A property must have a qualifying use to enter and stay in the commercial and industrial property tax (CIPT) reform.
How to determine if a property has a ‘qualifying use’?
The qualifying use of a property is assessed on a title-by-title basis.
The qualifying use of a property is usually (but not always) determined by reference to the Australian Valuation Property Classification Code (AVPCC) allocated to the property in its latest valuation by the Valuer-General of Victoria (VGV) (or a valuer appointed by the VGV).
Each separate occupancy on a property is allocated a numerical AVPCC of between 100-991. The AVPCC is displayed on numerous documents for a property, including its council rates valuation notice.
The qualifying use of a property is not determined by reference to its AVPCC in a limited number of cases. These include properties that are allocated multiple different AVPCCs (i.e. a mixed-use property), used as student accommodation, not valued by the VGV, not allocated an AVPCC or non-rateable non-leviable land under the Emergency Services and Volunteers Fund Act 2012.
When does a property have a ‘qualifying use’?
All AVPCC(s) are within the prescribed range
A property will have a qualifying use if it has been allocated one or more AVPCC, all of which are in the following prescribed range:
| Prescribed range | Examples |
|---|---|
| 200-299 (commercial) | Retail premises, shops, cafes, offices, hotels, motels, medical centres, commercial vacant land |
| 300-399 (industrial) | Manufacturing, factories, warehouses, storage facilities, industrial vacant land |
| 400-499 (extractive industries) | Mines, quarries |
| 600-699 (infrastructure and utilities) | Waste disposal, recycling facilities |
Example 1
Rose owns a commercial retail property in regional Victoria recorded on a single certificate of title. The property has been allocated AVPCC 210 (retail premises) in its most recent council rates valuation notice.
The property has a qualifying use for the purposes of the CIPT reform.
Example 2
Arjun owns two properties in Melbourne that are adjacent to each other. The properties are separately titled. One of the titles has an office building that has been allocated AVPCC 220 (office premises). The adjacent property is a detached residential dwelling that has been allocated AVPCC 110 (detached dwelling).
The property with the office premises has a qualifying use. The property with the detached residential dwelling does not have a qualifying use.
Provisional determination of a qualifying use
Sometimes, a property will not have been valued by the VGV and/or not been allocated an AVPCC when it is sold. This is rare and mostly occurs when a property is subdivided and then sold soon after i.e. sold prior to a council valuation. Prior to amendments made by the State Taxation Acts Amendment Act 2025 (the Amendment Act), there was no mechanism to determine if these properties had a qualifying use and therefore were eligible to enter the CIPT reform under an entry transaction.
The Commissioner of State Revenue (Commissioner) is now authorised to provisionally determine that a property has (or does not have) a qualifying use in the following circumstances:
- the property has not been valued by the VGV or a valuer nominated by the VGV;
- the property has not been allocated an AVPCC in its latest valuation; or
- the property is not Council rateable and not leviable under the Emergency Services and Volunteers Fund Act 2012 (non-rateable non-leviable) and more than 12 months have elapsed since the valuation date of the property’s latest valuation.
The Commissioner’s provisional determination is an interim step and applies until the property is allocated an AVPCC in a valuation undertaken by the VGV or a valuer appointed by the VGV. When this occurs, the new AVPCC will override the Commissioner’s provisional determination to the extent of any inconsistency. The new AVPCC will be taken to have been allocated to the property on the effective date of the Commissioner’s provisional determination. If required, the Commissioner must assess or reassess any duty or CIPT payable as a result of the new AVPCC.
The Commissioner may make a provisional determination with effect at any date, including a date that occurred before the commencement of the Amendment Act (25 June 2025) and/or a date prior to a dutiable transaction.
In making a provisional determination, the Commissioner may have regard to any relevant matter, including:
- the sole or primary use of the property
- if the property is a child lot created on the registration of a plan of subdivision, the AVPCC (if any) allocated to the property that was subdivided (the parent lot)
- the zoning of the property under a planning scheme applying to the property.
Example 3
Rupert owns a property which is allocated AVPCC 320 (general purpose warehouse), zoned industrial and includes 2 warehouses. Diego registers a plan of subdivision to subdivide the property into a separate lot for each warehouse, Lots A and B.
Shortly after the subdivision, Rupert transfers Lot A to Diego under a qualifying dutiable transaction. As at the date of the transaction, Lot A had not been valued by the VGV and had not been allocated any AVPCC. Therefore, Lot A does not have qualifying use and could not enter the CIPT reform under the transaction unless the Commissioner makes a provisional determination.
