Qualifying Use
Determining Qualifying Use for CIPT
A property must have a qualifying use to enter and remain in the CIPT reform. Use is assessed on a title-by-title basis, primarily by reference to the AVPCC.
At a Glance
- Qualifying use is determined by the Australian Valuation Property Classification Code (AVPCC) in the property's latest valuation by the Valuer-General of Victoria.
- AVPCC ranges 200–499 (commercial and industrial) and 600–699 (infrastructure and utilities) are qualifying.
- Mixed-use properties with multiple AVPCCs are assessed on a 'sole or primary use' test.
- Eligible student accommodation may also qualify, subject to specific GST Act criteria.
- The Commissioner may make a provisional determination of qualifying use where no AVPCC has been allocated.
Qualifying AVPCC Ranges
The AVPCC is displayed on a property's council rates valuation notice. Each separate occupancy on a property is allocated a numerical AVPCC between 100 and 991. A property has a qualifying use if all of its allocated AVPCCs fall within the prescribed ranges below.
200–299
CommercialRetail premises, shops, cafes, offices, hotels, motels, medical centres, commercial vacant land
300–399
IndustrialManufacturing, factories, warehouses, storage facilities, industrial vacant land
400–499
Extractive IndustriesMines, quarries
600–699
Infrastructure & UtilitiesWaste disposal, recycling facilities
Non-Qualifying Uses (AVPCC outside prescribed ranges)
Mixed-Use Properties — The Sole or Primary Use Test
Where a property is allocated multiple AVPCCs — some within and some outside the prescribed ranges — the property will have a qualifying use only if it is used solely or primarily for a qualifying use. This determination is made by the Commissioner of State Revenue.
The inquiry is directed at the current and actual use of the property. Intended or potential future use is irrelevant. The use must not be minimal, slight, intermittent, or spasmodic to be considered the sole or primary use.
Factors the Commissioner Considers
Floor Area
The proportion of floor space used for a qualifying versus non-qualifying use. More than 50% qualifying floor space supports a qualifying use finding.
Intensity of Use
The relative intensity of each use — a professional office suite occupying 70% of a building has greater intensity than a small residential apartment in the remaining 30%.
Level of Investment
Greater capital investment in the qualifying use component supports a finding that the property is primarily used for a qualifying use.
Return on Investment
Where a greater proportion of income derives from the qualifying use component, it is more likely the property has a qualifying use.
Zoning
The property's zoning, overlays, planning restrictions, and covenants — a commercial zone property limited to specific non-commercial purposes is more likely to have a qualifying use.
Example — Mixed-Use Inner-City Property
A two-level building in inner Melbourne has three professional suites on the ground floor (leased to health practitioners with tailored fit-outs) and two apartments on the smaller second floor (one vacant). The property has both commercial and residential AVPCCs. The Commissioner would likely determine a qualifying use because: more than 50% of floor space is commercial; the commercial use has greater intensity; and the capital expenditure, revenue, and profit attributable to the commercial use is more significant. A purchaser uncertain about the classification should seek 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, meaning residential premises that are:
- Designed for occupation by students of a higher education provider;
- 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 GST Act.
University-Affiliated Accommodation Excluded
Premises that provide accommodation to students "in connection with" a higher education institution are not commercial residential premises and therefore do not qualify. This includes university-owned residences, privately owned accommodation let to a university for student use, and privately run accommodation for students of a particular institution under an arrangement with that institution.
Provisional Determination of Qualifying Use
Where a property has not been valued by the Valuer-General of Victoria (VGV) or has not been allocated an AVPCC (most commonly for recently subdivided lots), the Commissioner may provisionally determine that the property has (or does not have) a qualifying use.
The Commissioner's provisional determination is an interim step. It is overridden when the VGV subsequently allocates an AVPCC, which is taken to apply from the effective date of the provisional determination. The Commissioner must then reassess any duty or CIPT payable. Importantly, a taxpayer cannot object to a provisional determination — only to the VGV's subsequent valuation.
Factors for Provisional Determination
- The sole or primary use of the property
- If the property is a child lot, the AVPCC of the parent lot
- The zoning of the property under the applicable planning scheme