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NSW land tax relief for commercial and residential landlords: More questions than answers

NSW land tax relief for commercial and residential landlords: More questions than answers

The NSW Government is introducing measures to help commercial and residential landlords manage their rental properties.

Reduction of land tax

Eligible landlords will be able to apply for a NSW land tax reduction of up to 25% in respect of the 2020 (calendar year) land tax liability on ‘relevant’ NSW properties.

Broadly, the 2020 NSW land tax reduction is available to a land owner when:

  • The land that you are leasing out is being used for business or residential purposes
  • You are leasing the land to a residential tenant or a business tenant (with annual turnover of up to $50 million) and the tenant can demonstrate financial distress resulting from the COVID-19 outbreak
  • You reduce the rent of the affected tenant by at least as much as the tax reduction
  • The land tax is directly related to the property for which rent has been reduced

Financial distress is considered to be as follows:

  • For commercial tenants – a 30 per cent drop in revenue due to COVID-19 pandemic
  • For residential tenants – a 25 per cent drop in household income due to COVID-19

Three-month deferral of outstanding land tax

A landlord who applies for the NSW land tax reduction of up to 25% will also be able to apply for a 3-months deferral for outstanding land tax payments. In addition to these measures, there are several options available to landlords such as extending deadlines for payments and getting leniency for late payment of land tax.

We see some of the issues that require consideration by Revenue-NSW include the following:

  • The land tax reduction appears not fixed at 25% but rather scaled “up to 25%”. What is scaling criteria?
  • How does a landlord and or a tenant demonstrate (substantiate) that their respective ‘financial distress’ is the result of the Covid-19 outbreak?
  • From what date are the measures applicable, from what date does the landlord or tenant need to demonstrate ‘financial stress’?
  • How is annual ‘turnover’ measured, it is on an ‘aggregated basis’?
  • What is the form of evidence of a rent reduction being provided to a tenant, what about reduced rents for incoming new tenants?
  • What happens where the landlord and tenant are related parties, e.g. family and or related business entities?
  • What happens to 2020 land tax already paid, particularly for landlords who have already paid their entire 2020 land tax liability?
  • To obtain a deferral of land tax, what is meant by ‘outstanding land tax payments’?

Given the infancy of these land tax measures, the NSW Government will be releasing further details and hopefully address these issues.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

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