CIPT Transition Loan: Pay Stamp Duty Upfront or Over 10 Years?

Key Takeaways

• Duty on a qualifying commercial purchase is paid one final time, and a 1% site value tax starts in year 11 whichever way the duty is funded.
• Using the government’s $1.8 million example, the transition loan cuts cash needed at settlement by about $90,000 but costs $141,740 over 10 years against $99,000 paid once.
• TCV caps total borrowing, including the transition loan, at 75% of the property’s value, so a 70% bank loan plus duty may not fit.
• SMSF trustees, foreign purchasers, cash-only buyers and anyone acquiring shares or units in a landholder cannot use the loan.

A $1.8 million warehouse in Melbourne’s south-east comes with a $99,000 stamp duty bill, payable at settlement on top of the deposit. For a business owner already stretching cash to buy premises, that bill can decide how much working capital is left once the keys change hands. Since 1 July 2024, Victoria’s Commercial and Industrial Property Tax (CIPT) reform has offered a second option. The CIPT transition loan, issued by the Treasury Corporation of Victoria (TCV), lets an eligible buyer repay that final duty over 10 years instead of in one lump sum.

The loan sits on title ahead of your bank and counts towards a combined borrowing limit. The property also picks up an annual tax once the 10 years are up, whichever path you choose. A commercial loan broker in Melbourne can test both paths against your lender’s policy.

When CIPT Applies to a Commercial Purchase

A purchase becomes eligible for the transition loan only once it enters the reform. To enter, it must pass every test the State Revenue Office (SRO) and the Department of Treasury and Finance (DTF) set for a CIPT entry transaction:

Property Use

A property qualifies when it has a commercial or industrial use, which the SRO usually identifies through its Australian Valuation Property Classification Code (AVPCC) in the latest valuation. Qualifying codes sit in the 200 to 499 and 600 to 699 ranges. They cover retail, offices, hospitality, manufacturing, warehousing, extractive industries and infrastructure, as well as vacant commercial or industrial land. Eligible student accommodation counts as commercial too.

The AVPCC appears on the council rates valuation notice and on the property clearance certificate, usually attached to the vendor’s Section 32 statement. Mixed-use sites, such as a shop with a residence above on one title, go through a sole or primary use test decided by the Commissioner of State Revenue.

Contract Dates

Both the contract and the settlement must fall on or after 1 July 2024. An owner who bought before that date is not directly affected, and the property stays outside the reform unless 50% or more of it later changes hands.

Share Bought

Buying 50% or more of a property brings the entire property into the reform. Indirect purchases are captured as well, including acquisitions in companies and trusts that own land.

Duty Payable

Duty must be payable on at least 50% of the property’s market value after any exemption or concession. Transfers exempt from duty do not trigger entry. These include deceased estate transfers, spouse or partner transfers and purchases by charities. The next dutiable sale of that property becomes its entry transaction instead.

Victoria’s standard non-principal place of residence scale sets the final duty. Under current SRO rates, a dutiable value above $960,000 and up to $2 million attracts 5.5% of the whole value, so a $1.8 million purchase carries $99,000 in duty. Other states apply their own scales, and commercial stamp duty by state can differ widely for the same purchase price.

Who Can’t Use the Transition Loan

Eligibility for the TCV transition loan is narrower than eligibility for CIPT. TCV also assesses each applicant’s capacity to repay, so meeting the criteria makes a buyer eligible to apply, not certain of approval:

SMSF Trustees

A self-managed super fund (SMSF) cannot use the transition loan, because TCV’s definition of an eligible Australian business excludes it. A fund buying commercial premises pays the final duty in the usual way, so it typically needs more cash on hand before settlement than a business buyer using the loan. An SMSF commercial property loan broker can map that requirement against the fund’s balance early.

Foreign Purchasers

Foreign purchasers cannot use the transition loan. Individual applicants must be Australian citizens or permanent residents aged at least 18 at settlement, and business applicants must be Australian businesses. According to DTF, foreign owners still become liable for CIPT once the transition ends, without an absentee owner surcharge.

