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Land Tax Developments In Response To COVID-19

Nov 5, 2021 | News and Updates, Property Investing, Property Market, Tax Tips

The COVID-19 pandemic has led to an economic crisis. In Australia, the government faces the need for policies that will counter the negative economic effects. To do this, it requires a reliable COVID-19 emergency response plan and finance policies that will set the economy on the road to recovery, and one of those is the changes of land tax. State governments announced in 2020 land tax developments in response to COVID-19.

New South Wales

Landlords of commercial and residential properties may receive a reduction of up to 50% of the land tax payable in the 2020 land tax year if:

  • the land is used for business or residential purposes
  • the landlord is leasing that property to a residential or business tenant with an annual turnover of up to $50 million who can demonstrate financial distress due to COVID-19
  • the landlord reduced the rent of the affected tenant
  • property for which the rent has been reduced is directly related to the land tax

Financial distress resulting from COVID-19 is considered to be a 30% drop in revenue for commercial tenants, and a 25% drop in household income for residential tenants.

The 50% reduction for the 2020 land tax year is divided into 25% of the total annual land tax for two periods, 1 April to 30 September 2020, and 1 October to 31 December 2020.

Eligible landowners who have paid for the 2020 tax year may apply for a refund. Applications were closed on 31 January 2021.

The period between 1 January to 28 March 2021 had a separate 25% reduction but this is limited to retail leases where the annual turnover of the tenant is less than $5 million, and the tenant has a 30% decline in turnover for the December 2020 quarter, or 15% decline for non-profits.

Affected taxpayers have extended deadlines for payments and get leniency for late payments.

Victoria

Landowners who were due to pay 2020 land tax that has at least one non-residential property (commercial property, industrial property, and vacant land – excluding residential vacant land) and total taxable landholdings below $1 million, had the option to defer their 2020 land tax payment until after 31 December 2020.

Deferred land tax payments were needed to be paid in full on 31 March 2021.

Where land tax for the 2020 tax year has already been paid, landowners were able to request a return and needed to pay the tax in full by 31 March 2021.

Landlords who have met the criteria for land tax reduction were also able to defer the balance of their 2020 land tax assessment until 31 March 2021.

Commercial and residential landlords were, may be eligible to access a reduction in land tax for the 2020 land tax year if:

  • property is rented to a tenant with an annual turnover of up to $50 million, if the tenant is eligible for the Federal government’s JobKeeper payment, and if the landlord has provided rent relief to the affected tenant, commercial landlords are eligible for a 25% reduction of land tax.
  • a tenant’s ability to pay their normal rent is affected by COVID-19 and the landlord has provided rent relief to the affected tenants, residential landlords are eligible for a 25% reduction for a particular property. For landlords who are unable to secure a tenant because of Covid-19, relief is also available to certain eligible landlords.

Tenants who have been provided with a 50% or more outright rent waiver for at least three months, eligible landlords had a reduction of 50% and were able to defer payment of remaining tax until 31 March 2021.

The 25% reduction was extended to the 2021 land tax year for residential landlords.

A 25% waiver of the property’s 2020 land tax has been reduced for owner-occupiers of commercial properties. If their annual aggregated turnover were less than $50 million in either 2018/19 or 2019/20 and have received JobKeeper payments, payment of the remaining tax was deferred to 31 March 2021. There are different eligibility requirements for pubs, clubs, and restaurants with a liquor license.

The Vacant Residential Land Tax for 2021 was waived for properties that were vacant in 2020. 

Queensland

Landlords have received a reduction in land tax by 25% for eligible properties for the 2019/20 assessment year if the ability of the tenants to pay normal rent was affected by COVID-19, and the landlord provided rent relief to the affected tenant of at least the amount of the land tax rebate.

Eligible landlords must also comply with the leasing principles established by the Queensland Government for this relief package.

Landlords whose property is available for lease and who can secure a tenant who has been affected by covid-19 may apply for a rebate.

Applications for the 2019/20 rebate have closed.

A landlord may also be eligible for a 25% rebate in 2020/21 if they have provided additional rent relief in 2020/21. The rebate application deadline for 2020/21 was on 26 February 2021.

Foreign entities who have already paid for the 2019/20 assessment year with the 2% foreign land tax surcharge will be refunded. The waiver is available if the entity owned an eligible property at 30 June 2019 and was liable for land tax in relation to the property. (The waiver does not apply to owner-occupied land.)

The issuing of assessment notices for 2020/21 was delayed for three months resulting in a deferral of land tax liabilities.

Western Australia

The first round of grants equivalent to 25% of the landlord’s 2019/20 land tax bill was paid to commercial landlords who have provided rent relief for a minimum of three months (1 March 2020 to 31 May 2020) and froze outgoings for small businesses that have suffered at least a 30% reduction in turnover due to COVID-19.

The second round of grants was available for the qualifying period starting between 1 September 2020 and 31 December 2020. Applications have closed for the first round and applications for the second round were closed on 28 March 2021.

South Australia

Landlords may receive a reduction in land tax by up to 50% for eligible properties for the 2019/20 land tax year if:

  • The tenant has been financially impacted due to COVID-19 and the landlord reduces rent to the affected tenant by at least the amount of the land tax reduction. This reduction is divided into two periods, 30 March to 30 October 2020, and 31 October 2020 to 30 April 2021, with up to 25% reduction of the total annual land tax available in each period. In order to be eligible, commercial tenants must have an annual turnover of up to $50 million. Tenants will be considered as being financially impacted if it is eligible for the Federal Government’s JobKeeper payment.
  • Owner-occupiers of commercial property who are eligible for the Federal Government’s JobKeeper payment between 31 October 2020 and 30 April 2021 with an annual turnover of up to $50 million, may be eligible for a reduction of up to 25% of the 2019-20 land tax payable on that property.

Applications were closed on 30 April 2021.

Businesses and individuals paying land tax quarterly in 2019/20 were able to defer payment of their third and fourth quarter installments for up to six months.

For 2020/21, the Land Tax Transition Fund relief is increased from 50% to 100%, based on existing relief criteria guidelines.

Tasmania

A business owner who can demonstrate that their business operations have been affected by COVID-19, land tax will be waived for commercial property for the 2020/21 financial year.

Australian Capital Territory

Landlords may be eligible for land tax credits whose residential property rent was reduced by at least 25% for tenants impacted by COVID-19. Land tax credits will be 50% equivalent to the rent reduction.

Northern Territory

Land tax is not imposed in the Northern Territory.

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