Investing Just Got Easier: Victoria Ditches Stamp Duty for Commercial Properties

Starting July 1st, the 2025 fiscal year introduces several tax adjustments that could impact broker clients. Notably, Victoria is phasing out the stamp duty on commercial and industrial properties, replacing it with the Commercial and Industrial Property Tax (CIPT).

Initially proposed in the state budget, the CIPT reform will replace the land transfer charge on these properties. The CIPT will come into effect ten years after the property is next sold. If the property continues to be used for a qualifying purpose, CIPT will apply ten years after the entry transaction at a fixed rate of 1% of the site's unimproved value per year. Properties rented at a discounted cost are subject to a 0.5% construction rate.

While there will still be a duty on entry-level transactions, a 50% concession for the transfer of qualifying commercial and industrial property in regional Victoria may apply. Starting July 1, 2024, first-time buyers of commercial or industrial properties can pay the final stamp duty liability in one lump sum or opt for fixed instalments spread over ten years with the help of a government transition loan.

This transition loan allows buyers to stretch payments over time with a fixed, market-based interest rate set at the beginning of the loan. Annual repayments over ten years will be fixed upfront and equal to the property's ultimate stamp duty due plus interest. A first-ranking statutory charge on the relevant land will serve as collateral for the loan.

At Nfinity Financials, we are implementing this scheme using our in-house, purpose-built technology and our expertise in credit and loan servicing. We applaud and support this change, aligning with our goal of helping individuals realize their full potential. The transition loan helps Victorian businesses manage cash flow by spreading payments over ten years.

This loan provides businesses with more opportunities to develop, invest, and expand. The funds can be used to hire more employees, expand operations, or alleviate some current financial stress.

The state government estimates that this change will generate up to $50 billion in economic benefits for Victoria over the next 40 years, creating 12,600 additional jobs.

Key Points for Financial Professionals

• Understanding the Reform: Finance experts, including brokers, accountants, financial planners, conveyancers, and attorneys, must understand the new reform and explain the possibilities to their clients.
• Reform Benefits: The initial expense (stamp duty) can be spread out over time, improving cash flow and potentially leading to business growth and job creation.
• Exemptions: Properties used primarily for residential, primary production, community services, sports, historical, or cultural purposes are exempt from these amendments.

Summary

• New Annual Levy: Victoria replaces stamp duty on commercial real estate with an annual levy.
• Transition Loan: First-time buyers can spread the stamp duty payment over ten years with a government-provided transition loan.

Action for Financial Professionals

• Recognize the Effects: Be prepared to explain the differences between stamp duty and transition loans to business clients.
• Prepare for Changes: Ensure that clients are informed and ready for these significant adjustments to Victoria's tax code.

This reform marks a significant shift in Victoria's tax landscape, offering substantial benefits for businesses and the economy. At Nfinity Financials, we are here to help you navigate these changes and make the most of the new opportunities they present. Read our insights.