be set at a single flat rate of one per cent of a property’s unimproved land value. Administration will also be similar to arrangements for land tax.

Eligible purchasers will have the option of accessing a government-facilitated transition loan to fund their last stamp duty payment. Annual repayments over 10 years will be set upfront.

How the process works

1. The reform will commence from 1 July 2024. People who own property before that date will not be affected by the reform – for as long as they own the property.
2. After that date, when a commercial/industrial property is transacted, it will trigger a 10-year transition period for that property. The purchaser will have a choice to either: pay the property’s final stamp duty liability as an upfront lump sum; or pay an annual payment for ten years – equivalent to the property’s final stamp duty liability (plus interest) – with a government-facilitated ‘transition loan’.
3. If the property is transacted again within the 10-year transition period – no stamp duty will be payable (even if the property is transacted multiple times). If the initial purchaser opted for the transition loan, they will be obliged to make the remaining repayments.
4. The annual property tax will kick in 10 years after the initial transaction (regardless of whether the property has been transacted since). The annual property tax will be set at a flat 1 per cent of that property’s unimproved land value. It will be separate from and in addition to the existing land tax system.
5. After the 10-year transition period, the property has now moved permanently into the new system. No stamp duty will be payable on any transaction. And whoever owns that property will be liable for the annual property tax.

The reform encourages businesses to expand or set up in the best location, for example close to their customers or where there is a growing workforce; support businesses to invest in buildings and infrastructure; and promote more efficient use of commercial and industrial land.

Treasurer Tim Pallas thanked the Victorian Chamber for its advocacy on the matter: “We’ve worked closely with industry to deliver these changes, supporting Victorian businesses to grow and expand faster without the burden of stamp duty,” he said.

Victorian Chamber of Commerce and Industry Chief Executive Paul Guerra said: “This bold move to stimulate commercial property investment signals the Victorian Government’s willingness to further the conversation about tax reforms in a way that can benefit business growth in Victoria.

“We are proud to be the voice of business in this State and we ensure we listen to our 85,000 members and clients, which makes it easy for Government to engage in a confidential and trusted way to develop appropriate reforms.”

Ahead of the 1 July 2024 start date, the Government will provide educational support on the reform, including helping industry and taxpayers navigate the transition to the new scheme.

These reforms will not apply to residential, primary production, community services, sport, heritage or cultural properties. Existing stamp duty concessions for commercial and industrial properties, including the regional concession, will continue to be available.

The move is expected to benefit the state’s economy by up to $50 billion in cumulative net present value terms over the next 40 years.

Victorian Chamber advocacy

The announcement aligns with Victorian Chamber advocacy for conditions that make it easier and more economically attractive to own and operate a business in Victoria.

As Victoria’s peak business body, the Victorian Chamber offers information, support and advocacy for our community of members and clients to ensure a diverse and robust business community in Victoria.

For more information on the Victorian Chamber’s advocacy work, please visit the Policy and Advocacy section of our website.

If you have any questions or would like to be involved in our broader advocacy work, please contact us via policy@victorianchamber.com.au