Commercial and Industrial Property Tax (CIPT): What Victorian Property Buyers Need to Know

If you're buying commercial or industrial property in Victoria, there's an important tax reform that could affect your investment now and well into the future.

The Victorian Government introduced the Commercial and Industrial Property Tax (CIPT) on 1 July 2024, marking the beginning of a significant change to how commercial and industrial property is taxed. While the changes won't impact every property immediately, it's essential for buyers, investors and business owners to understand how the new system works before signing a Contract.

‍

What is the Commercial and Industrial Property Tax (CIPT)?

The Commercial and Industrial Property Tax is part of the Victorian Government's transition away from upfront stamp duty on commercial and industrial land.

Rather than paying stamp duty each time an eligible property changes hands indefinitely, qualifying properties will gradually move into the new CIPT system. Once a property has transitioned, future purchasers of that property will generally no longer pay stamp duty. Instead, the property will become subject to an annual property tax.

It's important to note that properties do not automatically enter the new system. A property will only transition when there is a qualifying dutiable transaction with a Contract date on or after 1 July 2024.

‍

How much is the annual CIPT?

The annual Commercial and Industrial Property Tax is calculated at 1% of the property's site value, payable each year by the property owner.

However, the annual tax does not begin immediately. It only becomes payable 10 years after the property first enters the CIPT system.

Understanding when a property entered the new system is therefore an important part of assessing its long-term holding costs.

‍

Which properties are affected?

CIPT applies to land with a qualifying commercial or industrial use.

Whether land qualifies is determined by its Australian Valuation Property Classification Code (AVPCC). Generally, the new tax applies to properties classified under AVPCC codes 200–499 and AVPCC codes 600–699.

For mixed-use properties containing both residential and commercial uses, the property's primary or sole use will determine whether it falls within the CIPT regime.

‍

Which properties are excluded?

Not all land is affected by the new tax. The following property types are generally excluded from the CIPT system:

• Residential land.

• Primary production land.

• Land used for community service purposes, including childcare facilities.

• Sporting, heritage and cultural land.

• National parks, conservation areas, forest reserves and natural water reserves.

‍

Why this matters for buyers

When purchasing commercial or industrial property, it's no longer enough to simply consider the purchase price and current outgoings.

A property's CIPT status can have significant financial implications, including whether stamp duty is payable now, when the property entered the new system, and whether an annual property tax will become payable in the future.

Understanding these issues before you commit to a purchase can help you make informed investment decisions and avoid unexpected long-term costs.

‍

How Wakefield Lawyers can help

Whether you're purchasing your first commercial property or expanding an investment portfolio, our experienced property lawyers and conveyancers can review the property's CIPT status before you sign a Contract.

We'll help you understand how the Commercial and Industrial Property Tax may affect your purchase, explain any future tax implications, and ensure you have the information you need to confidently move forward with your investment.

Thinking of buying commercial or industrial property? Contact the experienced property law team at Wakefield Lawyers before you sign your Contract to ensure you understand the property's CIPT status and any future tax obligations.

‍