Land tax relief for Queensland landlords – with a catch

On 9 April 2020, the Queensland Government announced a package of land tax relief for both commercial and residential property owners. The measures provide for the following land tax relief:

• a land tax rebate reducing land tax liabilities by 25 per cent for eligible properties for the assessment year ending 30 June 2020 (to be provided by way of refund where the tax has already been paid)
• a waiver of the 2 per cent land tax foreign surcharge for foreign entities for the assessment year ending 30 June 2020
• a 3-month deferral of land tax liabilities for the following assessment year ending 30 June 2021.

How do landlords obtain the relief?

The Office of State Revenue (OSR) advises that:

• in relation to the foreign surcharge waiver for the land tax year ending 30 June 2020, and the 3-month deferral for the land tax year ending 30 June 2021, landlords do not need to apply. This relief will be applied automatically. The OSR will reassess land tax to apply the waiver and provide a refund where the assessment amount has already been paid (it appears that this relief is automatically provided to all affected landlords) 
• in relation to the 25 per cent land tax rebate for the land tax year ending 30 June 2020, landlords do need to apply. Instructions on how to apply for the rebate were released on the OSR’s website on 14 April 2020 (accessible here). It will be by way of online application, and an OSR online account. 

What are the eligibility criteria for the 25 per cent land tax rebate?

Landlords will be eligible for the 25 per cent land tax rebate for the land tax year ending 30 June 2020 if at least one of the following circumstances apply to them (this is the criteria as described on the OSR’s website):

• the landowner leases all or part of a property to one or more tenants and all of the following apply:
  • the ability of one or more tenants to pay their normal rent is affected by the coronavirus (COVID-19) pandemic.
  • the landowner will provide rent relief to the affected tenant(s) of an amount at least commensurate with the land tax rebate
  • the landowner will comply with certain “leasing principles” established by the Queensland Government.
• in relation to the landowner all of the following apply:
  • all or part of the property is available for lease
  • the landowner’s ability to secure tenants has been affected by the COVID-19 pandemic.
  • the landowner requires relief to meet its financial obligations (e.g. debt obligations) as a result of the property not being leased
  • the landowner will comply with certain “leasing principles” established by the Queensland Government.

The operation of each of the circumstances described above is not yet clear. It would appear that a landlord may satisfy one set of circumstances and also satisfy the other set of circumstances. 

The land tax rebate will only apply to each property that meets the above eligibility requirements and conditions, rather than the rebate applying to entire taxable landholdings of the landowner.

What are the “leasing principles” that must be complied with for the 25 per cent land tax rebate?

The Queensland Government’s “leasing principles” can be found here. While the principles state that the landowner does not need to comply with the Commonwealth Governments’ “Code of Conduct” in relation to commercial leases, importantly, the principles do include some of the fundamental conditions from the Code, including:

• the landowner will not evict a tenant who is in financial distress and unable to meet their commitments due to the impact of COVID-19
• the landowner will not increase rent, except where rent is linked to turnover
• the landowner will not penalise a tenant who stops trading or reduces opening hours
• the landowner will not charge any interest on unpaid or deferred rent
• the landowner will not make a claim on a bank guarantee or security deposit for non-payment of rent.

What is the catch in relation to the 25 per cent rebate?

The Government “expects” landowners to apply the rebate firstly to provide rent relief to their tenants, with any remaining rebate to its own financial obligations (e.g. in relation to debt and other expenses). It is unclear as to what force this “expectation” will ultimately take once legislated, and whether it will in fact be compulsory for landowners to demonstrate that they will pass the rebate on to tenants. It is also unclear as to the proposed method of apportioning the rebate to multiple tenants, and the circumstances in which there might be a portion of the rebate remaining after the landowner has passed the rebate on to the tenants.

In addition, under a net lease, the saving in land tax is clearly passed on to a tenant by virtue of reduced outgoings. In a gross lease it is assumed that the "rent" includes a portion of land tax recovery. Any rent relief provided to a tenant under a gross lease generally (e.g. under the Commonwealth Government’s Code of Conduct) must therefore be very clear that the rent relief is in part due to the Queensland land tax relief package.

Moving forward

As raised above, there are a number of points that will need to be clarified as to the operation of the relief to be provided, especially in relation to the land tax rebate for the current land tax year. Parliament is not due to sit again until 28 April 2020, so unless the Government clarifies the package before then, we may have to wait to see the final form of the package once it is passed by Parliament. However, in the meantime, landowners who believe they will be eligible for the 25 per cent rebate should promptly prepare their application by accessing the OSR website. 

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

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