Buying Commercial Property in Victoria

The purchase roadmap

Commercial acquisitions in Victoria tend to move through five stages, and the leverage available to a purchaser falls sharply at each transition:

1. Before an offer. Fix the acquiring entity and funding structure, form an initial view of use and value drivers, and obtain the draft contract and Section 32 statement so they can be read before terms are agreed.
2. Negotiating the contract. Negotiate the special conditions, the GST treatment, the due diligence or finance conditions, and the warranties and adjustments — this is where risk is allocated.
3. Between signing and the end of any condition period. Complete the searches, reports and enquiries, and either satisfy, waive or terminate under the conditions on their exact terms and timing.
4. Between conditions and settlement. Finalise finance documentation and security, obtain clearance certificates, agree the adjustments, and put lease, security and insurance transitions in place.
5. Settlement and immediately after. Settle electronically, take possession, notify tenants and authorities, register the transfer, and attend to post-settlement adjustments and compliance obligations.

Advice is required at stage one rather than stage three. A due diligence condition that is drafted after the price is agreed rarely covers the issues the purchaser most needs to investigate, and an unconditional contract signed at auction leaves no room to correct an assumption about use, compliance or tax treatment.

What is acquired, and by whom

Two decisions frame everything that follows: what is being acquired, and which entity will acquire it.

What. A purchase of the land and buildings, a purchase of a business operating from premises, and a purchase of shares or units in an entity that holds land are three different transactions with different documents, liabilities, duty bases and GST treatment. Only the first is the subject of this guide. For the second and third, see our guides on buying a business in Victoria, business sale agreements and business due diligence.

Who. The purchasing entity — an individual, a company, a discretionary or unit trust, a partnership of entities or a self-managed superannuation fund — affects the contract description, lender requirements and guarantees, duty, GST registration, land tax and surcharge exposure, asset protection and succession. The entity should be settled, and where necessary incorporated or the trust established, before the contract is signed. Practical points that recur:

• Authority and execution. A company purchaser should execute in a manner consistent with the Corporations Act 2001 (Cth); a trustee should be confirmed as the current trustee with power under the trust deed to acquire, borrow and mortgage, and any required consents or resolutions should be documented before signing.
• Nomination and sub-sale risk. Signing in one name intending to nominate another is not a neutral step. Depending on what occurs between contract and completion — including additional consideration and land development — the sub-sale provisions of the Duties Act 2000 (Vic) can produce duty on more than one transaction. Naming the correct purchaser at the outset is the reliable answer; where a nomination is genuinely required, duty advice should be obtained first.
• SMSF acquisitions. A fund may acquire business real property from a related party only within the limits in section 66 of the Superannuation Industry (Supervision) Act 1993 (Cth), and any borrowing must satisfy the limited recourse borrowing arrangement conditions in section 67A. Fund-specific advice is required before an offer.

Contract and Section 32 review

Commercial contracts usually start from an industry form and are then heavily varied. The special conditions are where the substantive bargain sits, and they are read with — and often override — the general conditions. A purchaser review typically concentrates on:

• the description of the property, the plan, any excluded items and what personal property (fit-out, plant, chattels) is included;
• the GST clause: whether the price is GST-inclusive or plus GST, who bears the risk if a claimed treatment fails, and any gross-up or indemnity;
• conditions precedent — due diligence, finance, planning, board or trustee approval — and the exact mechanics for satisfaction, waiver, notice and termination;
• whether completion is with vacant possession or subject to existing leases, and what the vendor warrants about those leases;
• vendor warranties, disclaimers, limitation of liability and the survival of warranties after settlement;
• deposit amount, whether early release under section 27 of the Sale of Land Act 1962 (Vic) is contemplated, default interest, and rescission and forfeiture rights; and
• the adjustment date, what is adjustable, and any attempted adjustment that the law does not permit.

