Leasing during lockdown – land tax and payroll tax relief during COVID-19
As expected, the immediate response to the government shutdown from many businesses was to stand down staff and/or to significantly cut wages. In an effort to reduce the economic impact of the COVID-19 shutdown, Australian states and territories will grant land tax relief to eligible landlords and payroll tax relief for impacted businesses.
Eligibility thresholds and waiver/refund amounts for tax paid for both land tax and payroll tax differ between each jurisdiction. The concessions and eligibility are briefly outlined below.
In Victoria, eligible landlords will receive a 25% discount on their 2020 land tax assessment. In addition to the discount, landlords can defer the remainder of their land tax liability (i.e. the balance of the land tax owing after having reduced the total land tax amount by 25%) to 31 March 2021. Landlords must reduce rent by at least the dollar value of the land tax discount and tenants must have been financially affected by COVID-19. For commercial landlords, their tenants must have an annual turnover of up to $50 million.
For a Victorian business with annual taxable wages (ATW) of up to $3 million, their entire payroll tax liability for the 2020 financial year will be waived or, if already paid, refunded. This is calculated on an individual payor basis, not a group basis. Note that businesses must still lodge payroll tax returns on time, and late lodgements may still accrue penalties.
New South Wales (NSW)
Landlords who meet the eligibility criteria in NSW will be entitled to a rebate of up to 25% on their 2020 land tax assessments, so long as, for tenanted properties, rent is reduced by at least the same amount.
For commercial landlords, the commercial tenant must have experienced at least a 30% reduction in revenue and have an annual turnover of no more than $50 million.
Businesses in NSW with ATW of $10 million or less or which are in a group, where the group’s ATW are $10 million or less, are exempt from payroll tax for March, April and May 2020 – equating to a 25% reduction in their annual payroll tax obligation. Furthermore, the payroll tax threshold in NSW will increase from $900,00 to $1 million.
Commercial landlords in Western Australia can apply for grants which equal to 25% of their land tax for 2019-20. Like other States, it is available to landlords who give rent relief to “small-business” (as defined in the Small Business Development Corporation Act 1983 (WA)) tenants who are eligible for the JobKeeper payment.
The landlord must waive rent to an amount equal to three months’ worth before 31 May 2020. Additionally, the landlord must not seek to recover outgoings for a period of six months starting from the date of the commencement of the rent waiver. The additional requirements here are that the land in question must have an unimproved value of $300,000 or more and the landowner themselves must demonstrate that they have been affected by COVID-19 (usually demonstrated by reduced rental income).
In Western Australia, wages that are paid out of the Australian Government’s Jobkeeper payment will be exempt from payroll tax. In addition, waiver will be provided in the following circumstances:
- if the business pays between $5 million to $7.5 million of ATW, the business can apply for a waiver for the months to March to June 2020;
- if the business pays below $5 million of ATW, then the business can automatically claim the waiver without the need for an application; and
- if the business pays less than $4 million, but above $1 million of ATW, a once-off grant of $17,500 will be payable to the business.
On top of the standard 25% land tax rebate for eligible properties, Queensland is in fact doing away with the foreign owner land tax surcharge for relevant properties for the 2019-20 land tax year. The Queensland Office of State Revenue is also contacting business which pay ATW of $6.5 million or less regarding their refund/waiver of payroll tax for the months of November 2019 through to March 2020.
However, if a business pays more than $6.5 million of ATW but has nevertheless been negatively affected by COVID-19, it is entitled to apply for a two-month refund of payroll tax, provided that this was done prior to 31 May 2020.
Australian Capital Territory (ACT), the Northern Territory (NT) and Tasmania
In Tasmania, land tax will be waived for the 2021 financial year for commercial property where the business owner is the one liable for land tax and can demonstrate that their business operations have been adversely affected by COVID-19.
In addition, eligible Tasmanian hospitality, tourism and seafood industry employers, as well as other employers who turn over less than $5 million per year on a group level and who can demonstrate that they were adversely impacted by COVID-19, will not be required to pay any payroll tax for the entire 2020 financial year.
In the NT, employers with a maximum annual turnover of $50 million, maximum ATW under $7.5 million and a reduction in turnover of at least 30% compared to the same period the preceding year are eligible for payroll tax waiver for the months of March to August 2020.
In the ACT, employers who operate businesses in the ‘prohibited activities list’, such as gyms, hotels and entertainment venues, will be compensated by having their payroll tax waived for April to September 2020.
In South Australia, eligible landlords can apply for a 25% reduction in their 2020 land tax before 30 June 2020. Landlords owning either commercial property, where the tenant’s annual turnover is less than $50 million, or residential property with a tenant that has been financially impacted by COVID-19, will receive the discount. The landlord must reduce the rent by at least as much as the land tax reduction and commercial tenants are required to have a 30% reduction in turnover for their landlord to be eligible.
South Australian businesses with grouped ATW of $4 million or less will receive a six-month (April to September 2020) waiver of payroll tax, with no application required.
Maddocks has produced guides on legal issues raised by the coronavirus which may be of interest, and we encourage you to share these with colleagues who may also find them useful.
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