Commercial and Industrial Property tax questions and answers

No, not in the current legislation. Under current law, a property will remain outside the CIPT regime (and will not become subject to annual CIPT) until the first transaction on or after 1 July 2024 that triggers entry into the reform. Annual CIPT will then become payable from and including the first calendar year after the 10-year anniversary of the entry transaction.

The ‘entry transaction’ is calculated from the date of the dutiable transaction or relevant acquisition under the legislation. For a direct land transfer, this is the settlement date.

For an 'entry consolidation', the entry date is the date on which the existing 'tax reform scheme land' that forms part of the consolidation first entered the CIPT regime (via a dutiable transaction or relevant acquisition). Similarly, for an 'entry subdivision', the entry date is the date on which the existing 'tax reform scheme land' that is subdivided first entered the CIPT regime (via a dutiable transaction or relevant acquisition).

No.

The annual CIPT will commence in the calendar year following the expiry of the 10-year transition period, which period commences on the date of the transaction which causes the land to enter the CIPT regime (year 11).

After the transition period, the commercial or industrial property will be subject to both land tax and CIPT (assuming a land tax and CIPT exemption does not apply).

Yes, if the contract and transfer is entered into on or after 1 July 2024.

There is no stipulated timeframe, so indefinitely under current legislation.

Note however, if 50% or more of the interests in the property are directly or indirectly transacted or if the property is consolidated with existing 'tax reform scheme land' which forms 50% of more of the area of the consolidated land, it will bring the property into the CIPT regime.

No, this is not an 'opt-in' regime.

Stamp duty must be paid on the first entry transaction on or after 1 July 2024 and CIPT will commence in the calendar year after the 10-year transition period has expired.

In the current legislation, there is always a 10-year transition. If the first entry transaction was in 2035, CIPT would commence in the calendar year after the expiry of the 10-year transition period, so from the 2046 calendar year.

A subdivision by itself does not cause entry into the CIPT regime. However, a subdivision of land that has already entered the CIPT regime (i.e. 'tax reform scheme land') will cause the post-subdivision child lots to enter the CIPT regime with their entry date deemed as the same date that the parent lot had entered the regime.

Yes. A pre-1 July 2024 contract that settles on or after 1 July 2024 comes within the transitional provisions (so the post-1 July 2024 settlement will not cause the land to enter the CIPT regime—see section 9(2) of the Commercial and Industrial Property Tax Reform Act 2024.

No, a rezoning of land is not itself an entry transaction, and therefore will not of itself result in the rezoned land entering the CIPT regime.

Please note that potential implications under the Victorian windfall gains tax would need to be considered for any rezoning.

Broadly, yes, there is no stamp duty on the second / subsequent transaction if before that transaction:

• the first transaction that signs and settles on or after 1 July 2024 concerns a 50% or greater interest in the commercial or industrial property and is not exempt from stamp duty or subject to relief under the corporate consolidation / reconstruction concession (i.e. it causes entry into the CIPT regime)
• where the first transaction related to a fractional interest of less than 100% in the property, a period of at least 3 years has passed since the date of the first transaction (before the second transaction) and
• there is no change in use of the property (to a non-qualifying use) by the time of the second and subsequent sales.

Yes. A transfer of property which is eligible for the regional stamp duty concession will still receive a 50% reduction in the stamp duty liability.

Note, although there is a reduction in the amount of duty, the transaction will (subject to all criteria being met) cause entry into the CIPT regime.

In general, yes. The second purchaser during the 10-year transition period does not pay stamp duty and will only become liable to pay annual CIPT in the first calendar year after the transition period ends (assuming there is no change in use for the property during that time).

In general, assuming the property continues to have a qualifying commercial and industrial use, no land transfer duty applies on the sale in year 5 and the purchaser gets 5 years free of annual CIPT before it (CIPT) begins to apply from the first calendar year after the 10-year transition period (year 11). The start date for CIPT commences by reference to the first transaction, regardless of the change of ownership.

If the first purchaser had obtained a government transition loan for the stamp duty payable on the first entry transaction, the first purchaser would need to repay the outstanding balance under the loan in year 5 when the property is sold.

