The 2023/24 Victorian State Budget has announced that the lump sum stamp duty payment on commercial and industrial properties payable upon purchase will be abolished.
Please read on to find out what you need to know about this major change.
When will the stamp duty be abolished?
The existing legislation requires stamp duty to be paid upfront on the purchase of commercial and industrial properties in Victoria. This compulsory arrangement will end on 1 July 2024.
From that date, commercial/industrial property buyers will have the option to pay an equivalent annual property tax for 10 years from the date of purchase which will be equivalent to the stamp duty amount plus interest. Alternatively, the initial buyer can choose to make a one-time upfront payment to cover the property’s final stamp duty amount
In effect, businesses will be able to spread the upfront cost of stamp duty over 10 years, plus interest.
How much will the annual property tax be?
The annual commercial/industrial property tax will be fixed at 1% of the property’s unimproved value. The table below provides some examples.
| Commercial/Industrial property purchase price | Annual property tax |
| $500,000 | $5,000 |
| $1,000,000 | $10,000 |
| $5,000,000 | $50,000 |
| $10,000,000 | $100,000 |
The option to pay the annual property tax will only apply to commercial/industrial properties first purchased after 1 July 2024. Owners of properties purchased prior to 1 July 2024 will not be affected.
If a commercial property purchaser selects the annual land tax system after 1 July 2024, then that property will remain as part of this subject to that system in future. In other words, future purchasers will not be able to choose to pay the upfront stamp duty cost. Only first-time purchasers of the property after 1 July 2024 will have this option.
What are the benefits?
The benefits of commercial property buyers choosing to pay an annual property tax rather than upfront stamp duty after 1 July 2024 include:
- Less upfront capital being required.
- More capital being available for other business purposes.
What are the risks?
The risks of commercial property buyers choosing to pay an annual property tax rather than upfront stamp duty after 1 July 2024 may include:
- Paying a higher amount over the 10 years due to interest charges.
The need to budget for these annual payments rather than paying the total cost upfront.
Further details of the new scheme are still to be announced, such as how properties that are a mix of commercial and residential spaces will be affected.
The bottom line
If you buy Victorian commercial/industrial property after 1 July 2024, then whether you should choose to pay the stamp duty cost upfront or choose the new annual property tax system option, depends on your individual business circumstances. Please speak to a professional for advice in relation to this matter.
How we can help
Our team at Wilson Pateras can provide you with a full range of business accounting and advisory services, including:
- Business accounting and tax
- Bookkeeping
- Tax planning
- Advice on government grants
- Lending and finance advice.
Contact us today to find out how we can help you.
