FBAA: brokers need to understand Victoria's commercial stamp duty reform

Commercial stamp duty to be phased out in Victoria

FBAA: brokers need to understand Victoria's commercial stamp duty reform


By Ryan Johnson


The FBAA has urged brokers to be aware of the impending stamp duty changes on commercial properties in Victoria coming in from July 1.

In the 2023–24 State Budget, the Victorian government announced that land transfer duty (stamp duty) on commercial and industrial property will be abolished and replaced with the commercial and industrial property tax (CIPT). 

The reform will give prospective purchasers of commercial and industrial properties the temporary option to pay stamp duty on a property upfront (as per current standard) or apply to borrow the funds via a government transition loan from Treasury Corporation of Victoria.

Steven Ragany (pictured above), FBAA’s newly appointed national commercial and asset manager, said commercial and asset finance brokers should be aware of the changes and its implications on the cashflow of clients.

“Given there is potential for clients to free up cash flow and it promotes flexibility for eligible business owners, it’s important that the industry gets across the changes,” said Ragany, who also had previously operated a commercial brokerage in Victoria.

Victoria’s stamp duty reform: What is changing?

Currently, commercial and industrial property stamp duty is based on a tiered system, meaning the tax rate you pay depends on the purchase price of the property.

Here's a breakdown of the tiers:

  • Price below $25,000: You'll pay a stamp duty rate of 1.4%.
  • Price between $25,001 and $130,000: The rate jumps to 2.4%.
  • Price between $130,001 and $2 million: The stamp duty rate is 6.4% (caps out at $100,000).
  • Price above $2 million: Stamp duty is 6.4%.

This system will eventually be replaced by the commercial and industrial property tax (CIPT), which will be 1% of the property’s site value.

To help businesses transition, eligible purchasers will have the option of accessing a government transition loan for the final stamp duty payment, allowing them to avoid upfront lump sum payments.

Ragany said this transitional stamp duty payment, spread out over 10 years, could help businesses keep more money in their businesses now and alleviate some of the pressures businesses are facing.

“The 10-year transition period offers brokers and their clients a lot more flexibility,” Ragany said. “You can still pay the stamp duty on July 1 like you can today but you also have a secondary option where you can apply for a loan and pay it off over a 10-year period.”

“Then, in the eleventh year, the new commercial industrial property tax will take effect.”

The spread of this stamp duty payment over a 10-year period can be quite effective for many businesses when managing annual cash flow.

The transition loan will be issued by the Treasury Corporation of Victoria.

The interest rate will be equal to a base rate (based on government borrowing costs) plus a risk margin determined annually by the treasurer (set at 2.25% for 2024-25).

Case study example one – Entry into the tax reform system (first transaction)

Imagine a business owner called Emma who buys a commercial property for the first time on Sept. 25, 2024 to set up her business.

This transaction will trigger entry of that property into the reform (as it was contracted and settled on or after July 1, 2024).

At this point Emma can choose to pay stamp duty upfront or opt for a transition loan to pay the stamp duty, reducing her upfront costs.

If Emma’s property is in a regional area, she will receive a 50% discount on her stamp duty through the regional commercial and industrial stamp duty concession. The commercial and industrial property tax will commence 10 years after her purchase in 2035.

Case study example two – Buying a property which has entered the reform (subsequent transactions)

Minh is the owner of a small online business and purchases a retail premise in October 2030 to expand their business.

This property was previously sold in 2025, at which point it entered into the reform.

 Minh would pay no stamp duty on the transaction, freeing up capital to invest in their business.

They would begin to pay commercial and industrial property tax annually from 2036.

What’s excluded from the reform?

Of course, there will be exclusions.

Properties that are not classified as commercial or industrial under the AVPCC classification identified for entry into the reform.

These include properties with the following AVPCC classification categories:

  • residential
  • primary production
  • community services
  • sport, heritage & culture
  • national parks, conservation areas, forest reserves and natural water reserves

It also excludes properties where the sale price is above $30 million - equivalent to land transfer duty payable that exceeds $1.93 million – and properties purchased by foreign purchasers or self-managed superannuation funds.

The bottom line

While tax reforms are contentious at the best of times, Ragany avoided weighing in on any debate.

“Everyone has views on new taxes and these types of legislation, but the fact is it’s already written into law and it doesn’t matter how we feel about it,” Ragany said.

The point, according to Ragany, is that this is happening and the industry needs to get across it.

“From a broker’s perspective, it’s all about knowing the options and being able to articulate the pros and cons of each course of action,” he said.

“While brokers won’t be super involved in that space, typically stamp duty falls to a conveyancer or a solicitor, it’s something you need to be aware of.”

To find out more, click here.

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