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Recovery of land tax under commercial leases

Handing over the keys

If you are a landlord or a tenant, and currently hold a commercial lease in Queensland, you may be impacted by the Queensland Court of Appeal decision in Vikpro Pty Ltd v Wyuna Court Pty Ltd [2016] QCA 225 (Vikpro).


Background

The original Supreme Court decision in Wyuna Court Pty Ltd v Vikpro Pty Ltd [2015] QSC 216 opened the doors for landlords to recover land tax from tenants that had been imposed on, or after, 30 June 2010, in circumstances where a lease had been entered into between those parties before 30 June 2009, and where that lease contained a provision permitting the recovery of land tax by the landlord.

Whilst the original decision of the Supreme Court was upheld on appeal by the Queensland Court of Appeal in Vikpro, recent changes to the Land Tax Act 2010 (Qld) (the Act) by way of the Revenue Legislation Amendment Act 2017 (Qld) have now overruled those decisions.

Put simply, the decisions of the Supreme Court and the Court of Appeal have been reversed by the insertion of a new Section 83A into the Act. The land tax recovery position for different commercial leases now depend on the date of entry into the lease:Diagram - Recovery of Land Tax under Commercial Leases: Changes made from 1992 to 2009

Important Note:  Each lease category includes options entered into under that lease.

Impact

The changes are retrospective to 30 June 2010, except that any amounts paid by a tenant to a landlord in reliance upon the Vikpro decision are not refundable. The issue for landlords who have relied, or intended to rely, on the Vikpro decision is that any amount:

  • charged, but not yet paid; or
  • budgeted for, but not yet charged,

will not be able to be recovered after 1 July 2017.

In a retail context, the changes only really affect major tenancies as recovery of land tax under specialty shop leases is prohibited under the Retail Shop Leases Act 1994 (Qld).

In a residential context, recovery of land tax is prohibited in relation to all residential tenancies under the Residential Tenancies and Rooming Accommodation Act 2008 (Qld).

Takeaway

Landlords and tenants under Queensland commercial leases entered into between 1 January 1992 and 30 June 2010 should check their lease to ensure they are aware of their rights and obligations.

Landlords will need to consider re-calculating their annual budgets and potentially issuing an amended estimate of the annual outgoings for leased land (to the extent they have an obligation to do so), so as to factor in that land tax is no longer recoverable from the tenant under the lease.

Landlords seeking to recover land tax should do so promptly. If they don’t, tenants could run waiver or estoppel arguments based on any delay.

Please contact us if you want to know more or would like a detailed note on the case.

 

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