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Incentives Every Commercial Property Investor Should Know

Article | 2min read

by JONES REAL ESTATE on January 28, 2025

Victoria is making significant strides to attract commercial property investment, offering a range of incentives that far exceed those available in the residential sector.

These government benefits not only help investors improve cash flow but also reduce tax burdens and enhance long-term profitability.

Asset Depreciation Claims

One of the advantages for commercial property investors is the ability to claim depreciation on assets, such as building structures and fittings, which is applicable to new and old properties.

This powerful tool allows investors to offset costs, free up capital, and reduce taxable income, ultimately enhancing the performance of their portfolio.

Capital Gains Tax Benefits

Investors who hold a commercial property for more than 12-months may qualify for a Capital Gains Tax (CGT) discount.

For an individual or trust, this could be up to 50 per cent when selling, or for those whose commercial properties are managed by a Self-Managed Super Fund (SMSF), the CGT discount is 33 per cent.

This significantly reduces the overall tax liability and for long-term investors can lead to substantial savings, making it an attractive option for those looking to build wealth over time.

Commercial Stamp Duty Roll-Back

As at 1 July 2024, the Victorian Government began phasing out stamp duty on commercial and industrial property transactions. Buyers will pay stamp duty for the final time at the point of purchase from 1 July, after which a new tax system will apply.

Starting ten-years after the purchase, a Commercial and Industrial Property Tax (CIPT) of one per cent of the property’s site value will apply annually.

This shift is separate from land tax, which will continue as usual, with existing exemptions under land tax also applying to the CIPT.

This reform is designed to streamline the taxation process and support business growth and investment in Victoria.

Deductions & Sustainability Incentives

Beyond these tax benefits, commercial property investors can also claim a range of deductible expenses, such as interest on loans, property management fees and maintenance costs, which help to reduce taxable income and improve cash flow.

Additionally, the Australian federal government offers several grants to enhance the sustainability credentials of buildings. This includes $500,000 grants from the Green Building Fund to help commercial office buildings, hotels and shopping centres lessen their environmental impact.

Another sustainability incentive is Energy Efficiency Grants for Small and Medium Sized Enterprises. These offer business owners up to $25,000 to improve the energy efficiency of their buildings through the replacement of outdated operational equipment.

Ultimately, these tax benefits and sustainability incentives are aimed at stimulating investment in Victoria’s commercial property market, driving growth, fostering innovation and increasing competition within the sector.

By leveraging these opportunities, investors can not only maximise returns, but also contribute to a more sustainable and dynamic property market.

Seeking expert advice is crucial to navigate the complex eligibility criteria, understand risks and maximise the benefits of these incentives.

If you are considering your next commercial property move and would like to learn more about these insights, reach out to our experienced team at info@jonesre.com.au.

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