Imposition and rate of CIPT
Commercial and industrial property tax (CIPT) is imposed each year on CIPT taxable property.
CIPT taxable property for a tax year, is property that, as at midnight on 31 December immediately preceding that tax year:
- was tax reform scheme land
- had completed a transition period
- had a qualifying use
- was taxable land for land tax purposes.
This means that property that is exempt land for land tax purposes is also exempt from CIPT.
The rate of CIPT is 1% of the land’s site (unimproved) value for land other than build-to-rent (BTR) land (as that term is defined in the Land Tax Act 2005). A reduced rate of 0.5% of the site value applies to BTR land.
Unlike for land tax, there is no difference in the rate of CIPT as between an owner that is an absentee owner and an owner that is not an absentee owner.
The owner of CIPT taxable land is liable to pay CIPT on the property.
The owner of property for CIPT purposes is broadly the same as applies under the Land Tax Act 2005.
Joint owners of CIPT taxable land are jointly assessed for CIPT on the property as if the property was owned by a single person.
Unpaid CIPT (including any interest and penalty tax) is a first charge on the property on which the CIPT is payable.
A property clearance certificate obtained from the Commissioner will protect a bona fide purchaser for value of land for any amount of CIPT (including any interest or penalty tax) in excess of the amount set out in the certificate.
A purchaser cannot rely on a property clearance obtained by the vendor.
Property clearance certificate
An owner, purchaser or mortgagee of property may apply to the Commissioner for a property clearance certificate. The property clearance certificate provides information about land tax (including vacant residential land tax), windfall gains tax and from 1 July 2024, CIPT.
In relation to CIPT, the property clearance certificate may disclose:
- the AVPCC allocated to the property. If there are multiple AVPCCs allocated to the property this fact will be noted
- whether there is any CIPT (including any interest and penalty tax) due and unpaid on the property described in the application
- a statement of whether the property is tax reform scheme land and, if so:
- the date on which the property became tax reform scheme land and when it became, or will become, subject to CIPT
- whether the entry interest (within the meaning of section 3 of the Duties Act 2000) in relation to tax reform scheme land was a 100% interest or an interest of less than 100%
- whether the Commissioner has been notified that the property has undergone a change of use to a non-qualifying use.
A vendor is also required to disclose additional information relating to CIPT in the statement required under section 32 of the Sale of Land Act 1962.
Electronic conveyancing for mixed use land
Where a dutiable transaction involves property that has been allocated more than one AVPCC, one or more of which is in the prescribed range and one or more AVPCC is outside the prescribed range, the transaction will be a complex Duties Online (DOL) transaction. This is because the Commissioner must determine whether this mixed use property is used solely or primarily for a use that is within the prescribed range.
Also, if the AVPCC stated on a Transferor Statement is within the prescribed range and the AVPCC allocated to the property based on the SRO’s records is outside of the prescribed range (or vice versa), the transaction will be a complex DOL transaction.
However, a transaction will not be treated as a complex DOL transaction if the AVPCC stated on a Transferor Statement lodged with the SRO is different to the SRO’s records provided each AVPCC is within the prescribed range.
CIPT notice of assessment
The Commissioner administers CIPT and will issue a notice of assessment for CIPT when required.
A key feature of the CIPT reform is that there is a 10-year transition period starting on the date when the relevant land enters the CIPT reform before CIPT may be chargeable. This means that it will be at least ten years from 1 July 2024 and the commencement of the Commercial and Industrial Property Tax Reform Act 2024 (CIPT Act) before a CIPT assessment may be issued by the Commissioner.
The notice of assessment will specify the date by which the assessment must be paid. The day for payment is not less than 14 days after the day the notice is served on the taxpayer. Further guidance about the process for the Commissioner to issue a CIPT assessment will follow in due course.
A person who is served with a notice of assessment of CIPT must notify the Commissioner of any error or omission in the notice relating to:
- any tax reform scheme land owned by the person at the relevant time that has a qualifying use at that time but is not specified in the notice; and
- any property specified in the notice as not subject to CIPT.
Notice of the error or omission must be given to the Commissioner within 60 days after the date of the issue of the notice of assessment.
Failure to notify the Commissioner of an error or omission in the notice of assessment of CIPT may result in the taxpayer being liable to pay penalty tax.
The CIPT Act has become a taxation law under the Taxation Administration Act 1997 (TAA). This means the TAA provides the power to issue assessments, make refunds and offsets, impose penalties and interest for tax defaults, recover unpaid tax, carry out investigations and consider objections in relation to the CIPT Act.
The TAA was also amended to permit the disclosure of protected information to Treasury Corporation of Victoria in relation to the transition loan program.
Prohibition on passing on CIPT
A vendor is prohibited from apportioning or passing on CIPT to a purchaser under a contract of sale entered into on or after 1 July 2024 where the GST-inclusive purchase prices is less than $10 million (to be indexed annually from 1 January 2025).
A landlord (or head landlord) is prohibited from recovering CIPT from a tenant under a retail premises lease.
A landlord is also prohibited from recovering CIPT from a tenant or other renter under a residential rental agreement (such as for mixed use land or BTR land).
Notification requirement – change of use
Land with a qualifying use that has entered the CIPT reform 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 the property or part of the property undergoes a change of use (as defined in the CIPT Act). This notice must be given to the Commissioner within 30 days after the change of use. The notification requirement applies in a broad range of circumstances.
Failure to notify the Commissioner of a change in use within the prescribed 30-day period may result in penalty tax being payable. Penalty tax is in addition to change of use duty.
More about change of use duty including notification requirements.
Anti-avoidance
There are anti-avoidance rules that apply to schemes that seek to:
- enable a person to obtain a reduction in or an exemption from CIPT
- prevent property from becoming tax reform scheme land or CIPT taxable land
- cause property to enter the CIPT regime to avoid duty being payable on subsequent dutiable transactions or subsequent acquisitions in a landholder.
If the Commissioner considers that a person has participated in a tax avoidance scheme, the Commissioner may do one or more of the following:
- disregard the scheme
- determine that land is tax reform scheme land or CIPT taxable land
- determine what CIPT would have been payable but for the scheme.
- make an assessment or reassessment under the TAA to give effect to the Commissioner’s determination.
The Commissioner may also aggregate interests in property obtained or taken to have been obtained under one or more dutiable transactions and one or more relevant acquisitions if the Commissioner is satisfied that the transactions and acquisitions formed part of a tax avoidance scheme.
Objection
A taxpayer may object to:
- a CIPT assessment
- a valuation used by the Commissioner in an assessment of CIPT.
An objection must be lodged with the Commissioner within 60 days after the date of the service of the notice of assessment or reassessment.
If you lodge your objection after the 60-day timeframe, you must provide reasons for the delay. If no reasons are provided to explain the lateness in lodging your objection, your objection will be invalid.