The Commissioner makes a provisional determination, with effect from the date of the transfer, that Lot A has a qualifying use. The provisional determination is made on the basis that Lot A is used as a warehouse, zoned industrial and its parent lot had a commercial AVPCC (320). Accordingly, Lot A will enter the CIPT reform on the date of the transaction if it meets all other requirements to be an entry transaction.
Example 4
On 28 March 2025, Akash acquires a 60% interest in Company A (a private landholder) under a relevant acquisition that was a qualifying landholder transaction. At the time of the relevant acquisition, the only land holdings of Company A are 2 lots under a recently registered plan of subdivision, Lots A and B. The lots had not been valued by the VGV or a valuer appointed by the VGV as at the date of the relevant acquisition. Therefore, the lots do not have qualifying use and cannot enter the CIPT reform under the acquisition unless the Commissioner makes a provisional determination.
Akash lodges an acquisition statement for the relevant acquisition with the Commissioner. The Commissioner subsequently makes a provisional determination as to the qualifying use of Lots A and B. This provisional determination is made on 4 August 2025 but applies as at the date of the relevant acquisition, being 28 March 2025.
If the provisional determination was that Lots A and B had a qualifying use, the lots would enter the CIPT reform on 28 March 2025. This is the outcome even though the relevant acquisition occurred before the commencement of the Amendment Act (25 June 2025) and the Commissioner’s provisional determination was made after the date of the relevant acquisition.
Example 5
On 1 May 2028, Louis transfers a property to Nikolai under a qualifying dutiable transaction (Transfer 1). At the time of Transfer 1, the property had not been valued by the VGV or a valuer appointed by the VGV. The Commissioner makes a provisional determination that the property has a qualifying use as at 1 May 2028. This enables Transfer 1 to be an entry transaction and the property to enter the CIPT reform on 1 May 2028.
The Commissioner subsequently requests the VGV to cause a valuation of the property and to allocate one or more AVPCC to the property.
On 1 July 2028, Nikolai transfers their property to Manuel under a qualifying dutiable transaction (Transfer 2). At the time of Transfer 2, the property still had not been valued by the VGV. Based on the Commissioner’s provisional determination, Transfer 2 is exempt from duty on the basis the property had a qualifying use, was already in the CIPT reform and its entry interest was a 100% interest.
On 1 October 2028, the VGV returns a valuation of the property which allocates it a single residential AVPCC. This AVPCC is taken to have been allocated to the property on 1 May 2028 and will override the Commissioner’s provisional determination that the property had a qualifying use. Therefore, the property is taken to not have a qualifying use on and from 1 May 2028. As a result:
- Transfer 1 was not an entry transaction and the property did not enter the CIPT reform on 1 May 2028
- Transfer 2 will not be exempt from duty as the property was not already in the CIPT reform at the time of the transfer. The Commissioner must consequently reassess Transfer 2 for duty on this basis (unless a non-CIPT exemption applied).
Mixed-use property (multiple AVPCCs)
A property on one title may sometimes be allocated multiple AVPCCs, one or more of which is in the prescribed range (200-499 and 600-699) and one or more is outside the prescribed range. For example, a two-storey building with a street level shop and a residence above.
In these cases, the property will have a qualifying use if it is used solely or primarily for one of the qualifying uses described in the prescribed range (AVPCC 200-499 and 600-699). If the sole or primary test indicates that a property with multiple AVPCCs has a qualifying use, then the entire mixed-use property (on a single title) will enter the CIPT reform if it is the subject to an entry transaction.
The ’sole’ or ‘primary’ use of property is determined by the Commissioner. The concept of property being solely or primarily used for a particular purpose is not a new concept. For example, it is already a feature of the regime for foreign purchaser additional duty and for the primary production land tax exemption.
Although no single factor is determinative, the factors that the Commissioner may take into account to determine the sole or primary use of property include, but are not limited to, the following:
- The area of property over which each use extends. The area of floor space of the building that is used for a qualifying use and a non-qualifying use respectively. If more than 50% of the floor space is designed and built for a qualifying use, an inference could be drawn that the building is primarily used for a qualifying use.
- Intensity of use. The intensity of the qualifying versus non-qualifying use. For example, if 70% of the building is designed to be used as a professional office suite and the other 30% of the building is designed to be used as a single apartment for a couple or small family, there is a greater intensity of the qualifying use.
