An entry transaction

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

The Commercial and Industrial Property Tax Reform Act 2024 (the CIPT Act) provides that property will enter the CIPT reform if:

• 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; and
• the transaction is a qualifying dutiable transaction or a qualifying landholder transaction; and
• on the date the transaction happens, the property has a qualifying use; and
• the transaction relates to an interest in property that is a qualifying interest (of 50% or more) or amounts to a qualifying interest when aggregated with certain other interests.

A property that has entered the CIPT reform is known as "tax reform scheme land".

Qualifying dutiable transaction

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/has no duty chargeable 
• 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.

Qualifying landholder transaction

A qualifying landholder transaction may be a relevant acquisition under section 78 of the Duties Act 2000 (the Duties Act) other than a relevant acquisition that is eligible for an exemption from duty or that is eligible for the corporate reconstruction or corporate consolidation concession.

What is a ‘qualifying interest’ in property?

A qualifying dutiable transaction or qualifying landholder transaction must relate to an interest of 50% or more in the property. A qualifying dutiable transaction or qualifying landholder transaction may:

• of itself relate to an interest of 50% or more in the property; or
• amount to an interest of 50% or more in the property when aggregated with other interests in the property in certain circumstances.

Aggregation of interests in property acquired under qualifying dutiable transactions

The CIPT Act provides that separate interests in a property acquired under 2 or more qualifying dutiable transactions may be aggregated together to determine whether the aggregated interest amounts to a qualifying interest of 50% or more in the property.

Interests in a property acquired under 2 or more qualifying dutiable transactions must be aggregated if:

• the dutiable transactions are aggregated under section 24 of the Duties Act; or
• the dutiable transactions occur within 3 years and either:
  • the transferee under each dutiable transaction is the same person, or
  • the transferees under the dutiable transactions are "associated persons".

An "associated person" is broadly defined in section 3 of the Duties Act and includes, among other things: relatives; related bodies corporates; trustees of different trusts that have a common beneficiary; and persons who are associated persons of the same person.

The Commissioner has discretion to determine that persons are not associated persons if the Commissioner is satisfied that the interests of the persons:

• were acquired, and will be used, independently; and
• were not acquired, and will not be used, for a common purpose.

The Commissioner’s discretion does not apply if persons are associated persons because they are related bodies corporate.

Determining the interest in land taken to be acquired under a qualifying landholder transaction

The CIPT Act includes a formula for determining the interest in a property that a person is taken to have acquired under a qualifying landholder transaction.

This formula is relevant to determine whether the qualifying landholder transaction relates to an interest in a property that is of itself, or when aggregated with certain other interests in the property amounts to, a qualifying interest of 50% or more in the property. The formula is as follows:

A × B where:

• A is the interest acquired in the landholder under the qualifying landholder transaction on which duty is chargeable under Part 2 of Chapter 3 of the Duties Act. If a relevant acquisition that is the qualifying landholder transaction results from the aggregation of interests acquired by a person, associated persons and/or other persons in an associated transaction, then variable A will reflect all the interests acquired by those persons on which duty is chargeable on the relevant acquisition under Part 2 of Chapter 3 of the Duties Act.
   
• B is the interest the landholder holds in the land at the time the relevant acquisition is made. This interest is to be determined in accordance with Part 2 of Chapter 3 of the Duties Act. 

One effect of the formula (in combination with the requirement that a qualifying landholder transaction must relate to a qualifying interest of 50% or more in the property) is that duty must be chargeable on an interest of 50% or more in the relevant property under a qualifying landholder transaction (or qualifying landholder transactions that are aggregated together).

Aggregation of qualifying landholder transactions

The CIPT Act provides that separate interests that are taken to be acquired in a property under 2 or more qualifying landholder transactions may be aggregated together to determine whether the aggregated interest amounts to a qualifying interest of 50% or more in the property.

Interests in a property taken to be acquired under 2 or more qualifying landholder transactions must be aggregated together aggregation provisions apply if:

• the qualifying landholder transactions occur within a 3 year period; and
• under each qualifying landholder transaction, a relevant acquisition is made in the same landholder; and
• the relevant acquisitions in the landholder are made by the same person or "associated persons".

An "associated person" is broadly defined in section 3 of the Duties Act and includes, among other things: relatives; related bodies corporates; trustees of different trusts that have a common beneficiary; and persons who are associated persons of the same person.

An entry consolidation

A consolidation of 2 or more properties into one property will cause the consolidated property to become tax reform scheme land (i.e. enter the CIPT reform) if:

• one or more of the properties to be consolidated is tax reform scheme land; and 
• 50% or more of the area of the property that is to be consolidated is tax reform scheme land.

If tax reform scheme land and property that is not tax reform scheme land is consolidated and less than 50% of the area of the consolidated property is tax reform scheme land, then the consolidated property will not be tax reform scheme land. The property that was tax reform scheme land prior to the consolidation is also taken to no longer be tax reform scheme land.

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

An entry subdivision

A subdivision of a property that is tax reform scheme land into child lots will result in each child lots becoming tax reform scheme land. Each child lot that was derived from the subdivision is taken to have entered the CIPT reform on the date on which the property that was subdivided entered the CIPT reform.

If a plan of subdivision is registered in relation to 2 or more properties, a consolidation of those properties is taken to occur for the purpose of the CIPT reform.

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