Victoria’s 2024 Shift from Stamp Duty to Property Tax

Stamp duty on commercial and industrial property will be phased out in 2024 after the Victorian Government finalised the transition towards a property tax system. 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.