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Is There Stamp Duty When Buying a Commercial Property?
Stamp duty, or transfer duty as it is now known as in Western Australia, is a government tax that is payable on most property transactions.
When purchasing commercial or industrial property in WA, it’s important to understand what stamp duty is, what rate of duty will apply to a given transaction, and what it means for your circumstance.
What is Commercial Property?
A commercial property is simply a property which you intend to use for business purposes. Unlike residential, this is a broad category and includes everything from offices, warehouses and stores, as far as a residential dwelling that is used for commercial gain.
Industrial property is defined as a property that is used for the actual manufacturing of something, and can be considered either a factory or plant. In Western Australia, all commercial and industrial property transactions incur stamp duty tax, unless granted an exemption for unique circumstance.
What is Stamp Duty on Commercial Property?
Stamp duty is payable on most commercial property purchases when you buy land or property or have the ownership of land or property transferred to you.
In WA specifically, stamp duty is calculated on the market value of the property being purchased, rather than the purchase price. The amount you pay is calculated on a sliding scale, generally from 1% to 6% of the purchase price, although it can be higher, meaning the more expensive the asset is, the higher the transfer duty rate is that you will be required to pay.
Transfer duty extends past the commercial property and into certain business assets, but let’s start by looking at how stamp duty is defined, how it’s calculated, and any exemptions that might apply.
Is Stamp Duty Always Payable When Buying a Commercial Property?
Whenever you purchase or acquire an interest in commercial property, you will be liable to pay stamp duty. There may also be a requirement to pay duty in other circumstances, such as if you lease a property, or even receive it through a trust or as a gift.
How Much is Stamp Duty on Commercial Property?
There are factors that should be considered when determining how much stamp duty you will need to pay. These include:
- The ‘dutiable’ value or the price you paid or market value, whichever is higher
- The intended use of the property
- If you are a foreign purchaser
- If the property is also your principal place of residence
- Any exemptions or concessions you may be eligible for
General Rate of Stamp Duty
The general rate of transfer or stamp duty applies to commercial property, rural property that is used in isolation, and vacant land which doesn’t qualify for the residential rate. The general rate of duty is as follows:
- < $80,000 = $1.90 per $100 or part thereof
- $80,001 – $100,000 = $1,520 + $2.85 per $100 or part thereof above $80,000
- $100,001 – $250,000 = $2,090 + $3.80 per $100 or part thereof above $100,000
- $250,001 – $500,000 = $7,790 = $4.75 per $100 or part thereof above $250,000
- > $500,001 = $19,665 + $5.15 per $100 or part thereof above $500,000
More information on these rates is available on the WA government information and services website.
What are the Stamp Duty Exemptions for Commercial Property?
There are several circumstances where paying stamp duty may be avoided but they are typically considered as less-common circumstances.
Of the possible exemptions, spousal and family farm transactions can qualify for exemptions, however, both relate to the buying and selling parties being married or directly related. Charitable transactions can have stamp duty exemption, provided the transaction entered is or are for charitable or similar public purposes. One other reason for exemption is when the transaction involves purchasing from a state body, in this case, the State of Western Australia.
A concessional rate of duty is available for certain purchases of a business undertaking if the value of the dutiable property does not exceed $200,000. For more information on stamp duty rates and available concessions for commercial property, visit the Western Australian government information and services website, and the Duties Fact Sheets for Business Acquisitions and Residential Property.
Concessional Rate of Transfer Duty
A transaction may be assessed at the concessional rate of duty where:
- the dutiable property is business property
- the dutiable value of the dutiable property does not exceed $200,000 and
- the purchaser is an eligible purchaser, being a person who is not a government body and who intends to carry on the business for an indefinite period.
The concessional rate of duty is as follows:
- < $100,000 = $1.50 per $100 or part thereof
- $100,001 – $200,000 = $1,500 + $4.39 per $100 or part thereof above $100,000
Calculating Stamp Duty for Commercial Property
The Western Australian government information and services website has a calculating tool which you can use to check how much stamp duty you will have to pay with commercial and industrial property purchases fall under the general rate type.
If you are purchasing more than one commercial property, the properties would be combined into one collective and for stamp duty to be calculated accurately, you will need the execution date and the total purchase price and value of the property.
As a privately owned West Australian company that specialises in the South-eastern corridor of Perth, Ross Scarfone Real Estate can assist you with all aspects of commercial and industrial sales, leasing, property management, valuations, investment, and development.
For specialist insight into the commercial real estate market, opportunities, or specific advice on indicative transfer duties, call or email Ross Scarfone Real Estate.
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