Victoria government dumps commercial stamp duty

The Allan Labor government has solidified a reform, initially proposed during the state budget, which will gradually phase out stamp duty on commercial and industrial properties.

This move is designed to incentivise businesses to invest and generate employment opportunities.

These reforms, however, will not apply to properties primarily intended for residential, primary production, community services, sports, heritage, or cultural purposes.

While existing stamp duty concessions for commercial and industrial properties, including the regional concession, will remain available, the new reform will eradicate the upfront cost of stamp duty, introducing the commercial and industrial property tax in its place.

Starting 1 July 2024, the first purchaser of a commercial or industrial property will have the option to either pay the property’s final stamp duty liability upfront as a lump sum or choose fixed instalments spread over 10 years, equivalent to stamp duty and interest, facilitated by a government transition loan.

Treasurer Tim Pallas emphasised that stamp duty is a barrier for businesses wanting to invest and grow, underscoring the significance of this pivotal change.

“We’ve worked with businesses to get the design right and look forward to the transition beginning,” Mr Pallas said.

The tax will be established at a flat rate of 1 per cent of a property’s unimproved land value, eliminating the graduated rates previously in place.

Additionally, exemptions applicable to land tax will also be relevant to this new tax system.

Moreover, when these properties are subsequently sold, stamp duty will not apply if they continue to be used for commercial and industrial purposes, even if the property changes hands before the commercial and industrial property tax becomes due.

Eligible buyers will have the opportunity to access a government-facilitated transition loan for their final stamp duty payment.

This loan will be extended by the Treasury Corporation of Victoria on commercial terms, featuring a fixed interest rate.

Applicants will be presented with predetermined annual repayments spread over a 10-year period.

Projections suggest that this reform could positively impact the Victorian economy by up to $50 billion in cumulative net present value terms.

Detailed information regarding the transition loan, encompassing eligibility criteria and terms and conditions, will be provided before 1 July 2024.

[Related: Victoria to axe stamp duty on commercial real estate]