Land tax recovery revisited – Queensland may go ‘back into step’ with other states

03 February 2009 Topics: Property and planning law

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 June 2009.

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.

Current position

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 lease);
  • 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 prohibition.

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 new lease.

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.

Conclusion

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.

Cooper Grace Ward Lawyers can assist you with any questions which you may have regarding any of the matters in this Alert. In the next few weeks, we should be able to establish if the changes have been enacted.  We can advise you regarding lease negotiations and the contents of letters of offer as part of any lease negotiations.

We can also assist with the drafting appropriate clauses to include or remove land tax recovery.

For more information or assistance on your property matters, please contact Marcus Ford, Partner (07) 3231 2972.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.