Australian Rural & Regional News asked the Victorian Premier a question about primary production property, answered by a government spokesperson below.

Tim Pallas, Treasurer (Vic), Media Release, 20 May 2024

The Allan Labor Government’s landmark tax reform for Victorian businesses has passed Parliament, transitioning commercial and industrial properties away from stamp duty from 1 July 2024.

The commercial and industrial property tax reform will progressively abolish stamp duty and replace it with a more efficient commercial and industrial property tax. This transformational reform will help Victorian businesses set up, invest in new land and buildings, and employ more workers. 

The reforms amount to a $266 million tax cut in the first your[sic] years, adding 12,600 jobs and benefiting Victoria’s economy by up to $50 billion over the next 40 years in cumulative net present value terms.

Since announcing the development of this reform, the Labor Government has worked closely with industry and the property sector to finalise the design which was confirmed in the Victorian Budget 2024/25. 

From 1 July 2024, stamp duty will be payable one final time on commercial and industrial properties as they are transacted – with no stamp duty applicable to any future sale of those properties.

The commercial and industrial property tax will apply 10 years after the next transaction and will be set at a flat rate of 1 per cent of a property’s unimproved land value per annum.

As part of the transition, eligible purchasers will have the option of accessing a government transition loan for the final stamp duty payment, allowing them to avoid any up front lump sum payment – freeing up capital to invest and employ more workers.

The Labor Government will provide educational support to help industry and taxpayers transition to the new scheme.

Further details are available at  dtf.vic.gov.au/funds-programs-and-policies.

Quotes attributable to Treasurer Tim Pallas

“We’re encouraging more businesses to set up and expand through this transformational reform of Victoria’s property tax system.”

“This reform is all about supporting business and growing the economy – it provides a $266 million tax cut in the first four years that will encourage businesses to set up, invest and employ more Victorians.”

Quote attributable to Victorian Chamber of Commerce and Industry CEO Paul Guerra

“This is a milestone moment for Victorian business that will encourage and promote growth. The Victorian Chamber of Commerce and Industry has worked with the State Government to achieve this significant tax reform and we look forward to the increased activity that this change will stimulate.”

Question from Australian Rural & Regional News and response from a government spokesperson

Australian Rural & Regional News asked the Victorian Premier why – apart from transfers of family farms and purchases by young farmers – this reform is not to apply to land primarily used for primary production, which is plainly a commercial use?

Response from a Victorian Government spokesperson:  

Our landmark tax reform to transition away from stamp duty to an annual property tax for commercial and industrial properties will come into effect from 1 July 2024.

This reform will help create 12,600 jobs, save Victorian businesses $266 million in stamp duty, and benefit Victoria’s economy by up to $50 billion over the next 40 years.

Background

This reform is focused on commercial and industrial properties because transitioning these properties away from land transfer duty has the greatest economic benefit. Land transfer duty impedes businesses from investing, expanding, and creating more jobs.

Primary production properties that have a mixture of uses – i.e. commercial/industrial and primary production, may enter the reform if the primary use of the property is predominantly commercial/industrial. However, the part of the land used for primary production will be exempt from the Commercial and Industrial Property Tax (CIPT) consistent with land tax exemptions.

An important aspect of the reform is that it seeks to replace stamp duty with a new commercial and industrial property tax. Properties which are exempt from land tax are also exempt from CIPT. As primary production land is generally exempt from land tax, applying the reform to primary production land would in effect lead to exempting this land from both stamp duty and CIPT.

The reform will not apply to the following:

• Property primarily used for residential purposes.
• Property primarily used for primary production, community services, sport, heritage, or culture purposes.
• Transfers of commercial or industrial property that receive an exemption from stamp duty, for example due to being a transfer from a deceased estate, or a transfer between spouses or partners.
• Commercial and industrial property purchased prior to 1 July 2024 (unless 50 per cent or more of the property is transacted after this date).

It is estimated that businesses will pay $266 million less in stamp duty in the first four years – as shown in the Victorian Budget 2024-25.

Further information can be found at http://dtf.vic.gov.au/funds-programs-and-policies/commercial-and-industrial-property-tax-reform.