Buying commercial property in Victoria: how the CIPT transition loan fits with your bank loan

Buy a warehouse in Dandenong South, a shop in Bendigo or an office in Geelong today and you’ll face a choice no buyer in another state gets. You can pay the stamp duty at settlement in the usual way, or let the Victorian Government lend it to you and repay it over 10 years.

That second option, the CIPT transition loan, can free up tens of thousands of dollars of deposit. It also changes how your bank looks at the deal, because the government’s loan ranks ahead of the bank’s. Here’s how the two loans fit together, and how to set up the purchase so neither one trips up the other.

First, a quick refresher on CIPT

Victoria is phasing out stamp duty on commercial and industrial property and replacing it with an annual Commercial and Industrial Property Tax (CIPT). A property enters the reform the first time it changes hands in a qualifying sale on or after 1 July 2024. The buyer pays duty that one last time. Ten years later, the property starts paying CIPT instead, which the SRO says is generally 1% of the site value each year.

A few details matter for buyers:

• Qualifying use usually comes from the property’s land use code on its latest valuation. Shops, offices, warehouses, factories and vacant commercial or industrial land are the common ones.
• Duty must be payable on at least 50% of market value. If an exemption or concession cuts the duty below that, the property doesn’t enter the reform. That includes the regional commercial and industrial concession, so country buyers should check.
• CIPT is separate from land tax. Land tax can still apply during the transition, and after it you may pay both. Our land tax guide covers how land tax works on business premises in each state.
• Later sales can be duty-free while the property keeps a qualifying use. Future buyers will like that when you come to sell.

For how Victoria compares with the other states, see our stamp duty on commercial property comparison.

What the transition loan actually is

The transition loan comes from Treasury Corporation of Victoria (TCV), the state’s central borrowing authority. It covers the land transfer duty on a purchase that enters the reform. According to TCV’s own terms:

Feature	How it works
Who can apply	A business set up in Australia (SMSFs are excluded), or an adult citizen or PR buying for business or investment rather than as a home
Purchase price	Up to $30m, where you signed the contract from 1 July 2024
Loan amount	Any amount up to the duty owed, to a ceiling of $1.93m
Term	A decade, fully amortising, with nothing to redraw
Repayments	One payment a year, the same each time, covering interest and a slice of the duty; the pricing is locked in on the day the money is drawn
Security	A charge created by statute that sits first on the title, registered once settlement is done
Fees	Nothing to apply; minor recording fees for the charge
Early repayment	Pay it down whenever you like in lumps of $10,000 or more; breaking the fixed pricing can cost or credit you

There’s also a condition that surprises people: TCV wants to see that a mainstream lender, such as a bank, has already approved your purchase finance. The transition loan doesn’t stand on its own. It’s built to sit alongside a normal commercial property loan.

The two rules that shape your bank loan

1. The government ranks first

Normally your bank holds the first mortgage over the property you’re buying. With a transition loan, TCV’s charge jumps the queue. In plain terms, if the property were ever sold to clear debts, TCV gets paid before your bank.

The charge is only the size of the duty, so it’s small next to the purchase price. Even so, your lender needs to know about it from day one. Bring it up when you first talk to your bank or broker, not the week before settlement.

2. The 75% ceiling on total debt

TCV’s credit test caps the loan-to-value ratio at 75%, counting all interest-bearing debt, including the transition loan itself. This is where buyers get caught. Plenty of commercial lenders will go to 70% or more on a good industrial property. Add the duty loan on top and you can tip over the line.

Illustrative example: a factory in Dandenong South

Illustrative example. A family-owned joinery business has rented in Dandenong South for years and now has the chance to buy a $1.4m factory with a qualifying industrial use.

Victoria’s general duty scale charges 5.5% of the dutiable value for properties between $960,000 and $2m, according to the SRO’s current rates. On $1.4m, that’s $77,000 in duty.

	Pay duty upfront	Use the transition loan (bank at 65%)	Use the transition loan (bank at 70%)
Bank loan	$910,000	$910,000	$980,000
Transition loan	—	$77,000	$77,000
Total debt	$910,000	$987,000	$1,057,000
Total debt as % of value	65%	70.5%	75.5% — over the cap
Cash needed (deposit + duty, before other costs)	$567,000	$490,000	$420,000 (if allowed)

Using the transition loan at a 65% bank loan saves the business $77,000 of cash at settlement and keeps total debt well under 75%. Push the bank loan to 70%, though, and the combined debt breaks the cap. The highest bank loan that still works with a full $77,000 transition loan is $973,000, because $1,050,000 is 75% of $1.4m.

From then on, the business makes one transition loan payment a year: roughly a tenth of the duty plus interest. Your bank will count that payment when it checks whether the business can afford both loans, so don’t forget it in your own budget.

Thinking about buying your premises in Victoria and working out the deposit? See what your business could qualify for. Enquiring won’t touch your credit file.

Ways to bridge the deposit gap

The transition loan reduces the cash you need, but it doesn’t replace the deposit. Common ways to make up the rest:

• Use other property as extra security. If the owners have equity in a home or other premises, a lender can take that as extra security, which can reduce the cash deposit. Our guide to regional property as loan security explains how valuers look at different kinds of property.
• Split the costs. Pay part of the duty in cash and borrow the rest from TCV. There’s no minimum loan, so you can size it to stay under 75%.
• Keep working capital separate. Moving, fit-out and new machinery often land in the same few months. An unsecured or line-of-credit facility sized on turnover can stop the deposit eating into your trading cash.

Because the TCV charge ranks first on the new property, any further loan secured over that same property ranks behind both TCV and your main lender. Securing extra funds against a different property is often the neater option.

Timing: get the order right

1. Before you sign. Check the property’s land use code and confirm with your conveyancer that the sale will be an entry transaction. If you’re relying on a regional concession, confirm the 50% test.
2. When you apply to your bank. Tell them you plan to use the transition loan and give them the duty figure, so the valuation and approval are based on total debt.
3. Once the bank approves. Apply to TCV online with your documents. Leave plenty of room before settlement, because TCV assesses the application itself.
4. At settlement. TCV settles through PEXA and pays the duty, and its charge is recorded on title afterwards.
5. Every year after. Diarise the annual repayment. Ten years after entry, budget for CIPT as well, because it becomes a permanent holding cost.

Is it worth taking?

For many buyers, yes, mostly because of cash flow. Your duty money stays in the business when it’s buying stock, hiring or fitting out new premises. It’s less attractive if your bank is offering a higher loan than the 75% cap allows, or if you’d rather keep a clean first mortgage. In either case you can still pay the duty upfront.

Either way, the decision affects your deposit, your bank approval and your cash flow for the next decade. Run the numbers with your accountant before you sign the contract. The Victoria state guide lists local support services, including Business Victoria and the Victorian Small Business Commission.

Buying your own Victorian premises? Let’s look at the whole deal

Owning the building your business runs from is a big step. Rent turns into equity, nobody can refuse to renew your lease, and the CIPT reform means the next buyer may never pay stamp duty on it. Making the deposit, the bank loan and the transition loan fit together is where most of the work is, and that’s what we help with.

Enquiring takes around 60 seconds and there’s no credit check when you first enquire. We won’t send your details to a pile of lenders, so your phone won’t fill up with calls from strangers. A real person who knows how Victorian commercial property deals are put together reads your situation and calls you. Please fill the form in accurately, including the purchase price, the duty and any other property you own, so we can line up the right option the first time.

See if you qualify →