Further clarity has been given by the courts in Vikpro Pty Ltd v Wyuna Court Pty Ltd atf Wyuna Court Unit Trust [2018] QSC 160 regarding questions surrounding whether land tax is recoverable under a commercial lease. Previous decisions by the Supreme Court and Court of Appeal have been reversed by the insertion of a new provision in the Revenue Legislation Amendment Act 2017 (Qld) (‘The Act’).
As a result of this amendment to the Act, land tax cannot be imposed on lease entered into between 1 January 1992 and 30 June 2009, irrespective of when the land tax is imposed. This amendment prohibiting the charging of land tax applies to options to renew and assignments and transfers of leases if the original lease was entered into between 1 January 1992 and 30 June 2009.
Prior to this amendment, lessors were permitted to recover land tax imposed under commercial leases which were entered into between 1 January 1992 and 30 June 2009 if the land tax was imposed from 30 June 2010.
Importantly, the Act applies retrospectively from 30 June 2010, however lessors are afforded the right to recover the cost of land tax if they were reliant on the prior position. For example, if a tenant who is a party to an existing lease has paid land tax to their landlord from 30 June 2010, they will be unable to rely on the newly inserted provision to recover the land tax they have already paid.
Implications for tenants and landlords
To ensure landlords and tenants are aware of their rights and obligations, clauses regarding outgoings and land tax recovery in long-term leases entered into on or after 1 January 1992 and before 30 June 2009 should be checked by the contracting parties. Landlords who are seeking to recover land tax from a tenant should seek to do so promptly. If recovery is not actioned quickly or is delayed, tenants then have the opportunity to raise arguments pertaining to waiver or estoppel.
In summary, the law surrounding commercial leases and land tax in Queensland is as follows:
- Leases entered into prior to 1 January 1992 which contain an appropriate recovery clause, allow for recovery of land tax.
- For leases entered into between 1 January 1992–30 June 2009, land tax will not be recoverable (irrespective of when the land tax is enforced).
o However, land tax that was imposed from 30 June 2010–22 June 2017 on such leases that have already been paid by the tenant or have already been ordered to be paid by the tenant by a court can be retained by the landlord. - For leases entered into on or after 30 June 2009, land tax is recoverable if imposed from 30 June 2010 and there is an appropriate recovery clause in the lease.
How we can help
If you have a lease query, would like your lease reviewed or would like to clarify your rights and obligations under a commercial lease, you can contact our office today on (07) 3036 0649.