The Victorian government has abolished stamp duty on commercial and industrial property in favour of an annual property tax, which it hopes will raise an extra $50 billion.

The system will be phased in starting from 1 July 2024 and apply to any commercial and industrial properties as they are sold. The annual property tax will be 1% of the commercial property’s unimproved land value and will be payable from 10 years after the transaction.

There is a concession for first buyers of commercial property. They may choose to pay stamp duty upfront or take out a government-facilitated transition loan. This loan will let them pay the stamp duty and interest in fixed instalments over a 10-year period.

This tax will not affect property owners who bought before 1 July 2024.

“The Victorian Chamber has been working with the state government on this landmark and generational productivity reform which businesses across Victoria will welcome,” said Victorian Chamber of Commerce and Industry chief executive Paul Guerra.

The Victorian government said it would consult with businesses in the coming months to finalise the transition plan. Questions yet to be answered include:

  • What rules will apply to mixed-use land (residential and commercial)?
  • What happens if land subject to the new property tax is merged with land that isn’t subject to the new property tax?

Freya Southwell is a property lawyer and principal of Sutton Laurence King Lawyers.

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