Stamp Duty on Commercial vs Residential Property Purchases

The base duty is calculated the same way

Land transfer duty on a commercial property is generally calculated on the dutiable value using the same sliding scale as residential property. So on the face of it, a commercial purchase and a residential purchase at the same price attract similar base duty.

The concessions are different

The big difference is concessions. The generous residential concessions, such as the first home buyer exemption and the principal place of residence concession, do not apply to commercial property. A commercial buyer generally pays the full duty without those reductions.

There can be other reliefs relevant to commercial and industrial property in certain regional areas or circumstances, so it is worth checking whether any apply to your purchase.

GST is a commercial consideration

GST rarely features in a residential purchase, but it often does in a commercial one. Depending on the transaction, GST may apply to the sale, and the way the contract deals with GST matters. In some cases a commercial property can be sold as a going concern, which can be GST-free if the conditions are met.

Getting the GST treatment right is important, because it affects the real cost of the purchase and can interact with duty. This is an area where advice pays for itself.

Victoria is moving commercial property to an annual tax

Victoria is in the middle of a significant reform for commercial and industrial property. Over time, one-off stamp duty on these properties is being replaced by an annual commercial and industrial property tax. The change is being phased in, and how it affects a given property depends on when it last transacted and the transition rules.

If you are buying commercial or industrial property, this reform can change your upfront and ongoing costs, so it is worth understanding where your purchase sits within the transition before you commit.

Due diligence looks different too

Beyond duty, commercial conveyancing involves checks that residential purchases usually do not, such as existing leases and tenants, the permitted use and zoning, any environmental or contamination issues, and the condition of the building. These affect both the value and the risk of the purchase.

Because commercial transactions carry more moving parts, a property lawyer is generally the right choice over a conveyancer alone. Orange Legal Group acts on commercial property purchases and advises on duty, GST, leases and the commercial and industrial property tax reform, so you understand the full cost and risk before you buy.