You might have heard about the Victorian State Government introducing changes to the stamp duty regime for commercial and industrial properties. It’s called the Commercial Industrial Property Tax (CIPT). It has been bubbling away in the news for a while, but it wasn’t until late May 2024 that we received sufficient information that we can interpret what it means for us and our clients.
The change is essentially that if:
- the property is a relevant Commercial or Industrial property, and
- the Contract date is 1 July 2024 or later, then
the First Purchaser will pay the usual stamp duty at settlement, and then 10 years after settlement, the Purchaser will also have to pay CIPT of 1% of the site value each and every year thereafter.
As an example, if the site value of the land is $500,000.00, then the CIPT will be $5,000.00 per year. This CIPT is in addition to Land Tax, and if the Retail Leases Act applies to the tenancy, then neither the CIPT or Land Tax can be passed onto the tenant as an outgoing.
When the property sells for a second time after 1 July 2024, the Second Purchaser will not pay stamp duty at settlement, and will only pay the CIPT (starting 10 years after the First Purchaser settled).
The way we determine whether this new CIPT will apply to a particular commercial property, is to check the AVPCC code on a council’s Rates & Valuation Notice. If the code is in the 200s, 300s, 400s or 600s, then the regime will apply. Here are the relevant pages from the AVPCC which detail the different codes. Note that uses such as:
- Commercial, Industrial and Extractive Industries are included in the regime; and
- Residential, Primary Production, Community Services, and Sport/Heritage/Culture are excluded from the regime.
The essential FAQs to help navigate the change between now and 1 July 2024 are as follows:-
| What does the CIPT mean for a relevant commercial property… | …for a Vendor? | …for a Purchaser? |
| …for a Contract dated before 1 July 2024 | Nothing, except that the property might be more enticing for a purchaser if all parties can promptly sign a Contract before 1 July 2024. | Nothing. The usual stamp duty is paid at settlement, and the property does not enter the CIPT regime until it changes hands again. |
| …for a Contract dated on or after 1 July 2024 | Nothing, except perhaps a purchaser may be less inclined to buy a commercial property due to the additional 1% CIPT on site value payable from the 10th year after settlement. | Quite a bit. The usual stamp duty is paid at settlement, and then 10 years after settlement, the Purchaser will also have to pay CIPT of 1% of the site value each and every year thereafter. |
The upshot is… if you’re a purchaser looking at purchasing soon, you might like to ensure that the Contract is signed by all parties before 1 July 2024 to avoid entering the Commercial Industrial Property Tax regime earlier than necessary.
Here is an Information Sheet from the State Government that may be useful. You may also like to keep an eye on the State Revenue Office’s website.
If you have concerns or questions about this change to the stamp duty regime for commercial and industrial properties, contact one of our experienced property lawyers, Tessa Hoogerbrugge, Emily Farr, Rachel Arldt, Jamila Buchanan or Josh Groenewaldt, to discuss further.
Authors:
Tessa Hoogerbrugge – Property Lawyer | Partner
Disclaimer: The information in this post is general in nature. This does not constitute legal advice and should not be relied on as such. Please contact one of our Lawyers if you are seeking advice about a specific legal matter.
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