As it currently stands, when a purchaser acquires commercial/ industrial property in Victoria they pay land transfer duty (stamp duty). This can be discouraging for business as it increases the upfront costs of purchasing commercial/ industrial premises.
In the most recent 2023 Victorian State Budget the Victorian Government unveiled its new policy regarding stamp duty in relation to the sale of commercial/ industrial property.
The New Policy
Stamp duty will be abolished and replaced with an annual property tax from 1 July 2024.
The transition to the new system will occur on the sale of a commercial/ industrial premises after 1 July 2024.
Once in the new system, stamp duty will never again be payable.
The new system will introduce an annual property tax that will be a set rate equal to 1% of the commercial/ industrial property’s unimproved land value, payable annually after 10 years post the acquisition of the property after 1 July 2024.
Important to note, the new land tax policy will not affect current owners of commercial/ industrial property or those who purchase the property before 1 July 2024.
Further, the new land tax system for commercial/ industrial properties will operate separately and will be in addition to the existing land tax system.
Transitional policy for commercial/ industrial first being transacted with post 1 July 2024
The first-time purchaser of a commercial/ industrial land following 1 July 2024 will still have to pay stamp duty.
However, to ease the burden, the Government is allowing the first purchaser of a commercial/ industrial premises after 1 July 2024 to opt to select to pay either:
(a) The final stamp duty liability as an upfront lump sum; or
(b) fixed instalments over 10 years equal to stamp duty and interest via a Government-facilitated transition loan.
The annual property tax will then commence the year after the final transitional loan repayment.
Any subsequent transfers of the property will no longer attract stamp duty.
Where to from here?
The draft policy has not yet been released. The Government is currently in the process of consulting with business and industry and have noted that we will have to wait until the end of the year for the exact mechanics of how the new system will operate to be released.