Residential Investors

Buyers planning a residential or residential investment use are excluded. Individuals, and trusts or partnerships with an individual trustee or partner, must confirm the property will not be used wholly or predominantly for those purposes. A buyer intending to convert a commercial building into apartments would typically sit outside the loan.

Cash-Only Buyers

A buyer paying entirely in cash cannot use the loan, because TCV requires finance approval for the property from an approved lender. That means most authorised deposit-taking institutions regulated by the Australian Prudential Regulation Authority, or certain licensed lenders it registers as financial corporations.

Share Buyers

Buying shares or units in a landholder cannot be funded with the transition loan. TCV excludes purchases subject to landholder duty, economic entitlement duty, long-term lease duty or duty on changes in beneficial ownership. Buying the land directly is typically the only route to the loan.

Later Buyers

A property already within the tax reform scheme when the application is made, or one that has previously carried a transition loan, is not eligible. In most cases, there is no duty to finance, because later transfers of reform land are generally exempt while the property keeps a qualifying use.

Buyers Over $30 Million

The sale price must be $30 million or less, and the loan cannot exceed $1.93 million. That ceiling is the duty on a $30 million purchase under the current scale.

These criteria are a general guide drawn from TCV’s published eligibility rules, which TCV may update.

CIPT Transition Loan Terms

The loan comes on standard terms that cannot be negotiated, so each term compares directly with a commercial facility. The terms that shape the decision most are:

Loan Amount

Borrowers can apply for any amount up to the duty payable, with no minimum. Borrowing part of the duty and paying the rest in cash may help a buyer stay within the combined borrowing limit.

Interest Rate

The rate is fixed for the life of the loan. It equals a base rate linked to government borrowing costs plus a risk margin the Treasurer sets each year, which TCV’s published loan terms put at 2.25% for 2024–25. No later margin had been published as at October 2026.

DTF’s 2024 fact sheet combined a 4.87% base rate with that margin to show an illustrative fixed rate of 7.12%. Approved borrowers receive an indicative rate in their loan documents and are notified of the final rate on settlement day.

Repayment Schedule

Repayments are 10 equal annual instalments of principal and interest, with no interest-only period and no redraw. The first repayment falls due 12 months after settlement.

Loan Security

A first-ranking statutory charge recorded on title after settlement secures the loan, giving TCV priority ahead of all other encumbrances. The charge covers principal, interest and costs owed under the loan agreement.

Loan Fees

There is no application fee. TCV lists a Land Use Victoria fee of $108.60 for recording and for removing the charge. Electronic settlement fees of $68.64 to record it and $50.71 to remove it also apply.

Early Repayment

Borrowers can repay the loan in full or in part at any time, with a minimum prepayment of $10,000. A break cost or benefit may apply, and TCV confirms the effect before the borrower decides whether to proceed.

Payout Triggers

Selling the property or changing it to a non-qualifying use makes the outstanding balance repayable. The loan cannot be transferred to a later purchaser or extended beyond its 10-year term.

These terms are a general guide based on TCV’s published information and may change. The loan agreement issued at approval is the document to rely on.

Paying Duty Upfront Versus the Transition Loan

Paying duty upfront typically costs less over 10 years, while the transition loan leaves more cash in hand at settlement. DTF’s worked example shows the trade-off on a commercial purchase carrying $99,000 in duty, repaid through the loan at $14,174 a year. Assuming the property is valued at its $1.8 million price and the bank lends at a loan-to-value ratio (LVR) of 70%, the two paths compare as follows:

Item	Paying Duty Upfront	Using the Transition Loan
Duty paid at settlement	$99,000	$0
Purchase loan from the bank	$1,260,000	$1,251,000
Cash needed at settlement	$639,000	$549,000
Duty-related payment each year, years 1 to 10	$0	$14,174
Total duty-related cost over 10 years	$99,000	$141,740
Estimated CIPT in year 11	About $11,100	About $11,100

These figures are a general guide built on DTF’s 2024 illustrative rate and exclude legal, valuation and lender costs.

Cash At Settlement

The transition loan reduces the cash needed at settlement by about $90,000, not the full $99,000. TCV requires total interest-bearing debt, including the transition loan, to stay at or below 75% of the property’s value.

