Most States in Australia have announced land tax relief measures to support landlords and tenants through the COVID-19 crisis.
What are the land tax relief measures and how can I access them?
In most cases, the relief package will offer a waiver or reduction of liability for land tax for eligible landowners or businesses who have experienced financial difficulty due to COVID-19.
REMEMBER: The relief measures are different in each State or Territory.
- Queensland – the proposed relief package includes:
- A land tax rebate reducing land tax liabilities by 25 per cent for eligible properties for the 2019-20 assessment year;
- A waiver of the per cent land tax surcharge for foreign entities for the 2019-20 assessment year; and
- A 3-month deferral of land tax liabilities for the 2020-21 assessment year.
You will need to apply for the land tax rebate.1 However you do not need to apply for the foreign surcharge waiver or the three-month deferral. The QLD Government will reassess land tax to apply the waiver and provide a refund where the assessment amount has already been paid.
REMEMBER: This will apply to all taxable property, regardless of land-use, if you meet the eligibility criteria (see below).
You will be able to apply for relief if:2
- You rent all or part of your property to a tenant OR all or part of your property is currently available for lease; AND
- At least one tenant's ability to pay their normal rent OR your ability to secure a new tenant is affected by the COVID-19 pandemic; AND
- You will provide rent relief to an affected tenant proportional to the amount of the land tax rebate OR if the property cannot be leased, you need land tax relief to meet your other financial obligations (such as debt repayments); AND
- You will comply with new leasing principles announced by the Queensland Treasury, even if the relevant lease is not regulated.3
REMEMBER: The rebate will apply to each property that meets the eligibility requirements and conditions, rather than to your entire taxable landholdings.
Some of the conditions of eligibility are future obligations, e.g. the rebate will be paid on the basis that you will provide rent relief or that you will comply with the new leasing principles.
The information currently available is that the land tax rebate does not need to be repaid, provided that the eligibility requirements and conditions have been met. There could be situations where the land tax rebate is required to be repaid, although there is (at the date of this publication) no clear guidance on if or when this might be the case.
- NSW – the proposed relief package includes:
- A reduction of up to 25 per cent of the land tax payable on a parcel of land in the 2020 land tax year; and
- A three-month deferral for outstanding land tax payments if you have received a rebate or waiver.
You might also be able to extend deadlines for payments and get leniency for late payment.
The relief package is available when:
- Your land is used for business OR residential purposes;
- Your property is leased to a residential tenant OR a business tenant with annual turnover of up to $50 million, who can show financial distress from the COVID-19 outbreak;4
- You have reduced the rent of the affected tenant by at least as much as the tax reduction; and
- The land tax is directly related to the property for which rent has been reduced.
Documents will need to be provided showing that your tenant is in financial distress as a result of COVID-19. This could include BAS statements, or a letter from an accountant. The NSW Revenue office may also require evidence that the rent was reduced in response to that financial distress (such as evidence of rent reductions).
- Victoria – you may be eligible for a 25 per cent discount on your 2020 land tax, and any remaining land tax may be able to be deferred until March 2021, if:
- Your property is leased to a residential tenant OR a business tenant:
- With annual turnover of up to $50 million;
- Who is eligible for the Commonwealth Government's JobKeeper Payment, and the tenant can demonstrate financial distress from the COVID-19 outbreak; AND
- You provide rent relief for the tenant/s impacted by COVID-19; OR
- You are unable to secure a new tenant because of COVID-19.
- South Australia – if you are paying land tax quarterly in 2019-20, you may be able to defer payment of your third and fourth quarter instalments for up to six months. The deferral does not relate to outstanding arrears for previous periods.
You do not need to apply to put this new arrangement in place. You will be sent your land tax notices of assessment as usual, with information provided on how the deferral will be managed.
- Tasmania – land tax will be waived for commercial property5 for the 2020-21 financial year, if you are a business owner, are liable for land tax and can demonstrate that your business operations have been affected by COVID-19.
- WA – you can apply for an extension of time to pay land tax or pay land tax by instalments.6 Penalty tax for late payment will be refunded in full if you can show that your financial circumstances have been affected by COVID-19.
- ACT – if you reduce rent on privately rented properties by at least 25 per cent due to COVID-19, you may be eligible for a land tax credit to cover 50 per cent of the rental reduction, up to a limit of $1,300 per quarter. The ACT Government is also offering rates rebates for property investors, home owners and some commercial property owners as well as the opportunity to defer payment of rates for home owners experiencing financial hardship.
What should I do now?
If you are a landlord, you should visit the relevant State or Territory websites7 for more information and to get help to determine if you or your property is eligible for the land tax relief package in your jurisdiction.
If you are a tenant, you should keep clear records of any financial stress you are experiencing as a result of COVID-19 and your eligibility for financial assistance such as the Government's JobKeeper program.
Whether you are a landlord or a tenant, you should:
- Act honestly and transparently with your landlord/tenants;
- Be commercial but willing to compromise – the national Cabinet has made it clear that all parties need to cooperate and help one another where they can; and
- Keep very clear records of all communications, particularly changes to the lease terms agreed between the parties.
1 You can apply for the land tax rebate up to
30 June 2020.
2 From Tuesday 14 April, people will be able to apply for land tax relief, by going to www.qld.gov.au/landtax.
3 There are two streams of eligibility; either your property is leased (in whole or in part) OR your property is vacant. Both streams have their own eligibility criteria and you must meet all of the criteria in that stream to qualify.
4 Financial distress is considered to be, for commercial tenants - a 30 per cent drop in revenue due to COVID-19 and for residential tenants - a 25 per cent drop in household income due to COVID-19.
5 'Commercial property' refers to property classified as such for government valuation purposes.
6 All duty must be paid in full before settlement of purchase of a property. Arrangements to pay by instalment or extend the time for payment approved from 23 March 2020 will be interest-free.
7 QLD, NSW, VIC, SA, TAS, WA, ACT.
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.