As part of the 2023-24 Budget released on Tuesday, the Victorian Government has announced that land transfer duty will be abolished for commercial and industrial properties.
The land transfer duty payable on the transfer of commercial and industrial property will be replaced by an annual property tax set at 1 per cent of the property’s unimproved value which commences a further 10 years after the transfer occurs.
The new system will be implemented from 1 July 2024, with properties purchased before 1 July 2024 remaining under the current system.
For commercial and industrial properties purchased after 1 July 2024, the purchaser will have the option of either:
- Paying stamp duty upfront; or
- Transitioning to an annual payment by paying an amount equal to stamp duty and interest in fixed instalments over a 10-year period with a government-facilitated loan.
Any subsequent transfer of that land will be made under the new system meaning the purchaser will not have the option to pay the stamp duty upfront.
Concerns for purchasers and landowners
The finer details of the new policy are yet to be announced however it is clear that the land tax will not apply to existing owners and only comes into effect for land which is transacted after 1 July 2024.
The Treasurer’s media release has not provided details as to how mixed commercial and residential-use properties will be treated under the new regime.
Similarly, consolidation of land parcels that have different treatment under the new rules will be a topic of interest for landowners and prospective purchasers.
The Treasurer has confirmed that this proposal does not apply to residential properties and has not announced any intention for similar reform to the duty regime governing the transfer of residential property in Victoria.