After the land transitions to the CIPT regime, the tax will be levied against all CIPT 'tax reform scheme land' (for which the 10-year transition period has completed) that is held by the same owner at midnight on 31 December each year, with the tax assessed for the following calendar year (like land tax).

No. Similar rules that apply for land tax will apply for CIPT (e.g. any apportionment of an annual CIPT liability between vendor and purchaser of land that will be sold part way through the year will be based in contract, with prohibitions on a vendor's ability to recover CIPT from a purchaser where the sale price is below a high-value threshold which is subject to indexation each year).

It is correct that the owner of land that has entered (and continues to be in) the CIPT regime will receive an annual assessment of CIPT for the calendar year based on a liability date of midnight 31 December immediately preceding the relevant calendar year.

The legislation currently prohibits pass on of CIPT to tenants under residential rental agreements or leases under the Retail Leases Act 2003.

The legislation also currently prohibits apportionment of a CIPT liability between a vendor and purchaser of land where the sale price is below a high-value threshold which is subject to indexation each year.

Yes, broadly CIPT will be assessed on all CIPT 'tax reform scheme land' (for which the 10-year transition period has completed) that is held by the same owner at midnight 31 December for the following calendar year. CIPT will apply at the rate of 1% on the total unimproved value of all CIPT 'tax reform scheme land'.

No, there is specific eligibility criteria that must be met as set out in the Transition Loan Notice issued by the Treasurer.

Yes. A fixed interest rate will be calculated at the start of the loan comprising a base rate (based on the Treasury Corporation of Victoria's yield curve) plus risk margin.

Yes, the Treasury Corporation of Victoria will have a first ranking charge registered on the land title to secure the loan.

Fixed. The principal and fixed interest will be calculated at the start of the loan and apportioned over 10 equal yearly instalments.

No. The first purchaser can pay the duty upfront from their own resources. The loan is an option if they qualify.

No. The loan cannot be transferred to another party. A sale of the subject property within the 10-year loan term is a mandatory repayment event and the first purchaser will be required to repay the outstanding balance of the loan.

The outstanding loan balance must be repaid at or before settlement of the subsequent sale.

Yes. Unpaid CIPT is a first ranking statutory charge on the land that can be registered on title, and the SRO can also recover unpaid CIPT from a lessee, mortgagee or occupier of the land.

Yes. Vendors will need to ensure that section 32 vendor statements disclose whether or not the land is CIPT 'tax reform scheme land', the AVPCC most recently allocated to the land, and if the land is tax reform scheme land, the entry date.

Yes. The legislation amends section 32 of the Sale of Land Act 1962 by adding section 32A(ca) which applies for all land being sold, and practitioners should comply with those requirements.

This information will be set out in a property clearance certificate issued by the SRO. See section 49 of the Commercial and Industrial Property Tax Reform Act 2024.

Yes. The new disclosure obligations imposed by new section 32A(ca) of the Sale of Land Act 1962 will apply to all land in Victoria.

Yes. If signing of the contract by the purchaser will occur on or after 1 July 2024. The section 32 vendor statement should be updated and current as at the date of the sale.

Not if the sale price is less than the high-value threshold amount (being A$10 million until 31 December 2024 and subject to indexation each following year).

The amendments to the Sale of Land Act 1962 include the addition of CIPT to section 10G, prohibiting recovery of CIPT under a contract of sale for a sale price less than the high-value threshold amount (as is the case for land tax).

Yes.

No.

Yes. If the SMSF is an owner of CIPT 'tax reform scheme land' (similar to land tax).

If the transfer of commercial property from the trustee to beneficiary is exempt from stamp duty (noting there are specific criteria that must be met for the exemption to apply which varies depending on the type of trust), that transfer will not cause the property to enter the CIPT regime.

It may if the distribution of land with a qualifying commercial or industrial use occurs on or after 1 July 2024 (and is not preceded by a pre-1 July 2024 agreement or arrangement) and is not exempt from stamp duty.

If the distribution is exempt from stamp duty, see the answer to the question above.