The NSW and Queensland Governments have pledged a combined $840 million in land tax relief for landlords that are financially impacted by the COVID-19 pandemic. These announcements come as state and territory governments move to legislate the mandatory commercial tenancy code of conduct (the Code) released by the National Cabinet last week. Land tax concessions will be available to all commercial tenancies (including retail) covered by the Code. Landlords are expected to pass on the savings to tenants whose commercial activities have been impacted by the pandemic. Similar land tax relief will also be available to landlords of residential tenancies if tenants can demonstrate they have lost 25% or more of their income due to the pandemic. Liability for land tax in residential, retail and commercial tenancies Land tax is an annual tax levied at the end of each calendar year on the total value of all property owned by a land owner above the land tax threshold (excluding that person’s principal place of residence). Typically, the type of leasing arrangement dictates who is responsible to pay land tax. Residential – landlords are prohibited from passing on land tax obligations to tenants (NSW and Queensland) Retail – land tax may be a type of ’outgoing’ expense that can be passed on to a tenant (NSW only) Commercial – a landlord will usually require a tenant to contribute to land tax via outgoings (NSW and Queensland). Land tax relief available in NSW The NSW Government has announced a $440 million land tax relief package which is expected to be divided approximately equally between the commercial (including retail) and residential sectors. This relief includes: A land tax concession of up to 25% of the 2020 (calendar year) land tax liability on relevant properties if residential or commercial landlords pass on these savings to tenants, and A further land tax deferral of three months if commercial and residential landlords pass on to tenants a relief greater than 25% of their annual land tax bill. Land tax relief available in Queensland The Queensland Government has also committed $400 million in land tax relief for landlords who agree to provide rent relief for tenants affected by the economic downturn brought about by the COVID-19 pandemic. Similar to NSW, this package applies to both commercial and residential tenancy agreements. The Queensland Government is offering commercial and residential landlords a 25% reduction on land tax liabilities for the 2019-20 assessment year and three months deferral of land tax for landlords of eligible tenancies. To be eligible, the following circumstances must apply to the tenancy: The ability of one or more tenants to pay their normal rent must be affected as a result of the pandemic The landlord must provide rent relief to the affected tenant(s) of an amount at least commensurate with the land tax relief (that is, a 25% reduction) The landlord must comply with the Code (even if the relevant lease is not regulated). What about other states and territories? So far, the NSW and Queensland Governments are the only jurisdictions to have announced COVID-19 concessions in the form of land tax relief. In South Australia, businesses paying land tax on a quarterly basis can already defer payment of their third and fourth instalments for up to six months under measures announced prior to the Code. Further announcements from states and territories are expected shortly as governments take steps to reflect the Code in legislation. Victorian Premier Daniel Andrews announced on 13 April 2020 that rent relief measures may be prepared for that state. The above content is commentary rather than legal advice and was prepared on the basis of applicable legislation, government programs and initiatives that were in place as of the date of publication. Given the ongoing evolution of both the COVID-19 pandemic and frequent consequential changes to the various laws and programs within all Australian states and territories, readers should seek legal advice on the current situation as applicable to their specific circumstances before taking any action in relation to the above.
