Legal Insights

Commercial and Industrial Property Tax (CIPT) – Transactional Outcomes

By Michael Taylor-Sands, Nick Sparks, Andrew Wright, and Tristram Feder

• 16 May 2024 • 3 min read
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This article was amended on 2 July 2024.

Victoria’s new Commercial and Industrial Property Tax (CIPT) commenced operation on 1 July 2024 and imposes a 1% annual tax (additional to land tax) on the unimproved value of land classified as ‘Commercial or Industrial Property' (CIP) under the Valuation Best Practice Specifications Guidelines 2023 issued by Valuer-General Victoria. CIPT is intended to replace stamp duty on CIP transacted on or after 1 July 2024. This article seeks to summarise how the new CIPT will apply and operate in practice by considering a range of transactions affecting CIP before and after entry into the new regime.

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A. Transactions Transitioning CIP into new Regime

Basic Rule

A property will only enter the CIPT regime if:

  • it is subject to a contract of sale entered on or after 1 July 2024;
  • the contract relates to 50% or more of the property;
  • settlement of the contract will trigger a positive duty liability for the purchaser; and
  • the property has a qualifying commercial or industrial use at the settlement date.

If CIP is subject to a transaction which does not satisfy the above requirements, it remains subject to duty when next transacted, and CIPT will not apply at least until the next transaction.

  • "Victoria's Commercial and Industrial Property Tax (CIPT), effective July 1, 2024, will significantly impact commercial and industrial real estate transactions, reshaping the landscape for developers, investors and stakeholders for generations to come."

    Michael Taylor-Sands,
    Partner - Tax

    B. CIP Transactions Entitled to Transition Loan

    Basic Rules

    A transition loan to finance upfront duty payable on CIP will be available from the Victorian Government to purchasers who are:

    a) Australian citizens, permanent residents or an Australian business;

    b) the first purchaser of CIP on or after 1 July 2024;

    c) acquiring CIP for not more than $30 million; and

    d) approved for finance from an Authorised Deposit-taking Institution or other approved lender for the CIP.

    If a purchaser of CIP does not qualify for a transition loan, 100% of the duty liability must be paid in the ordinary way at settlement of the contract

    Ineligibility for a transition loan does not affect the transition of CIP into the CIPT regime. The Treatment for each Transaction outlined in Part A will therefore be the same irrespective of whether or not a purchaser is eligible for a transition loan.

    Transition loans will be issued by the Treasury Corporation of Victoria (TCV) and attract interest at TCV bond rate plus a credit risk margin. Principal and interest under the transition loan will be repayable annually over a 10 year period and the loan will be a first ranking charge on the land.

    C. Transacting CIP subject to CIPT

    If CIP subject to the CIPT regime is transacted, a property clearance certificate may be obtained by the vendor, purchaser or mortgagee from the Commissioner which will confirm that the CIP is within the CIPT regime. If the CIP is in the CIPT regime, the certificate will specify the date the land entered the regime and when the land will start to be assessed for CIPT. Once the CIP is being assessed for CIPT, the certificate will also show any CIPT due (including penalties and interest).

    Looking for more information on the Commercial and Industrial Property Tax?

    Contact our Tax & Revenue team.

    By Michael Taylor-Sands, Nick Sparks, Andrew Wright, and Tristram Feder

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