The impact of commercial & industrial property tax changes
It’s been just over a year since the Victorian Government introduced one of the most significant reforms to commercial and industrial property tax in recent memory, the introduction of the Commercial and Industrial Property Tax (CIPT).
This shift, effective from July 1, 2024, marked the beginning of a new chapter for property owners, developers, and investors across Victoria. While it promised a more modernised and flexible tax regime, it’s also brought with it a fair share of questions, confusion, and strategic shifts.
We’ve been working closely with clients, legal partners, and industry experts to help us and you understand these changes and plan for what’s next. Here’s what we’ve learnt and how you can best position yourself in this new landscape.
What is the Commercial and Industrial Property Tax (CIPT)?
CIPT is a new annual property tax that applies to commercial and industrial properties purchased after July 1, 2024. The tax is set at 1% of the property’s unimproved land value and begins ten years after the first transaction that brings the property into the CIPT system.
Think of it as a replacement for traditional stamp duty on these types of properties, with some key differences. When a property enters the CIPT regime, stamp duty is paid one final time, and from there, any future sale of the same property is exempt from stamp duty. However, this also means future owners will need to budget for the ongoing 1% annual tax down the line.
What we know so far
Uptake of the Government Loan Scheme was low. To ease the transition, the Victorian Government introduced a loan scheme that allows buyers to spread the “last” stamp duty payment over 10 years.
However, due to high interest charges and tight eligibility criteria, many buyers are opting to pay the stamp duty upfront. This hasn’t really been the silver bullet solution many hoped it would be.
What does this mean for landlords and leasing?
One of the most immediate impacts of CIPT has been around lease structures, particularly around who will be paying the bill.
For non-retail commercial leases, landlords are now being encouraged to update their lease agreements to ensure CIPT can be recovered from tenants, similar to land tax. However, for retail or residential leases, landlords are unable to pass this cost on.
This nuance has become a critical consideration for investors and landlords considering leasing out property in the future. It is why having a trusted advisor who can help you structure your lease to avoid any issues down the track is becoming increasingly important.
Buyers and developers are rethinking their strategy
We’re seeing a fundamental shift in acquisition strategy. Buyers are now weighing up the pros and cons of “pre-CIPT” and “post-CIPT” land. While stamp duty is still applicable to the first post-July 2024 transaction, there’s a real incentive for developers to get their properties into the CIPT regime sooner, as being able to advertise a ‘stamp duty free’ sale certainly grabs the attention of potential buyers.
Developers have begun exploring strategies such as landholder deals, subdivisions, and even land consolidations to bring their projects under the CIPT banner and enhance future buyer appeal. If you’re unsure how the new CIPT regime will impact you, your property, or the ability to buy in the future, our industry connections and decades of experience working with developers allow us to help you navigate these decisions and optimise both current and future value.
Avoidance is a no-go
As with any new tax scheme, some creative thinking has emerged on how to sidestep certain obligations. But the government has been quick to introduce anti-avoidance amendments, closing loopholes that might otherwise allow for internal restructures or partial ownership strategies to dodge CIPT.
The key takeaway? Don’t try to be clever, be strategic. Understanding how to work with the new rules, rather than around them, is what creates long-term value. We’re here to help you do just that.
Due diligence just got smarter
Another change that’s taken place quietly but importantly is around disclosure. Land tax clearance certificates now indicate whether a property is under the CIPT scheme, meaning buyers and sellers must factor this into their due diligence process.
Like land tax (which also became non-adjustable at settlement from January 1, 2024), CIPT is not something vendors and buyers can split or adjust at the point of sale. It’s an all-in cost that stays with the owner, which means it’s more important than ever to understand exactly what you are getting involved in from the very beginning.
A recent VCAT case between Grandview Trading and SJV Properties demonstrated the importance of getting lease definitions right from the outset. The court ruled that the initial intent of a lease determines whether it is retail or non-retail, regardless of how the tenant’s business use evolves over time.
So, if you’re leasing out commercial space, the language and structure of your agreement are critical, especially if you want to future-proof your ability to recover CIPT or manage compliance obligations.
Understanding next steps
CIPT isn’t going away. If anything, we’re just seeing the beginning of its ripple effects.
If you’re a landlord, buyer, or developer, the message is clear: make tax strategy part of your property strategy. Think long-term, seek advice early, and structure your leases, purchases and developments in a way that sets you up for the best outcomes.
We’re not just commercial and industrial property experts, we’re trusted partners in a fast-evolving property landscape. We work closely with legal advisors, developers, investors and landlords to ensure you’re making informed decisions and capitalising on opportunities.
If you’re unsure how CIPT affects you, or want to explore how these changes could benefit your investment plans, reach out to our team. We’re ready to help.