Commercial and Industrial Property Tax Reform Act 2024
The Commercial and Industrial Property Tax Reform Act 2024 (the Act) received Royal Assent on 21 May 2024 and commences on 1 July 2024.
The Act implements a tax reform scheme that progressively abolishes land transfer duty for commercial and industrial land and replaces it with a commercial and industrial property tax (CIPT).
Tax reform scheme
- From 1 July 2024, commercial and industrial properties will transition to the new tax reform scheme if there is an eligible dutiable transaction or relevant acquisition defined in the Act as an ‘entry transaction’.
- Duty will still apply to entry transactions, but concessions can also apply to this duty payment such as the 50% concession for purchases of regional commercial and industrial land.
- Certain concessional transactions including those subject to the corporate reconstruction concession will not cause entry into the tax reform scheme.
- Generally speaking, any subsequent transactions involving land that previously entered the reform will then be exempt from duty, if the property continues to be used for commercial and industrial purposes.
- Commercial and industrial land is not impacted by the transition to CIPT until a relevant entry transaction occurs on or after 1 July 2024 to bring the land into the tax reform.
- Transactions or acquisitions under a contract entered into before 1 July 2024 are not affected by the transition.
- General anti-avoidance provisions apply under this Act and under the Duties Act 2000 to schemes intended to either avoid entry into the reform or to avoid or minimise duty.
Commercial and industrial property tax
- 10 years after the initial transaction CIPT will begin to apply to the land at a flat rate of 1% of the land's site value each year.
- CIPT will be assessed on a calendar year basis using the same valuations as land tax. However, CIPT will be charged separately and in addition to any land tax payable for the land.
- Land that is exempt from land tax will also be exempt from CIPT.
- Unpaid CIPT will be a first charge on the land and will remain on the land until it is paid.
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.
Taxation administration
- The 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 Act.
- The TAA was also amended to permit the disclosure of protected information to TCV in relation to the transition loan program.
Other changes
The Act made consequential amendments to other Acts to allow the reform to be administered by the State Revenue Office. This included amendments to the Heritage Act 2017, Property Law Act 1958, Retail Leases Act 2003, Sale of Land Act 1962 and Valuation of Land Act 1960 to ensure the treatment of CIPT aligns with land tax.
