The Victorian government will be delivering a tax reform abolishing stamp duty and introduce an annual property tax for commercial and industrial properties.
The tax reform, announced in the state’s annual Budget, will see the lump-sum stamp duty system for commercial and industrial properties transition to a more efficient annual property tax from 1 July 2024. The annual property tax will be payable from 10 years after the transaction.
The annual property tax will be set at a flat 1% of the property’s unimproved land value.
The first buyer of a commercial or industrial property after 1 July 2024 will be able to choose whether to pay the property’s final stamp duty liability as an upfront lump sum or transition to an annual payment immediately by opting to pay fixed instalments over 10 years equal to stamp duty and interest with a government-facilitated transition loan.
Choosing to make annual payments will help free up capital that businesses can invest in their expansion, operations, or creation of new jobs.
It is crucial to note that these reforms will not apply to the current owner of any commercial or industrial property purchased before the starting date.
Still, once a property enters the new system, no stamp duty will be payable and the annual property tax will apply.
Victorian Treasurer Tim Pallas said the government will consult with business and industry in coming months, with the final form of the transition to be detailed by the end of the year.
“Business and industry have told us they want this reform and we’ve listened. These landmark changes will enable businesses to be more dynamic and agile, and to grow and employ more workers,” he said.
Overall, Mr Pallas said the reform is expected to result in a cumulative increase in the size of the Victorian economy to $50bn in net present value terms.
“We’re removing barriers to larger investments, accelerating business growth and helping our economy grow even stronger,” he said.
Land tax thresholds to change
Despite the move to abolish the stamp duty for commercial and industrial properties, the state government also plans to cut the tax-free threshold for land tax from $300,000 to $50,000.
This was part of the COVID Debt Repayment Plan, which will be a temporary policy in place that will raise an equivalent amount of funds, including covering interest, to pay down the COVID debt over the next 10 years.
The temporary increase will see additional annual payments of $500 for properties up to $100,000 in value and around $975 for those up to $300,000.
Properties exceeding $300,000 will see annual land tax rise by $975 plus 0.1% of the value of the land over the threshold.
Mr Pallas said these will apply primarily to those who own a second property or multiple properties.
“The family home will remain exempt from land tax,” he said.
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