A 70% bank loan plus duty equal to 5.5% of the price comes to 75.5%. The bank loan therefore has to drop to about 69.5%, or $1,251,000, which lifts the deposit from $540,000 to $549,000. A valuation below the purchase price would narrow the gap further. Planning the full commercial property deposit around this limit helps avoid a shortfall after exchange.

Total 10-Year Cost

On DTF’s figures, 10 repayments of $14,174 total $141,740, which is $42,740 more than paying the duty upfront. That difference is the interest at the 7.12% illustrative rate. The gap moves with the rate set at drawdown, so the comparison is worth rerunning with the indicative rate in your loan documents before you accept the offer.

Freed-Up Cash

The loan typically makes financial sense when the cash it frees up earns or saves more than the loan costs. Using that $90,000 to fund a fit-out, carry extra stock or avoid drawing on an overdraft may cost less than borrowing for those purposes at a higher rate. Cash that would otherwise sit in a low-interest account points the other way, and paying upfront usually costs less in that case.

Early Sale Cost

A sale before the loan is repaid means the remaining balance comes out of the sale proceeds. At the illustrative rate, about $67,300 would still be owing after four annual repayments, payable before settlement of the sale, along with any break cost.

A buyer who paid duty upfront has nothing outstanding in the same situation. Both have spent the $99,000, but only the loan path has also carried four years of interest. Owners who expect to relocate or sell within a few years may find the numbers less favourable.

How the Transition Loan Affects Your Borrowing

Your purchase lender and TCV assess the same deal, and each takes the other’s debt into account. That can change both the size of your bank loan and your settlement timetable:

75% Borrowing Limit

TCV’s ratio counts the transition loan together with the applicant’s other interest-bearing debt, measured against the property’s value on a standalone basis. TCV describes the ratio as one input to its credit assessment, not the only factor, and reserves the right to vary it.

Buying through an entity that already carries other borrowings may make the limit harder to meet. That question belongs with your accountant before you settle on the purchasing structure.

First-Ranking Charge

The statutory charge outranks your bank’s mortgage, which weakens the bank’s security position, and lender policies on this vary. Some lenders may count the transition loan balance as prior-ranking debt in their own LVR. Others may want the arrangement disclosed and approved before settlement, or may price the facility differently. TCV recommends that applicants tell their approved lender they are applying.

Annual Repayment

A lender assessing the purchase loan will typically treat the $14,174 annual repayment as a known commitment, which may reduce the amount it is prepared to lend. For an investor, the repayment also sits against the rent when a lender tests whether the property’s income covers its costs. How each lender weighs that commitment in commercial loan serviceability varies from one credit policy to the next.

Because the full instalment falls due once a year, a business with tight monthly cash flow may need a reserve set aside well ahead of each due date.

Approval Order

Bank approval comes first. TCV asks for proof of finance approval along with the contract of sale, the property clearance certificate and the documents supplied to the approved lender. Individual applicants also provide photo identification and a credit report no older than 30 days. Sole traders and non-individual applicants provide two years of audited financials, and trusts supply the trust deed.

TCV then assesses the application, prepares the loan agreement and takes part in the electronic settlement, paying the loan amount at settlement. It publishes no fixed turnaround and asks applicants to allow enough time before settlement, so a contract with a short settlement period may leave little room.

How CIPT Affects Holding Costs and Resale

The transition loan changes when the final duty is paid, not what the property costs to hold afterwards. These longer-term costs apply on either path:

Annual CIPT Bill

CIPT generally costs 1% of the property’s site value each year, or 0.5% for eligible build-to-rent properties, while the use stays qualifying. It begins in the first calendar year after the 10-year transition ends, so an entry transaction on 1 July 2024 leads to a first CIPT year of 2035.

There is no tax-free threshold. Liability is based on ownership at 31 December following the 10th anniversary of entry, and the tax can be paid in a single payment or by instalments.

DTF’s example estimates year-11 tax at about $11,100 on the same $1.8 million property, which suggests it assumes the $830,000 site value rises over the decade. On the loan path, a buyer moves from $14,174 a year in repayments to about $11,100 a year in tax. On the upfront path, the buyer pays nothing for 10 years and then picks up the same tax.