The Section 32 statement is a statutory disclosure document about prescribed matters as at its date. It does not warrant condition, lawful use or future approvals, and a purchaser who relies on it as a substitute for enquiry will be disappointed. Its contents, common defects and the remedies available are covered in our Section 32 guide.

Cooling off and commercial land

Section 31 of the Sale of Land Act 1962 (Vic) gives a purchaser of land a short cooling-off right, but the section does not apply in a number of cases. It does not apply to a contract for land used primarily for industrial or commercial purposes, and it does not apply to land of more than 20 hectares used primarily for farming. Section 31(5) separately excludes sales by public auction or within three clear business days before or after a publicly advertised auction, cases where the vendor and purchaser previously entered into a contract for the sale of the same land in substantially the same terms, and cases where the purchaser is an estate agent or a body corporate.

Whether an exclusion applies is a factual question about the land and the transaction, not an assumption to be made from the label on the listing. The practical rule is that no commercial contract should be signed on the footing that a cooling-off right will be available afterwards. Our cooling-off guide sets out the mechanics where the right does apply.

Title, encumbrances and access

A title search establishes what is on the register at a point in time. It tells the purchaser what is registered; it does not tell the purchaser what is on the ground or what unregistered arrangements exist. Three separate exercises are needed.

Register searches. The certificate of title, plan of subdivision, easements, covenants and restrictions, caveats, mortgages, registered leases and any registered agreements — for example a section 173 agreement under the Planning and Environment Act 1987 (Vic), which binds successors in title.

What survives settlement. The purchaser does not simply take subject to everything registered or disclosed. The purchaser takes subject to those interests the contract permits to remain — typically easements, covenants, registered agreements and (on a subject-to-lease sale) the leases. Interests that must be removed — the vendor's mortgage, caveats, and any other encumbrance the contract requires to be cleared — are discharged or withdrawn through settlement and registration arrangements, and the settlement mechanism must be checked to ensure the discharges and withdrawals will actually be lodged with the transfer.

Physical inspection and off-title enquiry. Boundaries and occupation, encroachments and party walls, the location of services and pits, the actual point of vehicle access and whether the crossover is lawfully constructed, on-site parking and loading arrangements and whether they depend on land the vendor does not own, rights of way and drainage used in practice but not registered, and utility capacity for the intended use (power supply and switchboard capacity, three-phase power, water pressure, trade waste and telecommunications). Where the intended use depends on a service upgrade or an access right over adjoining land, that should be resolved before signing rather than assumed.

Planning, use and overlays

Use of commercial land is controlled by the applicable planning scheme under the Planning and Environment Act 1987 (Vic). The purchaser's enquiry should establish:

• the zone and every overlay affecting use, buildings and works, including heritage, environmental audit, design and development, land subject to inundation or flooding, bushfire management and any public acquisition overlay or proposed road widening;
• whether the intended use is as of right, permit required, or prohibited in the zone;
• the permit history: existing permits, their conditions, endorsed plans, whether conditions have been complied with, and expiry or lapse;
• whether the current use relies on existing-use rights and whether the factual basis for those rights can actually be evidenced, since existing-use rights can be lost through discontinuance; and
• for any permit that would be needed, the likely referrals, notice requirements, objector risk and timeframe.

Council property information, planning certificates and informal comments from officers or agents do not guarantee that a use is or will be permitted. Where use, works or subdivision approval is essential to value, the contract should be conditional on the approval or on the purchaser's satisfaction with a planning assessment during a due diligence period. Planning strategy and prospects are matters for a town planner; the lawyer's role is to translate the outcome into the contract.

Building compliance and inspections

Building enquiry under the Building Act 1993 (Vic) and the associated regulations typically covers building permits and occupancy permits for the existing buildings; works carried out without a permit or contrary to endorsed plans; current building notices and orders; essential safety measures and the current maintenance determination and records; fire services; disability access, including the Premises Standards under the Disability Discrimination Act 1992 (Cth) where relevant; and combustible cladding and asbestos, including whether an asbestos register and management plan exist for the workplace.

