Land tax relief for landlords
Technical article

Land tax relief for landlords

The Victorian, New South Wales and Queensland governments have each announced land tax relief measures for eligible landlords impacted by COVID-19.

The relief measures follow the announcement by the Federal Government last week that it and the state governments will enforce a mandatory code of conduct for commercial tenancies impacted by COVID-19.

Victoria

The Victorian Government has announced that it will provide $420 million in land tax relief to landlords who provide rent relief to tenants impacted by COVID-19. Those landlords will be eligible for a 25% reduction of their 2020 land tax liability and may also defer any outstanding land tax on their 2020 assessment to 31 March 2021.

This relief can also be accessed by landowners who are unable to secure a tenant because of COVID-19.

The land tax relief is available to owners of both residential and commercial properties. However, for an owner of commercial property to be eligible:

  • The property must be leased to a tenant with an annual turnover not exceeding $50 million; and
  • The tenant must be eligible for the Commonwealth Government’s JobKeeper payment.

You can read more about the JobKeeper program, here.

Details of how the 25% reduction will be applied are not yet available. For example, it is unclear whether landlords will be eligible for the reduction where only some of their tenants have been granted rent relief, or where some tenants are eligible for the JobKeeper payment but others are not.

The Victorian Government will soon be introducing urgent legislation into Parliament, which should provide further clarity on how the land tax reduction will operate. The State Revenue Office has also stated that it will publish instructions this week on how landlords can apply for the land discount. Click here for more info.

It appears the 25% land tax reduction will be offered in addition to the relief already available to landowners who have at least one non-residential property and Victorian land holdings with a total taxable value of $1 million or less.

A new Coronavirus Relief Deputy Commissioner will be appointed at the State Revenue Office to manage the land tax relief claims.

New South Wales

The NSW Government has announced that it will provide $440 million in land tax relief to NSW landlords, with around half of that total directed to the commercial sector and the other half expected to benefit the residential sector.

Landlords are eligible for a land tax reduction of up to 25% for the 2020 land tax year provided:

  • their land is used for business or residential purposes;
  • a property on the land is being leased to a residential tenant who can demonstrate a 25% drop in household income due to COVID-19, or a business tenant with an annual turnover not exceeding $50 million who can demonstrate a 30% drop in revenue due to COVID-19;
  • the tenant’s rent is reduced by at least as much as the land tax reduction; and
  • the land tax is directly related to the property for which rent has been reduced.

Example: if a NSW commercial landlord has a 2020 land tax liability of $100,000 and it passes on rent relief to its tenants amounting to $30,000, the landlord should be eligible for a land tax reduction of $25,000 (capped at 25% of the land tax liability), provided all of the other requirements referred to above are satisfied. If the landlord only passes on rent relief of $20,000, it would only be eligible for a $20,000 reduction in its 2020 land tax liability.

In addition to the land tax reduction, eligible landlords who claim the reduction will also be able to defer any outstanding 2020 land tax liability for three months.

Queensland

The Queensland Government has announced the following $400 million land tax relief measures:

  • A land tax rebate reducing land tax liabilities by 25% for eligible properties for the 2019-20 assessment year;
  • A waiver of the 2% land tax foreign surcharge for the 2019-20 assessment year; and
  • A 3-month deferral of land tax liabilities for the 2020-21 assessment year for both residential and commercial landlords who provide rent relief to tenants affected by COVID-19.

A landowner can apply for the 25% rebate if at least one of the following circumstances applies to them:

  • They are a landowner who leases all or part of a property to one or more tenants and all the following apply:

o   The ability of one or more tenants to pay their normal rent is affected by the COVID-19 pandemic;

o   They will provide rent relief to the affected tenant(s) of an amount at least equal to the land tax rebate; and

o   They will comply with the leasing principles announced by the Queensland Government even if the relevant lease is not regulated.

  • They are a landowner and all the following apply:

o   All or part of the property is available for lease;

o   Their ability to secure tenants has been affected by the COVID-19 pandemic;

o   They require relief to meet their financial obligations; and

o   They will comply with the leasing principles announced by the Queensland Government even if the relevant lease is not regulated.

Where there are multiple tenants for a single property, including mixed-use developments, if the eligibility requirements and conditions are met for at least one tenancy, then the whole property is eligible for the 25% rebate.

If a landowner is eligible for the land tax rebate under both of the above circumstances, it is expected that they will apply the rebate received firstly to provide rent relief to their tenants, before applying any remaining rebate to meet their own financial obligations.

Landlords can apply for the land tax rebate up to 30 June 2020 via the Queensland Government website, here.

The land tax surcharge waiver and the deferral of the 2020-21 land tax liabilities will be applied automatically by the Office of State Revenue (OSR).

What are the next steps?

If you are a landowner who has offered, or will be offering, rent relief to your tenant(s), you may be eligible for a land tax reduction. It is not yet clear what information each revenue office will require landlords to obtain from their tenants for the revenue office to be satisfied that the landlord is eligible for the reduction. We expect the revenue offices to provide further guidance on this point soon.

If you are a tenant and have difficulty meeting your rental obligations due to the impact of COVID-19, we recommend you get in touch with your landlord to discuss rent relief options. Your landlord may be able to offset some or all of the relief through the land tax reduction available to them.

Please contact your usual Pitcher Partners representative if you need assistance with accessing any of the land tax relief measures announced by the state governments.

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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