From 01 July 2009, landlords of non residential and non Retail Act properties (about 95% of all commercial and industrial property) will be able to recover land tax from tenants.
The Qld Government has released for consultation the draft Land Tax and Taxation Administration Amendment Act 2009, which amongst other things, aims to remove the restriction in the Land Tax Act 1915 against passing on the cost of land tax to tenants (while retaining the same restriction in the Residential Tenancies Act 1994 and the Retail Shop Leases Act 1994).
The changes as proposed will not include any pre-existing lease entered into before 30 June 2009 or a renewal of a pre-existing lease (e.g. exercise of an option).
There is likely to be an incentive for Landlords to terminate existing leases so that land tax can be recovered under a new lease.
It will create a “transition” period where landlords, tenants and practitioners will need to be particularly careful when making market comparisons before agreeing on new rent structures.
This again highlights the critical need to fully comprehend the full occupancy cost of respective tenancy arrangements and make comparisons where possible on a gross rental basis.
Some may think this is not a big dollar issue, yet Land Tax is often more than 25% of all property outgoings second only to Council Rates. With the likelihood of an increasing Land Tax regime in Qld and tough economic times ahead, it will have real and meaningful impact.
It’s perhaps a bit “back to the future” days of dealing with the GST transitional arrangements, though should not be as complicated – for those that are aware of it.