Treasurer Tim Pallas has announced the tax overhaul will take effect from July 1 next year ahead of handing down his ninth budget on Tuesday, when he is expected to deliver cuts to the public service.
Commercial and industrial properties will transition to the new system once sold and the property tax will be paid yearly from 10 years after the transaction.
The tax will be set at a flat rate of one per cent of the property's unimproved land value.
The first purchaser will be able to choose to either pay the property's final stamp duty liability up front, or transition to an annual payment immediately by opting to pay fixed instalments over 10 years equal to stamp duty and interest.
Stamp duty will remain unchanged for residential properties.
The Victorian government said it will decide on the final form of transition by the end of the year after consulting with business and industry.
Mr Pallas said the reform has been requested by the industry and will increase the size of the state's economy by up to $50 billion in net terms.
"These landmark changes will enable businesses to be more dynamic and agile, and to grow and employ more workers," he said in a statement.
It comes as Victoria's public service braces for its funding to be slashed despite the government vowing hard-working families will not suffer to pay off mounting debt.
Latest forecasts project net debt will rise to $165.9 billion by mid-2026, accounting for 24.6 per cent of state revenue.
Deputy Premier Jacinta Allan declared the budget would deliver on Labor's 2022 election promises and pay down COVID-related debt, calculated to be at least $35.8b by the treasury department.
But she promised hard-working families will not bear the brunt of the bill amid the cost-of-living crisis.
Victorian Community and Public Sector Union secretary Karen Batt has requested Ms Allan qualify or retract her comments, or apologise.
"The deputy premier has implied the public sector is either not being cut, or we're not hardworking, or she reckons they don't have families," she told AAP.
Government departments have been told to prepare to cut 10 per cent of ongoing staff to help return the budget to surplus, according to the union.
Mr Pallas last week refused to rule out public service cuts as the government faces a forecast wage bill of $35.8b by mid-2026, up from $33.1b this financial year.
It's tipped the treasurer will announce the state's books will be back in the black by the 2025/26 financial year, posting an improved $1b surplus before another of $1.2b for the year ending June 2027.
In a bid to save cash, the Victorian government will overhaul the WorkCover scheme and could revise timelines for the jointly funded Melbourne airport and Geelong rail projects.
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