Busy day in Parliament – Victorian Government responds to stamp duty and apartment design standards

On Thursday 21 March 2024, the Victorian Government released its responses to the inquiries in relation to land transfer duty fees and apartment design standards.

Key takeaways are provided below.

Commercial and Industrial Property Tax

The government in its response confirmed its commitment to abolish and replace stamp duty with the Commercial and Industrial Property Tax (CIPT) for commercial and industrial properties.

The Commercial and Industrial Property Tax Reform Bill 2024 (Bill) passed the second reading in the State Parliament on 21 March 2024. In what is a landmark reform, the Bill proposes to:

• phase out stamp duty on eligible transactions of commercial and industrial property in Victoria on and from 1 July 2024; and
• replace stamp duty with a new annual CIPT which will be set at a flat rate of 1% of the property’s unimproved land value and be payable 10 years after the final stamp duty payment. The CIPT is separate and in addition to land tax, which will continue to apply.

At settlement, a purchaser of commercial or industrial property can either pay the property’s final stamp duty liability as an upfront lump sum payment, or, where the purchaser is an Australian citizen, permanent resident or Australian business, finance stamp duty through a transitional loan over a period of 10 years. No further stamp duty will be payable on future transactions of that property provided the property continues to have a commercial or industrial use.

From the date which is 10 years after the final stamp duty payment, annual CIPT will then be applied to the property.

Given the Bill is expected to be passed by the State Parliament and take effect in the coming months, we recommend that parties currently seeking to sell or purchase commercial or industrial property consider the impact the CIPT regime will have on their business and investments, including any implications on cashflow and holding costs.

Apartment design standards

The government’s report recognises the key role apartments play in providing increased housing supply, housing affordability and housing choice for Victorians and the importance of providing high quality and well-designed apartments.

The government confirmed:

• its support of all 35 recommendations made by the Legislative Assembly Environment and Planning Committee; and
• the advance of $3.5 million to action many of the recommendations and update the ‘Better Apartment Design Standards’ over the next three years.

Developers should be aware that the government is focusing on the following five priority areas:

1. improving apartment amenity and functionality;
2. embedding sustainability – including environmentally sustainable design and waste
3. contributing to neighbourhood liveability – including building height and density, neighbourhood planning and supply of affordable apartments;
4. ensuring design excellence; and
5. monitoring outcomes.

We recommend that developers familiarise themselves with the recommendations and how these may affect their existing sites and proposed developments.

We will continue to monitor the reforms relating to the CIPT and the Apartment Design Standards and provide further details and updates as soon as they become available.

Please contact us for advice if you have any questions or would like to discuss any of the above.

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Authored by:

Brihony Boan, Partner
Karena Balkwill, Senior Associate
Zoe Christodoulou, Associate