Ongoing Land Tax

Land tax may still apply during the transition, and an owner may be liable for both land tax and CIPT once the 10 years are complete, according to the SRO. A property exempt from land tax will generally be exempt from CIPT as well. A budget built on the current land tax bill alone may understate holding costs from year 11.

Recovery From Tenants

According to DTF, landowners cannot pass CIPT through to retail tenants covered by the Retail Leases Act 2003, which matches the treatment of land tax. For industrial and other non-retail leases, recovery depends on the outgoings clause, and leases drafted before the reform may not mention CIPT at all.

For an investor, an unrecoverable tax reduces net income and may affect how a lender or valuer views the property’s yield. A commercial property investment loan broker can factor that future cost into the lending assessment from the outset.

Duty-Free Resale

A standard transfer of reform land with a qualifying use is exempt from duty in three situations, according to the SRO. One is when the interests that entered the reform totalled 100%. Another is when at least three years have passed since the property first entered. The third is when the interest sold is the same, or substantially the same, as an interest that already entered.

A buyer who acquired 100% of the property can therefore typically offer the next purchaser a duty-free transfer straight away. That purchaser inherits the original CIPT start date. In DTF’s example, a business buys retail premises in October 2030 that entered the reform in 2025, pays no duty and starts paying CIPT from 2036.

Change-of-Use Duty

A property in the reform that changes to a non-qualifying use, such as residential, stops attracting CIPT. A later owner who bought it duty-free may face change-of-use duty, reduced by 10% for each 31 December since their purchase. Owners need to notify the SRO within 30 days of any change of use.

Fund Your Final Duty

Before the finance condition in your contract expires, ask your purchase lender to confirm in writing whether it will accept a transition loan charge ranking ahead of its mortgage, and at what loan size.

If you are weighing up how to fund the final duty on a Melbourne commercial purchase, the team at Loanworx Group can talk you through the options that suit your circumstances.

Frequently Asked Questions (FAQs)

1. Is the transition loan interest rate the same for every borrower?

At any given time, yes. DTF has said the same rate applies to all eligible borrowers.

Borrowers who settle at different times may still receive different rates, because each rate is set on the day the loan is drawn. TCV’s credit assessment decides approval, while the rate itself follows the published formula of base rate plus the Treasurer’s margin.

2. Can I refinance the transition loan into my commercial loan later?

Refinancing is possible in principle, because the loan can be repaid early. Your commercial lender would need to approve the extra borrowing against the property’s value, and removing the charge from title incurs the published removal fees.

A commercial refinance broker such as Loanworx Group can compare whether folding the balance into an existing facility costs less over the remaining term.

3. What happens if I miss an annual transition loan repayment?

Under TCV’s published fee schedule, a missed payment may attract a $50 arrears fee in the first 30 days and a $100 fee after that.

Default interest and a $350 default notice fee may also apply, and the debt remains secured by the first-ranking charge on the property. Contacting TCV early may open hardship options such as a repayment holiday.

4. How can I tell whether a property has already entered the CIPT reform?

The property clearance certificate issued by the SRO shows the property’s qualifying use, entry date and CIPT status, and buyers can apply for one directly.

Where a transaction is complex, the SRO can issue a private ruling on how CIPT applies.

5. Is transition loan interest tax deductible?

It depends on how the property is used and the structure that holds it. Stamp duty and interest on money borrowed to pay it may be treated differently for tax purposes.

An accountant can confirm the after-tax cost of each path for your purchase before you choose one.

6. Does the regional commercial duty concession work with the transition loan?

It can. DTF states that qualifying properties eligible for the regional commercial and industrial duty concession still enter the reform and keep the 50% reduction on their final duty. The SRO notes the purchase must still meet the 50% entry test.

The transition loan may then cover the reduced duty, provided the buyer and property meet TCV’s other criteria. Whether a particular property counts as regional depends on its location under the concession’s rules, which the SRO publishes.

This article is general information only and does not take your objectives, financial situation or needs into account. Figures, rates and loan terms reflect government sources available in October 2026 and may change. You may wish to speak with a qualified professional, such as your accountant, solicitor or finance broker, before acting on any of it.