Unauthorised works are a purchaser problem: the rectifying obligation and the cost of regularisation usually fall on the current owner. Technical inspection — a building surveyor, a building consultant, a structural or services engineer, and where indicated a hazardous materials consultant — is separate from the legal review, and the reports should be commissioned early enough to inform the price and the conditions rather than after signing. Insurance should also be examined: recent and open claims, the claims history, and whether the sum insured reflects current replacement value including demolition, professional fees and compliance upgrades.

Contamination and environmental duties

Two duties under the Environment Protection Act 2017 (Vic) must be kept distinct.

• The general environmental duty applies to a person engaging in an activity that may give rise to risks of harm to human health or the environment from pollution or waste. It attaches to what a person does, not to ownership or occupation as a status.
• The duty to manage contaminated land in section 39 applies to a person in management or control of contaminated land — which can include an owner, a tenant or another person with relevant control — and can apply even though that person did not cause the contamination.

A duty to notify the EPA may also arise where contamination of a prescribed kind is present, and information about contamination is expected to be passed on in specified circumstances, including to a purchaser or an incoming occupier. EPA public registers, priority sites and environmental audit statements are useful, but they are point-in-time records and do not establish that land is clean.

Where the site history suggests risk — service stations and underground storage tanks, mechanical or panel workshops, dry cleaners, metal finishing, chemical storage, fire-training or firefighting foam use associated with PFAS, landfill or imported fill, or older buildings with asbestos — a preliminary site investigation (Phase 1) should be obtained, and a detailed intrusive investigation (Phase 2) where the Phase 1 indicates it. The contractual response is then a matter of allocation: condition precedent, price adjustment, warranty, indemnity or a decision not to proceed.

Existing leases and tenant due diligence

On a tenanted purchase, the income is the asset. Lease due diligence should verify each lease against the rent roll and against the tenants themselves:

• the executed lease, every variation, any deed of consent or assignment, and any side letter, rent-free period, fit-out contribution or incentive deed — incentives frequently sit outside the lease and are frequently omitted from the disclosure pack;
• term, options to renew and how they are exercised, rent review mechanisms and dates, and whether any option or review has already been triggered;
• the rent ledger, arrears, payment history, and any current dispute, breach notice or proceeding;
• outgoings: what is recoverable, the estimate and reconciliation process, and any limit imposed by statute or by the lease;
• make-good and reinstatement obligations at expiry, and whether fit-out is the landlord's or the tenant's;
• security: a cash deposit, a bank guarantee, a personal or corporate guarantee, or a bond where a statutory scheme applies. Bank guarantees are commonly not transferable and may have an expiry date; replacement or reissue in the purchaser's name usually needs to be arranged before settlement, and the contract should say who does what if a tenant delays; and
• whether the tenancy is a retail premises lease, which changes disclosure, outgoings recovery and the recoverability of land tax — see our guide on when the Retail Leases Act applies.

A tenant estoppel certificate — a short confirmation from each tenant of rent, term, options, arrears, security, incentives and the absence of undisclosed arrangements — is the standard way of testing the vendor's rent roll against the tenants' own position. At settlement the purchaser assumes the landlord's role in practice: possession, rents and rent redirection, lease documents and ledgers, securities and notices to tenants are all dealt with then. That is contractual completion, and it should not be conflated with registration of the transfer, which occurs after lodgment.

GST and going concern

GST commonly applies to commercial property, and the contract should say clearly whether the price is GST-inclusive or expressed as a price plus GST. A purchaser who assumes an input tax credit will be available should confirm that assumption: it depends on the purchaser's registration, the creditable purpose of the acquisition, and holding a valid tax invoice. A GST cost that cannot be recovered is a real cost that should be priced.

