Take two: Victoria's turn to reform stamp duty

The Commercial and Industrial Property Tax Reform Bill 2024 was introduced to the Victorian Parliament on 20 March 2024. The Bill proposes transitioning certain interests in commercial and industrial land over a period of 10 years to a new tax reform scheme in which an upfront payment of stamp duty is ultimately replaced with a Commercial and Industrial Property Tax (CIPT).

Salient points include:

• the proposed start date of the scheme is 1 July 2024, however dutiable transactions that occur pursuant to an agreement or arrangement entered into prior to this date will not be captured;
• the scheme applies to land with a qualifying commercial or industrial use (ie. land allocated an AVPCC in the ranges 200-499 or 600-699, and residential premises that are "eligible student accommodation");
• what is excluded from CIPT are all other types of land which do not have a qualifying or industrial use and are not eligible student accommodation.
• an interest in land's transition to the scheme will be triggered when either an "entry transaction", "entry consolidation" or "entry subdivision" occurs in respect of the qualifying land. An "entry transaction" is a "qualifying dutiable transaction" or "qualifying landholder transaction" in respect of an interest of 50% or more in land. Broadly:
  • a dutiable transaction relating to an estate or interest in land in Victoria will be a "qualifying dutiable transaction" and therefore an "entry transaction", however a dutiable transaction in respect of a lease or an economic entitlement or a dutiable transaction which is exempt from duty under the existing provisions (including a transaction for which the corporate reconstruction concession is available) will not be a "qualifying dutiable transaction".
  • similarly, a relevant acquisition relating to an estate or interest in land in Victoria will be a "qualifying landholder transaction" and therefore an "entry transaction", however a relevant acquisition that is exempt from landholder duty under the existing provisions (including an acquisition for which the corporate reconstruction concession is available) will not be a "qualifying landholder transaction".
• stamp duty and landholder duty will be imposed as usual on the relevant "entry transaction", "entry consolidation" or "entry subdivision" (Final Duty Payment) – it is proposed that a transition loan program will be made available to certain purchases and acquisitions to fund the Final Duty Payment;
• following a 10-year transition period after the "entry transaction", CIPT will be imposed on the land annually at a rate of 1% of the unimproved land value (or 0.5% in respect of land that falls within the meaning of "BTR" land);
• dutiable transactions and relevant acquisitions in respect of land that has entered the scheme (ie. that occur during the transition period) will be exempt from duty in certain circumstances;
• unpaid CIPT (including any interest and penalty tax) will be a first charge on the land on which the CIPT is payable;
• interests obtained by a person under a qualifying dutiable transaction will be aggregated with interests acquired under another qualifying dutiable transaction in certain circumstances;
• change of use and notification of errors in a notice of assessment provisions require self-assessment whereby owners will need to actively monitor and notify the Commissioner of events that may affect the imposition of CIPT on their qualifying land;
• anti-avoidance provisions apply so that the Commissioner can disregard a scheme entered into to avoid the application of CIPT.

The important thing to note is that CIPT does not become payable until an entry transaction, entry consolidation or entry subdivision occurs and that CIPT will only apply 10 years after such transactions.

This means that for the foreseeable future, Victoria is likely to have a dual tax structure whereby some commercial and industrial land will continue to be subject to landholder duty on an ongoing basis and other industrial and commercial land may be exempt from stamp duty and become subject to CIPT after 10 years.

More details to follow.