Recovery of land tax for commercial and industrial leases
The Queensland Government has released a draft Bill to amend the
Land Tax Act 1915 (LTA). If enacted, the changes will
allow landlords of commercial and industrial properties to recover
land tax from their tenants. The changes will take effect from 30
Accordingly, it is important for all landlords and tenants to be
mindful of the proposed changes and to take steps to safeguard
their position if need be.
Landlords have been prohibited from passing on their land tax
liability to tenants since 1992 (section 44A – LTA).
This restriction is currently applicable to any lease of
commercial or industrial premises. Leases or tenancies which are
governed by the Retail Shop Leases Act 1994 (Qld) or the
Residential Tenancies Act 1994 (Qld) have similar
prohibitions under those Acts.
Back to the Future
If the proposed amendments are passed, from 30 June 2009 the
general prohibition currently contained in section 44A will not be
applicable to any lease of commercial or industrial premises
entered into after that date.
From then, landlords and tenants will be in a position to
negotiate whether the tenant will be liable to contribute to the
landlord's land tax liability.
However, the prohibition in section 44A of the LTA will continue
to apply to:
any lease entered into before 30 June 2009 (pre-existing
a renewal of a pre-existing lease (e.g. as a result of the
exercise of an option); and
an assignment or transfer of a pre-existing lease.
Tenants under pre-existing leases should ensure that options for
renewal in their pre-existing leases are correctly exercised to
ensure that any new lease arising from that exercise continues the
On the other hand, Landlords of pre-existing leases may wish to
take advantage of non-compliant option exercises or failures to
exercise and seek inclusion of a land tax recovery provision in a
Retail Shop Leases Act 1994 (Qld) and the
Residential Tenancies Act 1994 (Qld)
Any lease under the Retail Shop Leases Act 1994 (Qld)
or a tenancy under the Residential Tenancies Act 1994
(Qld) will continue to prohibit the recovery of land tax.
It is important to be aware of the potential changes to the LTA
and to be cautious when entering into future lease negotiations for
commercial or industrial premises.
This will be particularly important for parties who enter into
lease negotiations in the months leading up to 30 June 2009.
Landlords and tenants with pre-existing leases should also take
notice of the potential amendments to the legislation as the
prohibition against recovery of land tax under section 44A of the
LTA will not apply once the pre-existing lease has expired.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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