Commercial and industrial property tax

What is the CIPT reform?

The CIPT reform is detailed in the Commercial and Industrial Property Tax Reform Act 2024 (the Act) and includes amendments to several Acts including the Duties Act 2000 (the Duties Act) and the Taxation Administration Act 1997. The CIPT reform will be effective from 1 July 2024.

Transitioning into the CIPT reform

From 1 July 2024, commercial and industrial properties will transition into the CIPT reform if there is an eligible dutiable transaction or relevant acquisition, defined in the Act as an entry transaction. 

Commercial and industrial properties can also enter the CIPT reform if the property is part of certain types of subdivisions or consolidations of titles.

How does the CIPT reform work?

Duty will still apply to entry transactions.  A duty concession can apply to the entry transaction, such as the 50% concession for a transfer of eligible commercial and industrial property in regional Victoria.

Not every dutiable transaction or relevant acquisition is an entry transaction.  

With some exceptions for complex transactions and for when an entry transaction concerns an interest in property of less than 100%, any subsequent transactions involving property that previously entered the reform will be exempt from duty if the property continues to be used for commercial or industrial purposes.

CIPT is not payable immediately following the entry transaction. Ten years after the entry transaction, CIPT will begin to apply to the property at a flat rate of 1% of the property’s site (unimproved) value each year provided the property continues to have a qualifying use.  A reduced rate of .5% applies to build to rent land. 

CIPT is different to land tax.  A landowner may be liable to pay annual CIPT and annual land tax. However, land that is exempt land for land tax purposes will generally also be exempt for CIPT.

Transition loan program

As part of the transition to CIPT, eligible purchasers will have the option of accessing a government transition loan for the duty payment on the entry transaction.

The loan will be provided by the Treasury Corporation of Victoria (TCV) on commercial terms, including a fixed market-based interest rate. Annual repayments over 10 years will be set upfront to provide applicants with certainty and the loan will be secured by a first ranking statutory charge on the applicable land.

The Act included amendments to the Treasury Corporation of Victoria Act 1992 to enable TCV to administer the transition loan program. 

To find out more about the loan’s eligibility criteria and terms and conditions, please visit Treasury Corporation of Victoria’s website, call 1300 659 430, or email loanenquiries@cipt.tcv.gov.au.

Commencement

A dutiable transaction or relevant acquisition will not transition commercial or industrial property into the reform if it is made or occurs pursuant to an agreement or arrangement that was entered into before 1 July 2024. Learn more about the transitional arrangements.

What is ‘commercial and industrial property’?

For property to enter the CIPT reform under an entry transaction, the property must have a ‘qualifying use’ under the Australian Valuation Property Classification Code (AVPCC). Certain prescribed student accommodation also has a qualifying use. 

Each separate occupancy on a property is allocated an AVPCC under the Valuation of Land Act 1960 (Vic). The AVPCC is displayed on the council rates valuation notice for the property.

If a property has been allocated one or more AVPCC, all of which are in the following ranges, the property will have a qualifying use for CIPT:

• 200-299 (commercial)
• 300-399 (industrial)
• 400-499 (extractive industries)
• 600-699 (infrastructure and utilities).

Examples of commercial and industrial property include a retail premises, an office and a warehouse. A full list of AVPCCs is detailed in the 2024 Valuation Best Practise Specifications Guidelines.

Property may be allocated more than one AVPCC, one or more of which is in the prescribed range and one or more AVPCC may be outside the prescribed range. In this case, the property will have a qualifying use if it is used solely or primarily for one of the prescribed uses.  The primary use of property is determined by the Commissioner.

Learn more about commercial and industrial property that has a qualifying use.  

How will a commercial or industrial property enter the reform?

Commercial and industrial property will not automatically enter the CIPT reform from 1 July 2024.

For property to enter the CIPT reform, one of the following must occur in respect of the property on or after 1 July 2024:

• An entry transaction
• An entry consolidation
• An entry subdivision.

The entry date for property entering the tax reform scheme is generally also the start date for the 10-year transition period before CIPT begins to apply.

Entry transactions 

Property will enter the CIPT reform if all of the following occur:

• The transaction happens on or after 1 July 2024
• The transaction occurred pursuant to an agreement or arrangement entered into on or after 1 July 2024
• The transaction is a qualifying dutiable transaction or a qualifying landholder transaction
• On the date the transaction happens, the property has a qualifying use
• The transaction relates to an interest in property that is a qualifying interest or that amounts to a qualifying interest when aggregated with other interests.

A qualifying dutiable transaction can comprise most forms of dutiable transactions involving Victorian property. Transactions that will not be a qualifying dutiable transaction include:

• The grant, transfer or assignment of a dutiable lease
• The acquisition of an economic entitlement
• A dutiable transaction that is eligible for an exemption from duty or
• A dutiable transaction that is eligible for the corporate reconstruction or corporate consolidation concession.
• A transaction involving fixtures that are owned separately to the underlying land.

