Australia: Recovery of land tax under commercial leases - How can the provisions of a repealed Act still apply? - 19 October 2015

Last Updated: 23 November 2015
Article by James Bottomley and Justin Raiteri

The Land Tax Act 2010 (Qld) (the current Act) was implemented with a stated focus on simplifying the land tax rules contained in the now-superseded Land Tax Act 1915 (Qld) (the superseded Act). However, the transition from the superseded Act to the current Act inadvertently created considerable uncertainty about whether the current Act protects tenants from paying land tax under commercial (as opposed to retail) leases in the same way as provided for under the superseded Act.

Recently, the Supreme Court of Queensland declared decisively in the case of Wyuna Court Pty Ltd as trustee v Vikpro Pty Ltd [2015] QSC 216, that landlords can recover from tenants land tax imposed on a landlord on or after 30 June 2010, where the lease between the parties was entered into before 30 June 2009, and if there is a provision in the relevant lease allowing the recovery of land tax by the landlord.

In this alert, Partner James Bottomley, Associate Justin Raiteri and Law Graduate Kerrod Giles discuss what this decision means for both landlords and tenants.

Background and Issues

Vikpro Pty Ltd (the tenant) leased an area of land from Wyuna Court Pty Ltd as trustee (the landlord) under a sublease. The sublease was entered into before 30 June 2009. The sublease contained a clause that made the tenant responsible for the payment of all taxes and duties levied against the land.

The tenant contended that despite the clause in the sublease, it could not be held liable to pay land tax levied against the subleased land for any period during the term of the sublease. The tenant argued that the residual effect of the superseded Act prohibited the landlord at any time during the term of the sublease from enforcing any clause allowing the recovery of land tax from the tenant.

How can the provisions of a repealed Act still apply?

At trial, the tenant sought to rely specifically on section 76 of the superseded Act to advance this argument. Section 76 was a transitional amendment made to the superseded Act in 2009. That section ensured that the prohibition on the recovery of land tax from tenants, contained in the superseded Act, continued to apply to all commercial leases entered into before 30 June 2009 (the date when the transition from the superseded Act to the current Act began).

The tenant argued that the continuation of the prohibition for the duration of the term of the sublease was consistent with sections 20(2)(b) and (c) of the Acts Interpretation Act 1954 (Qld) (the AIA). Those sections of the AIA provide that the repeal or amendment of an Act does not affect the previous operation of an Act, or the rights, privileges or liabilities gained under that repealed or amended legislation.

However, the tenant's prospects of succeeding on those arguments were complicated by the fact that the current Act, although containing a number of transitional provisions, had not enacted a provision equivalent to section 76 of the superseded Act. That is, the current Act contains no prohibition on the recovery of land tax from tenants under commercial leases entered into before 30 June 2009.

Decision at Trial

Justice Dalton found that the prohibition on the recovery of land tax contained within section 76 of the superseded Act no longer applied to commercial leases entered into before 30 June 2009. Justice Dalton dismissed the tenant's arguments under sections 20(2)(b) and (c) of the AIA, noting that section 4 of the AIA allows an Act to be displaced, either wholly or in part, by a contrary intention appearing in any other Act.

Justice Dalton reasoned that the failure to include a provision equivalent to section 76 that prohibits the recovery of land tax from tenants under commercial leases entered into before 30 June 2009 was clear evidence of an intention to displace the prohibition on the recovery of land tax from the commencement of the current Act (being 30 June 2010).

What does this decision mean for landlords and tenants?

  • Landlords can now (at their election), in relation to commercial leases entered into before 30 June 2009, require tenants to reimburse them for land tax that has been taxed against the leased land from 30 June 2010 onwards, but only if there is a provision in the relevant lease allowing the recovery of land tax by the landlord.
  • In relation to commercial leases entered into on or after 30 June 2009, a Landlord may continue to require tenants to reimburse them for land tax that has been taxed against the leased land from 30 June 2010 onwards, but only if there is a provision in the relevant lease allowing the recovery of land tax by the landlord.
  • This decision is not without contention - it is recommended that landlords approach land tax recovery with some caution as this decision may be subject to appeal. Additionally, there is also the possibility that the Government may legislate to invalidate this decision.
  • Tenants entering into new commercial leases also need to ensure out of an abundance of caution that if land tax is not to be recoverable by the landlord in relation to the leased premises, that such a prohibition on recovery is expressly drafted in the lease.
  • This decision only affects commercial leases – the recovery of land tax under retail shop leases and residential leases remains prohibited by law.

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