A Closer Look at Victoria's Commercial Property Tax Reform: Is It Relief or Just a Rebrand?

From 1 July 2024, the Victorian Government will begin implementing a fundamental change to the taxation of commercial and industrial property transactions. Promoted as a bold reform intended to modernise the way we handle property duty, the transition away from traditional lump-sum stamp duty in favour of a new "Commercial and Industrial Property Tax" (CIPT) has been framed as a move toward simplicity and economic growth.

But as seasoned conveyancers, we at Victorian Property Settlements believe it’s our duty to provide a more critical lens on this supposed ‘relief.’ Because as anyone familiar with government policy knows—when the government gives with one hand, it almost always takes back more with the other.

The Reform – What’s Changing?

Under the new regime, purchasers of commercial and industrial property in Victoria will have two options:

Continue to pay stamp duty upfront, in the traditional manner.

Elect to pay the stamp duty amount in equal instalments over ten years, with interest, after which a perpetual annual tax of 1% on the unimproved land value of the property will apply.

Once a property has opted into the new regime, all future owners of that property will be subject to the annual 1% tax—effectively converting what was once a one-time transactional tax into a permanent recurring liability.

The Real Cost of “Choice”

While the government portrays this as a flexible, pro-business alternative, the reality is far less generous. Paying stamp duty over ten years may ease the initial cash flow burden, particularly for small and medium businesses, but it’s a costly form of financing—with interest charged by the State Revenue Office. After the ten-year payment period, the 1% annual land value tax begins, and unlike stamp duty, it never ends.

This is not a deferral. This is not a waiver. This is an introduction of another ongoing tax, in a form which may in time prove far more expensive than the system it replaces.

The Broader Implications

This is not an isolated policy. It follows a similar direction to the reforms implemented in the ACT and a now-repealed version attempted in New South Wales. It also follows strong recommendations from recent parliamentary inquiries calling for the phasing out of transfer duty in favour of land-based taxation models.

Once embedded into the tax structure, these ongoing levies are rarely, if ever, repealed. In effect, the government is creating a new, permanent revenue stream while simultaneously reducing the likelihood of future owners being able to plan for a clear and finite transactional cost at the time of purchase.

Where to From Here?

This new model only applies to commercial and industrial properties from 1 July 2024. Residential properties are currently unaffected. However, the government has openly signalled that this change may be a precursor to wider reforms, potentially extending to the residential property market.

At Victorian Property Settlements, we believe that every client should be equipped not just with the legal facts, but with insight into the broader strategic implications of policy changes like this. What’s offered as a choice today may become a mandate tomorrow.

Conclusion

While marketed as modernisation and reform, this policy effectively shifts the tax burden from a one-time payment to an open-ended obligation. As always, we encourage all our clients—particularly commercial investors and business owners—to seek independent advice, understand the long-term implications of this regime, and be cautious of policies wrapped in the language of relief that may, in practice, yield higher costs over time.

If you are considering purchasing commercial or industrial property, or wish to understand how these changes could affect your future obligations, please contact us directly. We are here to assist you with clarity, foresight, and a healthy scepticism of government tax reform.