Going concern. A supply may be GST-free under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) where the supply is for consideration, the recipient is registered or required to be registered for GST, the parties have agreed in writing before the supply that it is a supply of a going concern, the supplier supplies all of the things necessary for the continued operation of the enterprise, and the supplier carries on the enterprise until the day of the supply. Tenanted property is not automatically a going concern. Vacant premises, a lease that ends before completion, an enterprise that has ceased, or a recipient not registered by the relevant time can each defeat the claim. Because the consequences of failure fall somewhere, commercial contracts usually include a gross-up and indemnity so that the party bearing the risk is identified rather than left to argument.

Other GST issues. Rent and outgoings adjustments should be handled consistently with the GST treatment adopted. The margin scheme may reduce the GST on a taxable supply of real property, but only where the supply is eligible and the parties agree in writing before the supply; it is not generally available and eligibility turns on the acquisition history of the land. Mixed-use and development land requires apportionment analysis. And where the property is or includes new residential premises or potential residential land, the GST at settlement notification and withholding rules may apply, obliging the purchaser to pay an amount directly to the ATO. Each of these is a matter for tax advice on the specific supply.

Duty, landholder duty and CIPT

A direct purchase of Victorian land is generally assessed to land transfer duty under the Duties Act 2000 (Vic), broadly on the greater of consideration and market value. An acquisition of shares or units in an entity holding Victorian land may instead engage the landholder duty provisions, with their own thresholds, aggregation rules and calculation basis. Rates, concessions and calculation detail are covered in our land transfer duty guide.

Commercial and Industrial Property Tax. The Commercial and Industrial Property Tax Reform Act 2024 (Vic) established a reform under which qualifying commercial and industrial land enters the reform through an entry transaction on or after 1 July 2024. Entry is transaction-based: a great deal of commercial and industrial land has not entered, because it has not transacted since that date. For any particular property a purchaser needs to establish:

• whether the land has entered the reform and, if so, the entry date;
• whether the land has a qualifying commercial or industrial use, and whether any change of use has occurred or is proposed, since a change of use can have consequences under the reform;
• what the available certificate information and the transaction history disclose; and
• how the reform treats the transaction the purchaser is contemplating, including the treatment of subsequent transactions and the availability of the government transition loan in respect of an entry transaction.

Broadly, after entry the reform progressively replaces land transfer duty and landholder duty for qualifying property, and CIPT generally becomes payable 10 years after entry. The reform does not replace ordinary annual land tax under the Land Tax Act 2005 (Vic), which continues on its own terms. The detail is technical and the administrative guidance evolves, so the current State Revenue Office material should be checked for the specific land and transaction rather than a general position assumed.

Land tax, surcharges and windfall gains tax

Annual land tax under the Land Tax Act 2005 (Vic) is assessed on the owner by reference to holdings at midnight on 31 December, and commercial land is generally taxable. The purchaser's concerns are the future holding cost of the land in the acquiring entity's hands (grouping with other holdings can move the assessment materially), and the vendor's current liability being cleared at settlement, which is checked through the State Revenue Office property clearance certificate under section 105 of that Act.

Passing land tax on to the purchaser. For a contract of sale of land entered into on or after 1 January 2024, section 10G of the Sale of Land Act 1962 (Vic) makes ineffective a term requiring the purchaser to pay or reimburse an amount for or towards land tax for which the vendor is or may become liable, where the sale price is below the indexed threshold in section 10I. Four distinctions matter:

• a term requiring the purchaser to pay or reimburse the vendor's land tax below the threshold is ineffective, and the contract cannot validate what the statute prohibits;
• that is different from the vendor paying or discharging its own liability so that a clear property clearance certificate is available at settlement — which is not a pass-on at all;
• where the sale price is at or above the threshold, an apportionment may lawfully be negotiated; the threshold is $10.7 million from 1 January 2026 and is subject to future indexation, so the current figure should be confirmed with the State Revenue Office; and
• specified excluded contracts fall outside the rule altogether.

Where a purchaser lawfully assumes a vendor liability, there can be duty consequences, because what the purchaser gives in respect of the land may form part of the dutiable consideration. The mechanics of how a permitted adjustment appears at settlement are covered in our settlement adjustments guide.

