Land tax relief for landlords and tenants following the release of the Mandatory Code of Conduct
The National Cabinet recently signed off on the Mandatory Code of Conduct (“the Code”) for commercial landlords and tenants, which included a set of “good faith leasing principles”.
Our summary of the Code and associated commercial leasing principles can be found here. While the Code sets out the guiding principles under which commercial landlords and tenants will negotiate in good faith, the Code is to be given effect through legislation and regulations implemented by each state and territory government. As a means of incentivising these good-faith negotiations and ensuring landlords and tenants can reach a mutually agreeable position on future rent payments, most states and territory governments have released land tax relief packages which are linked to the leasing principles.
Land Tax COVID 19 Stimulus package - Summary
What land tax relief is currently available for tenants and landlords in NSW, victoria, Queensland, WA, SA, TAS and act?
New South Wales ("NSW")
The NSW Government has announced a $440m land tax relief package, which is designed for both the commercial and residential sectors.
Commercial and residential landlords will be able to apply for a waiver of up to 25% of their 2020 calendar year land tax liability, on the proviso that they provide rent relief to their eligible tenants of the same value or greater.
Landlords will also be entitled to a deferral of payment of their remaining land tax liabilities for a further three months if they pass on rent relief to their eligible tenants for an amount equal to, or greater than, 25% of their land tax liability.
Tenants eligible for rent relief under these measures are:
- Commercial tenants with a turnover of less than $50m who have experienced a decline in revenue of at least 30% due to COVID-19; and
- Residential tenants who have suffered a loss in income of at least 25% due to COVID-19.
We expect Revenue NSW to issue further guidance relating to how landlords can apply for land tax relief in the coming days.
The Victorian Government has announced a $420m land tax relief package which is also designed for the commercial and residential sectors.
Similar to NSW, commercial and residential landlords will be able to apply for a waiver of up to 25% of their 2020 calendar year land tax liability. For landlords who are eligible for this land tax relief, the payment date for any remaining 2020 land tax liability will be deferred until March 2021.
Victorian landlords who are unable to secure a tenant (commercial or residential) because of COVID-19 are also eligible for the 25% land tax waiver and the deferral of payment of the remaining 2020 land tax liability to March 2021.
To be eligible, landlords must demonstrate that:
- All or part of their property is rented or all or part of the property is currently available for lease;
- At least one of the tenant’s ability to pay their normal rent or the landlord’s ability to secure a tenant is affected by the COVID-19; and
- The landlord has provided rent relief to the affected tenant/s in accordance with the following eligibility requirements:
- For commercial landlords, landlords need to provide rent relief that is consistent with the Code. Broadly, the Code requires tenants to be provided with relief in proportion to the tenant’s loss in turnover that they have experienced from the COVID-19 crisis.
- For residential landlords, landlords will need to at least pass on the equivalent amount in rent relief to its tenant/s.
We expect the State Revenue Office to issue further guidance relating to how landlords can apply for land tax relief in the coming days.
A $154.5m relief package to support tenants, landlords and the construction industry has been announced, of which the WA Government has also committed $30m for grants of up to $2000 for private residential tenants who have lost their job and are facing financial hardship.
Financial Relief – WA Commercial Tenants and Landlords
Commercial landlords must provide rent relief that equates to a minimum of three months’ rent and freeze outgoings to small businesses starting from 1 March 2020 or from a date thereafter but before 31 May 2020.
Financial Relief – WA Residential Tenants and Landlords
ELIGIBILITY - TENANTS
- Assists private renters in Western Australia experiencing financial hardship due to losing their job on or after 20 March 2020 as a result of COVID-19.
- Tenant will need to lodge their revised agreement for reduced rent with Consumer Protection WA as part of your application.
- The grant will be equivalent to the difference between the usual rent and the newly negotiated rent rate for a four week period up to a maximum of $2000, whichever is the lesser
- Applied for by the tenant but is paid directly to the landlord
- The grant will not have to be repaid by either landlord or tenant although the landlord may need to offset any deferred rental debt by the amount of any grant that is made to them.
