Commercial and Industrial Property Tax Reform – What does it actually mean?

The reform will implement change progressively from 1 July 2024 and will look like this:

• If a commercial or industrial property is sold on or after 1 July 2024 (Reform Transaction), stamp duty will still be payable on settlement of the Reform Transaction, but the effects of the reform begin.
• At settlement of the Reform Transaction:
  • the purchaser will have a choice to either:
    • pay the property’s final stamp duty liability as a lump sum in the ordinary course; or
    • finance stamp duty through a government facilitated transition loan, allowing the purchaser to make annual loan repayments (plus interest) over 10 years; and
  • a 10 year transition period will commence for that property and stamp duty will not be payable on future transactions of that property, even if it is sold multiple times within the transition period (while it continues to have a commercial or industrial use).
• After the 10 year transition period ends, the property will become liable for the Commercial and Industrial Property Tax (which is 1% of the unimproved land value of the property, with no tax-free threshold). The Commercial and Industrial Property Tax will be separate from (and in addition to) the existing land tax regime. However, the existing land tax exemptions will apply to the Commercial and Industrial Property Tax.

This reform presents an enormous change in future transaction costs and could have huge implications on vendor and purchaser decision making – ensuring you have the right advice is critical so please get in touch if there are any gaps at all in your understanding of the changes or if you think you might benefit from some advice before your next commercial or industrial transaction.