Stamp Duty On Business Purchase In Victoria (VIC)

Transfer or stamp duty is a charge levied when you purchase a property, land, or business. Across Australia, each state and territory has different rules and requirements for stamp duty, making it tricky to know when you need to pay stamp duty as part of a business purchase. Victoria has recently overhauled their stamp duty for business purchases, abolishing stamp duty on commercial and industrial properties. To find out how this affects you and what tax you will pay on the purchase of your business, keep reading.

What is transfer (stamp) duty in Victoria?

Transfer, otherwise known as stamp duty, applies to the sale of most properties and land across Victoria. For businesses, there have been some changes to stamp duty in recent years across Victoria. In 2000, the Duties Act removed the stamp duty charges on business assets. Only property was listed as an asset that would be charged stamp duty, meaning that if you purchased a business without any property, you would avoid the stamp duty charge. Further changes in 2024 have seen the abolishment of stamp duty on business properties, with a new system taking place.

When does transfer duty apply to a business purchase in Victoria?

Transfer duty has changed in Victoria, and a new policy has been put in place for business purchases with property or land since 1 July 2024. The following guidelines apply to the new system:

Final stamp duty payment

When you purchase a commercial or industrial property, you must pay stamp duty once. The amount that you pay will vary depending on the value of the property and how much you have paid for it.

Annual property tax

Once you have paid your initial stamp duty, it will not apply to any sales if the property is used for industrial or commercial purposes. Starting ten years after the sale, a 1% tax on the property’s site value will be levied annually. You will need to make this annual payment to th revenue office, and it must be paid on time to avoid any late fees or interest being charged.

No further stamp duty

When the property is sold again, no additional stamp duty will be imposed, providing that it continues to remain a commercial or industrial premise. The sale can take place within or after the ten-year period without additional stamp duty being charged.

What is exempt from transfer duty for a business sale?

Most business assets, excluding property, are exempt from transfer duty, including:

• Goodwill – including the customers and reputation of the business
• Intellectual property – such as trademarks, patents, and copyrights pertaining to the business
• Business licenses – including licenses that allow the business to operate

How is transfer duty calculated?

Transfer duty is calculated in Victoria based on the dutiable value of the property of the business. This is taken based on the valuation of the property or the sale price, whichever is higher. The price is then applied to the duty rate to provide you with the total cost of your transfer duty.

Dutiable value (consideration or market value)

Transfer duty is calculated based on the dutiable value of the property. The dutiable value is usually the purchase price of the property or the market value, whichever is higher. The rate that is applied moves on a sliding scale; the more your property is worth, the more stamp duty you will pay.

Victoria transfer duty rates

Transfer duty rates in Victoria can fluctuate, but currently, they sit at the following:

• Up to $25,000 – 1.4% of the dutiable value
• $25,001 to $130,000 – $350 plus 2.4% of the dutiable value over $25,000
• $130,001 to $960,000 – $2,870 plus 6% of the dutiable value over $130,000
• Over $960,000 – 5% of the dutiable value

When calculating how much you owe, you will only pay the stamp duty on the percentage over the transfer rate. For example, if your business property is worth $30,000, you would pay 2.4% on the $5,000 that pushed you over the threshold. It is also only based on the property value of the business and not any other assets, so you will need a valuation or the price you are paying for the property portion of the business to calculate your stamp duty.

Who is responsible for the payment of transfer duty in Victoria?

The buyer is responsible for paying the transfer duty in Victoria. This is pretty standard across all Australian states, but there are instances where the responsibility of transfer duty has been shared between the buyer and seller. This is not a common occurrence, but you can always speak to your solicitor to see if this is up for negotiation.

When and how will payment need to be made on transfer duty?

Transfer duty must be paid within thirty days of the transaction date. The payment is made directly to the State Revenue Office, and you have several payment options, including online payment, direct debit, or cheque payment. You also need to submit relevant paperwork with your payment, including the contract of sale. Your solicitor can offer more specific guidance and help you submit the payment.

You must ensure that the payment is made on time. Paying your stamp duty late or not paying at all can lead to penalties and interest charges, costing you more in the long run.

Exemptions and concessions

There are some exemptions and concessions available that can eliminate or reduce the cost of stamp duty in Victoria when you are purchasing a business with a property. Each of these concessions or exemptions comes with strict requirements that you must meet. Make sure that you take the time to familiarise yourself with these before applying for any of the following:

Young farmer exemption/concession

Young farmers who are purchasing their first farmland property can access a concession on their stamp duty. Farmlands with property can qualify for a partial or full exemption from stamp duty, which lowers your bill, making it easier for young farmers to own their own land.

Corporate consolidation

If you are transferring property between related corporations, you might be entitled to some stamp duty relief. There are specific conditions that you must meet to qualify for this stamp duty relief. You might want to seek professional advice to ensure that you qualify for corporate consolidation relief before applying for it.

Charitable organisatons

Charities are sometimes exempt from paying stamp duty if the property they are purchasing is for charitable purposes. You will need to check that you meet the criteria before applying for these exemptions.

How to minimise stamp duty payments

There are a few ways that you can reduce the cost of your stamp duty in Victoria. It is important that you check carefully whether these situations apply to you and your business to ensure that you are paying the correct amount of transfer duty. We have outlined the common ways you can reduce your stamp duty payment below:

Asset allocation

Asset allocation involves structuring your sale agreement to allocate values to different assets. Doing so can help reduce the dutiable value of your sale, as well as reduce stamp duty tax payments.

Utilize available exemptions

You will want to explore every exemption opportunity to help you lower your payment. Not every business and its property will qualify for exemptions or concessions, but it’s important that you spend some time considering these exemptions to see which apply to you. You can seek professional advice here if you are unsure. Your solicitor will be able to help you lower the cost and find the right exemption for your business.

Keep up to date with reforms

Victoria has made several changes to its stamp duty tax in recent years, so it’s important that you keep up to date with the changes. Check with the revenue office frequently to ensure that you don’t miss any changes to stamp duty, which could reduce your bill.

Get more information on buying & selling a business from an experienced business broker across Australia

Buying a business in Victoria has many perks, with stamp duty only applying to property and the number of times it is paid significantly reducing. Finding the perfect business can be tricky, but with the help of an experienced business broker, you can find your new dream location.

We have experienced business brokers across Australia, and you can get in touch with them by following the details below:

• Get in touch with business brokers on the Gold Coast
• Get in touch with business brokers in Brisbane
• Get in touch with business brokers in Perth
• Get in touch with business brokers in Sydney
• Get in touch with business brokers in Adelaide
• Get in touch with business brokers in Melbourne