Are you looking to start your own business journey by purchasing a commercial property, or want to dive into the market for investment purposes? In comparison to residential property, stamp duty on commercial property is a very different ball game.
If you’ve got an impressive property portfolio and are eager to expand, commercial property may be the next best thing to buy in the property market.
What is commercial property?
Home buyers purchasing properties or looking to buy land is usually the norm, but property buyers can also be interested in commercial real estate.
Commercial real estate is used for business purposes or for commercial gain, whether it be a warehouse for industrial purposes, offices, retail places to open a store, or buildings for manufacturing use.
What is stamp duty on commercial property?
Stamp duty is a compulsory government tax, and the cost depends on several factors. With most commercial property purchases, stamp duty rates are applicable to any property or land, even if it was transferred over to you.
Overall, stamp duty is calculated using a percentage sliding scale based on the property purchase price, but also takes into consideration the location (each state will have their own rates), and any concessions that may be applicable to you.
When is stamp duty (land transfer duty) payable in Victoria?
In Victoria, stamp duty is payable at the time of settlement of your purchase, and which stage the Title will be registered in your name. Buyers will need money in the bank to cover the initial property deposit, mortgage fees, inspections if applicable, stamp duty, Land Transfer registration fees and overall moving costs. It’s important to be prepared.
How much stamp duty do you need to pay on commercial property?
When it comes to paying stamp duty, there is a lot to consider in terms of how the costs can be affected by your circumstances.
- The price of the dutiable property value. This can determine an increase or decrease in stamp duty based on the percentage sliding scale
- The intended use of the property
- If you are a foreign purchaser
- If you’re eligible for concessions or exemptions
- The rates set by the state of which the property is purchased
- If the property attracts GST
Calculating stamp duty on commercial property in Victoria
How is your stamp duty calculated? The State Revenue Office calculates how much stamp duty you will owe, which is often a percentage of the purchase price.
$0 – $25,000 – 1.4% of the property value
$25,000 – $130,000 -2.4% of the property value plus $350
$130,000, – $960,000 – 6% of the property value plus $2870
$960,000 – $2,000,000 – 5.5% of the property value
Over $2,000,000 – 6.5% plus $110,000 of the property value
When can stamp duty be exempt in Victoria?
From 1 July 2019, if you are buying property in regional Victoria for commercial, industrial, or extractive industries then a stamp duty concession is available.
Commercial, industrial, or extractive property examples may include:
- Retail stores
- Office spaces and buildings
- Restaurants and cafes
- Factories and warehouses
- Mines and quarries
The council that the property is located in must be listed on this official list of regional councils in Victoria.
In addition, in order to receive the concession the commercial property you have purchased must be referred to in section 10(1)(a) and (ad) of the Duties Act 2000, must be entirely located in regional Victoria and includes:
- Buying land
- Acquiring a life interest in land
- Buying or acquiring a land use entitlement
- Buying or acquiring an interest in fixtures separately from the underlying land on which the fixtures are located
The land must be used for one of three qualifying commercial, industrial, or extractive purposes for at least 12 months after purchase. The purchaser may not be required to use the land for the 12-month period, but anyone may use it to meet the qualifying use requirement.
Within two years after gaining possession of the land, the purchaser must ensure that twelve consecutive months of qualifying use begin. Land that qualifies with the use requirements, must following settlement continue the use for a period of at least 12 months.
What are stamp duty concessions for commercial property?
Looking to lower how much you pay all up for a commercial property? If your contract falls into the concession criteria, here are the amounts that can be available to you.
Contracts of sale entered:
- From January 1, 2021 – able to receive a 50% reduction in duty payable
- On or after January 27, 2020 – able to receive a 50% reduction in duty payable – if the property is located in any of the following areas: East Gippsland, Mansfield, Wellington, Wangaratta, Towong and Alpine
- From 1 July 2020 to 31 December 2020 – able to receive a 20% reduction on duty payable
- From 1 July 2019 to 30 June 2020 – able to receive a 10% reduction on duty payable
Conveyancing with Complete Conveyancing Solutions
All in all, if you’re unsure about the process of purchasing commercial real estate or would like to learn more about paying stamp duty on commercial properties, get in touch with one of our experts at Complete Conveyancing Solutions.
Whether stamp duty, transfer duty, land transfer duty, or market value confusion, we can assist you with your commercial property buying.
Maria Tomlinson holds an unrestricted conveyancing licence together with Professional Indemnity Insurance against civil liability. Maria Tomlinson commenced her career in Conveyancing in 2001. She furthered her studying by completing her Diploma in Conveyancing in 2017 which has led her to hold an unrestricted Conveyancing License and successfully open her conveyancing firm, Complete Conveyancing Solutions.