Surcharges. The absentee owner surcharge can apply where the owner is an absentee owner as defined, including through corporate and trust structures — which makes the identity and control of the acquiring entity a land tax question as well as a duty question. Vacant residential land tax has its own base and is relevant only where the land or a part of it falls within that regime; it should not be assumed to apply to commercial property.

Windfall gains tax. Where land has been or may be rezoned, windfall gains tax under the Windfall Gains Tax Act 2021 (Vic) can arise on the taxable value uplift, and an unpaid liability is a charge on the land with consequences at settlement for clearance. For contracts of sale and option agreements entered into on or after 1 January 2024, the Sale of Land Act 1962 (Vic) prohibits a vendor from requiring the purchaser to pay a windfall gains tax liability that is known at the time the contract or option is entered into — that is, where an assessment has issued and notice has been served before that time. A term offending the prohibition is of no effect, and including it carries offence exposure. Where the assessment issues after the contract is entered into, the position differs and a permitted arrangement may be possible. In either case the vendor remains the assessed taxpayer, the charge on the land and the clearance position still require attention at settlement, and in practice an anticipated liability is usually reflected in the price and in careful drafting rather than in a reimbursement clause.

Foreign purchasers and withholding

Three distinct regimes are often confused.

• Foreign purchaser additional duty under the Duties Act 2000 (Vic) applies to acquisitions of residential property by foreign purchasers as those terms are defined. It is not a general surcharge on commercial property, though property with a residential element, or a proposed residential development, can be captured, and landholder acquisitions raise the question separately.
• Foreign investment approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth) is a separate federal regime administered through Treasury and the Foreign Investment Review Board. Whether notification and approval are required, and what fees apply, depends on the acquirer, the asset and the current thresholds and exemptions, which should be checked on their current terms and built into the contract timetable as a condition where relevant.
• Foreign resident capital gains withholding is an obligation of the purchaser under the Taxation Administration Act 1953 (Cth) on acquisitions of taxable Australian real property. For contracts entered into from 1 January 2025 the rate is 15% and the former property-value threshold has been removed. An Australian-resident vendor ordinarily provides a valid ATO clearance certificate before settlement so that no withholding is required. The amount is calculated by reference to the first element of the purchaser's cost base for the asset — commonly, but not invariably, the contract price — and the ATO may grant a variation reducing it. If a certificate is not produced in time, the purchaser generally must withhold and remit, which changes the funds available to the vendor and can disrupt a payout figure; clearance certificates should therefore be requested early.

Finance, deposit and conditions

Commercial lending is more conditional than residential lending. Lenders commonly require a valuation, lease reviews and tenant covenants, environmental information, updated financials and legal documentation on the security position, and they frequently require personal or corporate guarantees from directors or trust controllers. Loan-to-value ratios, pricing and timeframes depend on the borrower, the asset and current lender policy and should not be assumed. A valuation below the contract price is a live risk on commercial assets and is a funding problem for the purchaser, not the vendor.

If funding is not unconditionally approved before signing, the finance condition must reflect the lender's actual process, with workable timing and clear notice mechanics on non-approval. The same discipline applies to a due diligence condition: it should identify what may be investigated, on what standard the purchaser may terminate, and by exactly when.

On the deposit, early release to the vendor before settlement is not automatic — it requires the process in section 27 of the Sale of Land Act 1962 (Vic), including the prescribed particulars, service on the purchaser and the statutory objection period. Deposit funds and settlement funds should only ever be paid on payment instructions verified by a call to a known number on a previously used file record; payment-redirection fraud targeting conveyancing transactions is a real and continuing risk, and emailed changes to bank details should always be treated as suspicious.

Owners corporation and shared facilities

Where the property is a lot affected by an owners corporation under the Owners Corporations Act 2006 (Vic), the Section 32 statement should include an owners corporation certificate or a statement that none has been obtained. Review should consider the rules, current fees and any special fees struck, arrears, the maintenance plan and fund position, insurance, common property condition, major works proposed, disputes or proceedings, and any restriction on use, signage, hours or parking that would affect the intended operation. The certificate speaks as at its date and is not a warranty about the future.

