Stamp duty on non residential property

Whether you are fitting out a Brunswick warehouse for your own business, purchasing retail space in Carlton or pooling funds with friends for a self-managed super fund investment, one question inevitably arises: "Do I have to pay stamp duty?" Victorians call the charge "land transfer duty", yet its impact on cash flow is the same. With a raft of recent reforms aimed at commercial and industrial property, plus generous concessions for certain buyers, the rules can feel confusing. This guide explains how duty is calculated on non-residential property, who is exempt, and how the new Commercial and Industrial Property Tax (CIPT) reshapes the playing field from 1 July 2024. Our focus is on metropolitan Melbourne, but we also touch on statewide concessions that could save you thousands.

Do You Pay Stamp Duty on Commercial Property in Victoria?

In most cases the answer remains yes. Unless a specific exemption applies, non-residential land transfers signed on or before 30 June 2024 attract duty at the general rates set out in the Duties Act 2000. The marginal scale ranges from 1.4 per cent to 6.5 per cent of the dutiable value, which is usually the greater of the contract price or market value. A 50 per cent concession applies where the land is classed as commercial, industrial or extractive and is located in regional Victoria, cutting the top effective rate to 3.25 per cent. In metropolitan Melbourne no similar concession exists.

How Is Duty on Non Residential Property Calculated?

Duty is assessed on a sliding scale. For example, if you purchase a Collingwood showroom for $1.2 million, the duty payable under the current schedule would be approximately $62,600. The State Revenue Office (SRO) provides an online calculator that automatically applies the correct brackets, concessions and foreign surcharges. Keep in mind that duty is paid at settlement, so it must be factored into your finance arrangements upfront. For self-managed super funds or company structures, the same rates apply, though additional landholder duty can arise when you acquire 50 per cent or more of an entity holding Victorian land.

The Commercial and Industrial Property Tax (CIPT): A New Era from 1 July 2024

The Victorian Government has begun phasing out stamp duty on qualifying commercial and industrial property in favour of a smaller annual tax. Properties that settle on or after 1 July 2024 will pay stamp duty once more on entry into the regime. Ten years later, that duty is replaced by the CIPT, levied at a flat 1 per cent of the site value each year. The goal is to lower the barrier to buying and selling business premises, freeing up capital for investment. In practice, buyers still need to budget for full duty on day one, but they can expect future purchasers to face only the annual 1 per cent charge rather than another lump-sum duty, potentially lifting resale values. The SRO confirms that if you bought land on, say, 26 August 2024, your first CIPT assessment will arrive in the 2035–36 financial year.

Who Is Exempt from Paying Stamp Duty in Australia?

Each state and territory writes its own rules, yet several broad categories re-appear across the country:

First-home buyers: most jurisdictions provide a full exemption or discount up to a threshold (e.g. Victoria: $600,000 full exemption, concessional sliding scale to $750,000).

Off-the-plan concessions: partial duty on construction value rather than contract price.

Pensioners and concession-card holders: reduced duty within set limits.

Family transfers: spouses, de facto partners and certain inheritances often qualify.

Charitable, educational and religious institutions: usually exempt where property is used for charitable purposes.

Primary production and inter-generational farm transfers: concessions to support agriculture.

Corporate reconstructions and amalgamations: relief where no change in economic ownership occurs.

Because duty is state-based, never assume an exemption in New South Wales will also apply in Victoria. Always check the local legislation or obtain professional advice.

Is There a Non-Resident Land Tax in Victoria?

Yes. While the ordinary land tax regime already applies once the total taxable value of your Victorian holdings exceeds $50,000 (or $25,000 where land is held in a trust), non-resident owners face an additional Absentee Owner Surcharge. From the 2024 land tax year this surcharge doubled to 4 per cent of the taxable value, up from 2 per cent in previous years. The surcharge applies to all Victorian land, residential or commercial, held by an absentee individual, absentee corporation or absentee trust. Note that the definition of "absentee" is broader than simply "non-resident for tax purposes"; you can be an Australian citizen living overseas and still trigger the surcharge. Failing to notify the SRO can result in penalties, so investors should review their residency status annually.

Who Is Exempt from Stamp Duty in Victoria?

Victoria offers a suite of exemptions and concessions to encourage home ownership and recognise certain life events. The main ones include:

First-home buyer exemption - Principal place of residence (PPR) valued at ≤ $600 000.

First-home buyer concession - PPR $600 001–$750 000, sliding scale.

Pensioner concession - Holders of a Victorian concession card buying a home up to $750 000.

Off-the-plan concession - Duty assessed on land value plus construction completed at contract date.

Family farm transfers - Land used primarily for agriculture transferred between relatives.

Transfers between spouses/domestic partners - PPR only; also applies following separation settlements.

Charitable and friendly societies - Full exemption if land will be used for approved charitable activities.

Corporate restructure relief - Available where ultimate ownership remains unchanged.

Remember: commercial purchasers do not currently enjoy a general duty exemption, though a regional Victorian concession may apply if the property is used for qualifying commercial or industrial purposes.

Practical Tips for Melbourne Investors and Business Owners

Time your contracts carefully. A contract dated 30 June 2024 falls under the old duty regime, whereas one signed a day later may enter the CIPT system, affecting long-term hold costs.

Factor duty into loan-to-value ratios. Banks rarely finance the duty itself, so ensure you have funds or equity to cover it.

Consider regional opportunities. A warehouse in Geelong or Ballarat may qualify for the 50 per cent regional concession, offering an immediate saving of tens of thousands of dollars.

Plan for the absentee surcharge. If you live or work overseas, check whether you fall into the SRO's "absentee" net and budget for the extra 4 per cent land tax.

Keep evidence of property use. Many concessions hinge on how the land is used (commercial, industrial, farming). Maintain lease agreements, council permits and utility bills to prove eligibility.

Quick-Fire FAQs

Can I avoid duty by purchasing a property through shares in a company? Possibly not. Landholder duty may apply once you acquire 50 per cent or more of an entity holding Victorian land.

Does vacant commercial land attract duty? Yes. The duty is based on the land's value even if no improvements exist.

When do I lodge the duty return? In Victoria your conveyancer or solicitor must lodge and pay duty within 30 days of settlement.

Is GST included in the dutiable value? If GST is payable and included in the contract price, it forms part of the dutiable value.

Will CIPT apply to residential investments? No. The new annual tax only applies to commercial and industrial property; standard duty remains for residential land.

Conclusion and Next Steps

The Victorian duty landscape is in transition. Until the CIPT fully replaces stamp duty, purchasers must navigate two parallel systems: traditional up front duty and, for post 1 July 2024 commercial deals, the prospect of an annual 1 per cent charge after a decade. Add in exemptions for first home buyers, family transfers and charitable use, plus a hefty absentee surcharge, and it is clear that professional guidance is essential.

Need clarity on your own contract? The team at Pearson Chambers Conveyancing specialises in Melbourne property and tracks every change from Spring Street. Call us for a free Section 32 contract review and personalised duty estimate today.

Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au