The Victorian Government is introducing significant reforms, known as the Commercial and Industrial Property Tax Reform, to streamline the tax processes associated with commercial and industrial properties.
Under this new initiative, stamp duty (land transfer duty) will be phased out and replaced with an annual property tax known as the Commercial and Industrial Property Tax (CIPT). In this article, we explore the Transition Loan Program and how it works for eligible purchasers of commercial or industrial property.
The Transition to CIPT Has Begun
Effective from 1 July 2024, the Commercial and Industrial Property Tax (CIPT) will replace the existing stamp duty on commercial and industrial properties in Victoria. This reform is part of the government's broader effort to simplify and modernise the tax system.
Transition Loan Program: Supporting First-Time Purchasers
In addition to the tax reform, the Victorian Government has introduced the Transition Loan Program to assist first-time purchasers of commercial or industrial properties. This program allows eligible purchasers to access government-provided transition loans to cover their final stamp duty liability on commercial property in Victoria.
Key terms of the Transition Loan include:
- Loan Amount: Up to $1.93 million.
- Interest Rate: Fixed for the loan's duration, based on government borrowing costs plus a risk margin of 2.25% for the 2024-25 period.
- Loan Term: 10 years with equal annual repayments.
- Security: The loan is secured by a statutory charge on the property.
- Payment Frequency: Annual instalments.
CIPT Transition Loan Eligibility Criteria
To be eligible for the Transition Loan, applicants must meet the following criteria:
Applicant Requirements:
Australian businesses and individuals aged 18 or older who are Australian citizens or permanent residents, and not using the property for personal purposes.
Property Requirements:
- Must fall within specific property classification codes.
- The purchase price must not exceed $30 million.
- Must not have been previously part of the commercial and industrial property tax reform.
- Must have finance approval from an APRA-regulated or ASIC-certified lender.
- The applicant must not have engaged in prohibited activities such as illegal operations or bankruptcy.
Application Process
Applicants must ensure compliance with eligibility criteria and prepare the necessary documentation, including:
- Contract of sale.
- Property Clearance Certificate (PCC).
- Proof of finance approval.
- Identity verification and credit report for individuals.
The Treasury Corporation of Victoria (TCV) will conduct a credit assessment based on metrics such as the Loan to Value Ratio (LVR), capped at 75%. Once approved, applicants will sign a Loan Agreement and Direct Debit Agreement, and TCV will handle settlement procedures by placing a statutory charge on the property.
Managing the Loan
Post-approval, TCV will provide support to manage the loan. Borrowers will receive a welcome call and letter with guidance on accessing the online portal for loan management. The TCV customer service team is available to assist with any enquiries.
Fees and Charges may apply, including:
- Administration fees for arrears.
- Dishonour fees.
- Third-party administration fees.
- PEXA fees for statutory charge recording.
Speak to BlueRock Finance’s Commercial Property Loan Experts for Support with the CIPT Transition Loan Program
As part of the transition to CIPT, the Victorian Government is providing financial support through transition loans, these initiatives seek to create a more streamlined and predictable property market.
For further information and assistance, speak to our commercial property finance brokers who can assist with the primary bank funding and provide information on how the CIPT and TLP can impact you. Simply submit the form below and we’ll be in touch.