Comparable issues arise outside an owners corporation where a site shares access, parking, loading, drainage, detention systems or a substation under a private agreement or an easement. Those arrangements should be identified, read, and confirmed to bind successors.

Settlement preparation

Settlement in Victoria is ordinarily electronic. In the lead-up the parties obtain the State Revenue Office property clearance certificate and the council and water certificates, agree the adjustments, confirm the duty position and any withholding, and prepare the transfer and incoming security documents in the workspace. Where personal property is included, PPSR searches and releases should be arranged so that plant and fit-out transfer free of registered security interests.

On a tenanted settlement, possession, keys, rent redirection, lease and ledger handover, security transition and notices to tenants happen at completion. Insurance cover should be in place from the time risk passes under the contract. The mechanics of the workspace and the statement are covered in our PEXA guide and our settlement adjustments guide; a general purchase process is set out in our buying property guide, and PPSR searches and releases are explained separately.

Staged due diligence timetable

Red flags and specialist advice

Some findings should stop a transaction until they are resolved rather than being priced in optimistically:

• the intended use is prohibited in the zone, or depends on existing-use rights that cannot be evidenced;
• buildings or works with no permit or occupancy permit, outstanding building orders, or unresolved combustible cladding;
• a site history indicating contamination with no investigation, or an environmental audit overlay with no audit statement;
• a public acquisition overlay, proposed road widening or an inundation or bushfire overlay affecting the developable area;
• a rent roll that cannot be reconciled to leases, or incentives and side letters produced late;
• security that is expiring, non-transferable or absent, or arrears presented as timing differences;
• access, parking or loading that in fact depends on land the vendor does not own;
• a going-concern clause with no supporting facts, or a price expressed without stating the GST position; and
• pressure to sign at auction or "today" without the Section 32 having been reviewed.

Each professional has a defined role. Lawyers advise on the contract, title, disclosure, leases, statutory obligations and settlement; accountants and tax advisers on structure, GST, duty modelling and holding costs; town planners on use and approvals; building surveyors, engineers and hazardous materials consultants on compliance and condition; environmental consultants on contamination; valuers on value; and finance advisers and brokers on funding. No adviser can guarantee an approval, a tax outcome or a saving, and the purchaser's decision should be built on evidence rather than on assurances.

Parke Lawyers acts for purchasers of commercial and industrial property across Victoria — pre-contract review, due diligence coordination and settlement — through our Property & Conveyancing and Commercial & Business Law teams.

Authoritative sources

• Sale of Land Act 1962 (Vic) — s 27 deposit release, s 31 cooling off, s 32 disclosure, ss 10G and 10I land tax, windfall gains tax prohibition.
• Duties Act 2000 (Vic) — land transfer duty, sub-sale and landholder provisions.
• Commercial and Industrial Property Tax Reform Act 2024 (Vic).
• Land Tax Act 2005 (Vic) — s 105 property clearance certificate.
• Planning and Environment Act 1987 (Vic).
• Environment Protection Act 2017 (Vic) — general environmental duty and s 39 duty to manage contaminated land.
• SRO — Commercial and Industrial Property Tax.
• SRO — Land tax — including the apportionment prohibition and the current indexed threshold.
• SRO — Buying and selling land subject to windfall gains tax.
• ATO — GST-free sale of a going concern (commercial property).
• ATO — GST at settlement (purchaser withholding and supplier notification).
• ATO — GST and the margin scheme.
• ATO — Foreign resident capital gains withholding.
• Foreign Investment — Australian Government — commercial land requirements and fees.
• EPA Victoria — Duty to manage contaminated land.
• Victorian planning provisions and planning schemes.
• Victorian Small Business Commission — retail leases guidance and dispute resolution.
• Land Use Victoria — About electronic lodgment.
• Personal Property Securities Register.

Frequently asked questions