The NSW Government has introduced measures to provide relief to commercial and residential landowners, who provide a reduction in rent to a tenant who is experiencing financial distress as a result of COVID-19.

The 2020 land tax COVID-19 relief is intended to reduce a landowner’s land tax payable for 2020, by up to 50 per cent, for a taxable parcel of land where rent relief has been given to the tenant who occupies that land.

Reduction in land tax payable

A landowner can receive a reduction of up to 50 per cent of land tax payable for the 2020 land tax year, subject to the terms of these guidelines. There are two relief periods for which a landowner can apply for relief.

Period 1

A landowner providing a reduction in rent to a tenant between 1 April 2020 and 30 September 2020 can receive a reduction in land tax payable for the relevant parcel of land. The land tax reduction will be the lesser of:

• the amount of rent reduction provided to an eligible tenant for any period between 1 April 2020 and 30 September 2020, or
• 25 per cent of the land tax attributable to the parcel of land leased to that tenant.

Period 2

A landowner providing a reduction in rent to a tenant between 1 October 2020 and 31 December 2020 can receive a reduction in land tax payable for the relevant parcel of land. The land tax reduction will be the lesser of:

• the amount of rent reduction provided to an eligible tenant for any period between 1 October 2020 to 31 December 2020, or
• 25 per cent of the land tax attributable to the parcel of land leased to that tenant.

Landowners can be eligible for land tax relief for either, or both of these relief periods, provided all eligibility requirements are met.

Landowners can also be eligible for land tax relief for either, or both 2020 land tax COVID-19 relief and 2021 land tax COVID-19 relief, provided all eligibility requirements are met.

Land tax attributable to a parcel of land is calculated as follows:

Taxable value of the parcel of land divided by aggregate taxable value of all parcels of land, multiplied by landowner’s 2020 land tax liability.

If you haven’t completed payment of your land tax for 2020, the relief granted will be used to offset the balance of land tax you have left payable. If your land tax for 2020 has been paid in full, the reduction can be refunded to you.

A deferral of up to three months on land tax payments may also be granted to eligible landowners who applied for relief on or before 30 September 2020.

You’ll be eligible if:

• you’re leasing a parcel of land to:
  • a commercial tenant, who has an annual turnover of up to $50 million, or
  • a residential tenant,
• the tenant is in financial distress as a result of COVID-19,
• you reduce the rent of the affected tenant for any period between 1 April 2020 and 30 September 2020, and/or
• you reduce the rent of the affected tenant for any period between 1 October 2020 and 31 December 2020,
• and, for 2020, you have land tax attributable to the parcel of land leased to that tenant.

Financial distress

A tenant is considered to be in financial distress where:

• for commercial tenants – there is a reduction in turnover compared to a previous comparable period of 30 per cent (or more),
• for residential tenants – there is a reduction in household income of 25 per cent (or more).

You’re responsible for verifying that your tenant is in financial distress.

Rent reduction

To be eligible, the rent reduction must not be required to be paid back at a later date. If a reduction in rent is provided but is required to be paid back at a later date, this is considered to be a deferral of rent and won’t be considered as a reduction of rent under this program.

If you’re not eligible for a reduction in land tax or a deferral in land tax payments under this program but you’re having difficulty paying, you can still apply for a payment plan to extend your payment dates.

Relief under this program is being provided under section 5.7 of the Government Sector Finance Act 2018 (the GSF Act) and is subject to the terms and conditions as set out in these guidelines (section 5.7(2) of the GSF Act).

You acknowledge that the following terms and conditions are essential and, if any are contravened, you may be required to repay the relief (section 5.7(3) of the GSF Act):

1. You are being provided relief on the basis that your application, including any statements, information or documentation provided to demonstrate that you satisfy the eligibility criteria, is true and accurate.
2. If there is a change in your circumstances affecting your eligibility after an application is submitted, you must notify us by submitting an amended application as soon as practicable. This includes a change in tenant or a change in rent during the period for which an application has been submitted. An amended application may result in a change to the amount of relief previously provided to you and you may be required to repay all or part of the relief.
3. Your relief is calculated as at your 2020 land tax liability at the time your application is determined. If there is any reassessment of your 2020 land tax liability after relief is provided under this program, your relief may be recalculated and you may be required to repay all or part of the relief.

You also acknowledge that:

• Applications submitted for this program will be subject to potential compliance review for legitimacy.
• Eligibility of both landowners and tenants can be reviewed to confirm that relief under this program has been correctly requested and applied for.
• Providing false or misleading information in an application for 2020 land tax COVID-19 relief, or not notifying us of a change in your circumstances, may result in a land tax reduction under this program being revoked. If you are required to repay the relief and do not do so, the relief may be recovered from you as a debt. It’s also an offence to provide false or misleading information and penalties may apply.

Commercial

Used for business

Landowner

Has the same meaning as ‘owner’, as defined in the Land Tax Management Act 1956

Land tax year

Has the same meaning as defined in the Land Tax Management Act 1956

Residential

Used for a private place of residence

Taxable value

Has the same meaning as prescribed in section 9 of the Land Tax Management Act 1956

Example 1

Scenario

A landowner owns one property valued at $10,000,000, with a 2020 land tax liability of $170,404. The property is rented to a total of five commercial tenants, three of whom are impacted by COVID-19 and are eligible under these guidelines.

Each of the three eligible tenants’ leases require them to pay $10,000 per month.

As a result of the COVID-19 impacts, the landlord waives two months’ rent for each eligible tenant between 1 April and 31 May 2020.

Calculation for period 1

Rent reduction total = 3 (eligible tenants) x $10,000 (monthly rent) x 2 (number of months' waived) = $60,000

Land Tax attributable to the parcel of land = $10,000,000 (taxable property value) / $10,000,000 (total value of all taxable properties) x $170,404 (2020 land tax liability) x 25% = $42,601

Calculation for period 2

No rent reductions were given in period 2 so no relief is available to the landowner for this period.

Outcome:

The land tax relief granted to the landowner is equal to the lesser of the rent reduction ($60,000), or 25% of land tax attributable to the parcel of land ($42,601).

For this example, the total relief available is $42,601.

Example 2

Scenario

A landowner owns two properties: one valued at $10,000,000 (property 1), the other $5,000,000 (property 2), with a 2020 land tax liability of $270,404.

Property 1 is rented to a tenant who is impacted by COVID-19 and is eligible under the guidelines. The eligible tenant's lease requires them to pay $10,000 per month.

As a result of the COVID-19 impacts, the landlord waives six months’ rent for this tenant between 1 July 2020 and 31 December 2020.

Calculation for period 1

Rent reduction total = 1 (eligible tenant) x $10,000 (monthly rent) x 3 (number months' waived) = $30,000

Land Tax attributable to the parcel of land = $10,000,000 (taxable property value) / $15,000,000 (total value of all taxable properties) x $270,404 (2020 land tax liability) x 25% = $45,067.33

Calculation for period 2

Rent reduction total = 1 (eligible tenant) x $10,000 (monthly rent) x 3 (number months' waived) = $30,000

Land Tax attributable to the parcel of land = $10,000,000 (taxable property value) / $15,000,000 (total value of all taxable properties) x $270,404 (2020 land tax liability) x 25% = $45,067.33

Outcome

The land tax relief granted to the landowner is equal to the lesser of the rent reduction ($30,000), or 25% of land tax attributable to the parcel of land ($45,067.33) for each period.

For this example, the total relief available is $60,000 (i.e. $30,000 for each relief period).