Support Package – Building and Construction Industry
The SA Government has announced a 25% reduction on the land tax payable on a parcel of land in the 2019-20 land tax year for commercial and residential landlords who provide tenants impacted by COVID-19.
The land tax relief is available when:
- the land is used for residential or commercial purposes;
- the land is being leased to:
- a residential tenant, or
- a commercial tenant with an annual turnover of up to $50m, who has been financially impacted as a result of the COVID-19 pandemic;
- the landlord reduces the rent of the affected tenant by at least as much as the land tax reduction; and
- the land tax is directly related to the land for which the rent has been reduced.
“Financially impacted” is considered to be:
- for commercial tenants - a 30% drop in revenue due to COVID-19 and are eligible for the Federal Government's JobKeeper Payment; and
- for residential tenants – financial hardship due to COVID-19.
This relief is also available to residential and commercial land owners who are unable to secure a tenant because of COVID-19. To be eligible for land tax relief, eligible landlords will need to demonstrate that the land was leased to 30 March 2020, but has since been vacant due to the impact of COVID-19.
Land tax relief is limited only to land occupied by affected tenants or vacant due to the impact of COVID-19.
Landlords who have already fully paid their 2019-20 land tax liability and are eligible for relief under this scheme will be issued a refund equal to the value of eligible land tax relief.
The Queensland Government is offering commercial and residential landlords a 25% rebate of their 2019-20 land tax liability where they provide rent relief to eligible tenants of the same value or greater.
Queensland landlords will also be eligible for a 25% land tax rebate for eligible unoccupied properties.
A landlord will be able to access the land tax rebate where at least one of the following circumstances apply:
1. The landowner leases all or part of a property to on or more tenants and all the following apply:
- The ability of one or more tenants to pay their normal rent is affected by COVID-19.
- The landlord will provide rent relief to the affected tenant(s) of an amount at least commensurate with the land tax rebate; and
- The landlord will comply with the leasing principles even if the relevant lease is not regulated.
2. ALL THE FOLLOWING CONDITIONS APPLY:
- All or part of the landlord’s property is available for lease;
- The landlord’s ability to secure tenants has been affected by the COVID-19 pandemic;
- The landlord requires relief to meet its financial obligations; and
- The landlord will comply with the leasing principles even if the relevant lease is not regulated.
The land tax rebate will only apply to each property that meets the above eligibility requirements and conditions, rather than the rebate applying to a landlord’s entire taxable landholdings. Landlords are to make their applications for the land tax rebate through their existing “OSR Online” account.
Separately, the Queensland Government has also announced the following two land tax measures:
- A waiver of the 2% land tax foreign surcharge for foreign entities for the 2019-20 assessment year.
- A three-month deferral of land tax liabilities for the 2020-21 assessment year.
Landlords will not be required to apply for the foreign surcharge waiver or the three-month deferral. These two measures will be applied automatically to assessments, with the Commissioner of State Revenue reassessing landowners and providing a refund where the assessment amount has already been paid.
The Tasmanian Government will waive land tax for commercial property landlords for the 2020-21 financial year, where the business owner:
- is liable for the land tax; and
- can demonstrate that their business operations have been affected by COVID-19
"Commercial property" refers to property classified as such for government valuaton purposes.
The ACT Government will provide a land tax credit to landlords who reduce the rent on their privately rented properties by at least 25% due to COVID-19. Landlords who meet this criteria will be eligible for a land tax credit to cover 50% of the rental reduction, up to a limit of $1,300 per quarter.
What other land tax relief is available?
Prior to the release of the Code, the Victorian, South Australian and ACT Governments had announced the following land tax relief related measures:
- The deferral of payment of the 2020 land tax assessment to 31 March 2021 where the landowner had at least one taxable non-residential property and the total taxable landholdings was below $1 million;
- The deferral of payment of the third and fourth quarter land tax instalments for up to six months; and
How can RSM help?
We can provide further assistance and guidance in determining your eligibility for land tax relief, whether as a landlord or a tenant. Contact your local RSM adviser today.