- Level of investment. The level of investment undertaken by the property’s owner. A greater investment in the component of the building designed for a qualifying use provides an inference that the property could be used primarily for a qualifying use.
- Amount of return on investment (if each use provides a return on investment). Where a greater proportion of the return is derived from that part of the property that has a qualifying use, it is more likely that the property will have a qualifying use.
- Zoning of the property. The zoning of the property as well as any overlays, planning restrictions or covenants which impact the purpose or intended purpose of the property and its buildings. For example, a property that is located in a commercial zone and is limited to specific non-commercial purposes is more likely to have a qualifying use.
The sole or primarily use of a property is directed at the current and actual use of the property. The intended or potential future use of the property by its current owner or a purchaser is irrelevant.
The inquiry is also directed at whether the use of the property imparts on the property the necessary character of it being primarily used for that use. To this end, the use of the property must not be minimal, slight, intermittent or spasmodic to be considered the sole or primary use.
Example 6
Ethan owns a property in inner city Melbourne that is in a mixed-use zone and registered on a single certificate of title. A two-level building is located on the property and both levels are fully or partially leased to tenants. The ground floor comprises three professional suites which are leased to various health practitioners who have tailored fit outs. The second floor is smaller and used as two apartments, one of which is vacant.
Wei is considering making an offer to purchase the property from Ethan and wants to know if the property has a qualifying use for CIPT. During due diligence, Wei identifies that the property’s most recent valuation records that it has been allocated multiple AVPCCs – some that are commercial (200-299) and some that are residential (100-199).
The property will have a qualifying use if it is used solely or primarily for a use within the prescribed range of 200-499 and 600-699. As the property is used for commercial and residential uses, it is necessary to weigh the respective uses against one another. In this example, the property will be considered to have a primarily commercial use as:
- more than 50% of the floor space of the building is used for a commercial use and it is considered to have a great intensity of use than the residential use
- the amount of capital expenditure, current expenditure, revenue and profit attributable to the commercial use is more significant than for the residential use.
To obtain certainty as to whether the mixed-use property has a qualifying use, Wei could request a private ruling from the Commissioner.
Eligible student accommodation
A property will have a qualifying use if it is used solely or primarily as ‘eligible student accommodation’. Eligible student accommodation means residential premises that are:
- designed for occupation by students of a higher education provider; and
- occupied or available for occupation by students of a higher education provider; and
- ‘commercial residential premises’ within the meaning of section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 of the Commonwealth (GST Act).
The definition of commercial residential premises in the GST Act in this content requires that the premises must not be used to provide accommodation to students ‘in connection’ with a higher education institution (e.g. a university). If it is, then the premises will not be commercial residential premises and will consequently not be eligible student accommodation (i.e. it will not have a qualifying use). In this context, there are a broad range of factors to be considered when determining if a property provides accommodation to students ‘in connection with’ a higher education institution and no single factor is determinative.
Examples of premises that are not commercial residential premises and therefore not eligible student accommodation include:
- university or tertiary college owned and run residential accommodation
- privately owned accommodation let to a university or tertiary college for student accommodation
- privately owned and run accommodation for students of a particular higher education institution under an arrangement or agreement with that institution.
Example 7
ABC Pty Ltd provides student accommodation to university students in connection with XYZ University, a provider of higher education. XYZ University has significant input in the running of the student accommodation provided by ABC Pty Ltd and preference is given to students of XYZ University.
Taking into these and other factors into account, the student accommodation provided ABC Pty Ltd is not commercial residential premises within the meaning of the GST Act. Accordingly, the student accommodation is not eligible student accommodation for CIPT.
Example 8
Sample Enterprise Pty Ltd owns a property on which a building is affixed which was designed for student accommodation and provides student accommodation to university students. Sample Enterprise Pty Ltd is not owned by any higher education institution and the student accommodation is not affiliated with any higher education institution. Sample Enterprise Pty Ltd determines pricing arrangements for the accommodation and the services provided to students with no input from any higher education institution. Students attending any higher education institution are eligible to apply to reside in the student accommodation.
Taking into account these factors and other considerations, the student accommodation provided by Sample Enterprise Pty Ltd is commercial residential premises within the meaning of the GST Act. Accordingly, the student accommodation is eligible student accommodation for CIPT.