A qualifying landholder transaction is a relevant acquisition other than the following relevant acquisitions:

• A relevant acquisition of an economic entitlement in a private landholder
• A relevant acquisition of control over a landholder
• A relevant acquisition on the conversion of a private unit trust scheme, wholesale unit trust scheme or private company to a public unit trust scheme or public company
• A relevant acquisition that is eligible for an exemption from duty or
• A relevant acquisition that is eligible for the corporate reconstruction or corporate consolidation concession.

A qualifying interest in property is an interest of 50% or more in the property. Aggregation rules apply to determine whether interests together amount to a qualifying interest for the purpose of determining if there is a qualifying dutiable transaction or a qualifying relevant acquisition.  

Learn more about an entry transaction including a qualifying interest and aggregation.

Entry consolidations

A consolidation of property can also cause property to enter the CIPT reform if a property that has previously entered the CIPT reform (known as tax reform scheme land) and other property is consolidated and 50% or more of the area of the consolidated property is tax reform scheme land.

The consolidated property is taken to enter the CIPT reform on the first date when property that forms part of the consolidation entered the CIPT reform.

If tax reform scheme land and other property is consolidated and less than 50% of the area of the consolidated land is tax reform scheme land, then the property is taken to no longer be tax reform scheme land.

More about an entry consolidation.

Entry subdivisions

Child lots of a plan of subdivision obtain their CIPT character from the parent title.

This means that if tax reform scheme land is subdivided, all child lots that are derived from the subdivision remain tax reform scheme land. The child lots are taken to have entered the CIPT reform on the date on which the property that was subdivided entered the CIPT reform. If a property that has not previously entered the CIPT reform is subdivided, the child lots derived from the subdivision will not enter into the reform as a result of the subdivision. If a plan of subdivision is registered in relation to two or more properties, a consolidation of those properties is taken to first occur.  

The date of the consolidation is the date when the plan of subdivision is registered. The child lots from the subdivision obtain their CIPT character from the CIPT character of the parent title after the deemed consolidation.

Learn more about an entry subdivision.

Subsequent dealings in property after it enters the CIPT reform 

A duty exemption may apply to a tax reform scheme transaction which includes most dutiable transactions involving properties that have entered into the CIPT reform (tax reform scheme land). A comparable exclusion may apply to the assessment of duty on a relevant acquisition in a landholder whose landholdings include tax reform scheme land.  

For a duty exemption or exclusion to apply, the property must have a qualifying use on the date of the dutiable transaction or relevant acquisition.   

More about subsequent dealings in property exemptions.

Change of use of a property that has entered the CIPT reform 

A property with a qualifying use that has entered the tax reform scheme (i.e. tax reform scheme land) may change to a different use over time. For example, a commercial warehouse that has entered the tax reform scheme may later be re-developed into residential apartments.

The owner of tax reform scheme land must notify the Commissioner if their property or part of their property undergoes an actual change of use, or there are certain other prescribed changes of use including a change to the AVPCC allocated to the property. This notice must be given to the Commissioner within 30 days after the relevant change of use.

Change of use duty

Change of use duty may be chargeable where property that has entered the tax reform scheme changes its use to a non-qualifying use following a subsequent transaction that was exempt or partially exempt from duty. Change of use duty does not apply if a transaction was not exempt or partially exempt from duty.

The change of use duty is calculated based on the duty that would have been payable when the property was previously transacted (and fully or partly exempt from duty) to the extent that the transferee or acquirer continues to hold an interest in the property following the change of use.

Without these provisions a subsequent transaction after property has entered the CIPT reform may have no duty applied, and no CIPT payable in respect of the property as the property no longer has a qualifying use.   

The amount of duty is reduced by 10% for each 31 December that has elapsed since that subsequent transaction was previously exempt from duty.

For example, if a change of use occurs six years after a transfer was exempted as the property was already in the reform (i.e. there was an earlier entry transaction in respect of the property), then the change of use duty payable would be equal to 40% of the duty that would have been payable at the time when the property was transferred.

If property in the CIPT reform returns to a qualifying use after converting to a non-qualifying use (such as residential), there is no new transition period. Rather, CIPT becomes payable immediately after the original 10 year transition period has concluded.   For example, if 15 years have elapsed since the entry transaction for the land, CIPT will be payable with reference to the first 31 December following the change in use.

No refund on change of use duty will be given if property returns to a qualifying use.

Learn more about change of use duty.

We're here to help

If you require more information, contact our Customer Education team for further assistance or book into a CIPT webinar or seminar.