The NSW Government is continuing to provide relief to landowners with commercial leases in 2021, who provide a reduction in rent to a retail tenant who is experiencing financial distress as a result of COVID-19.

The 2021 land tax COVID-19 relief is intended to reduce a landowner’s land tax payable for 2021, by up to 25 per cent, for a taxable parcel of land where rent relief has been given to a retail tenant who occupies that land.

Unlike the 2020 land tax COVID-19 relief, this relief program only applies to commercial leases and impacted lessees as defined by the Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020.

Reduction in land tax payable

A landowner can receive a reduction of up to 25 per cent of land tax payable for the 2021 land tax year, subject to the terms of these guidelines.

A landowner with commercial lease providing a reduction in rent to a retail tenant between 1 January 2021 and 28 March 2021 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 January 2021 and 28 March 2021, 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 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 2021 land tax liability.

If you haven’t completed payment of your land tax for 2021, the relief granted will be used to offset the balance of land tax you have left payable. If your land tax for 2021 has been paid in full, the reduction can be refunded to you.

You’ll be eligible if:

• You have a commercial lease on a parcel of land with a retail tenant, who has an annual turnover of less than $5 million,
• The retail tenant is in financial distress as a result of COVID-19,
• you reduce the rent of the affected retail tenant for any period between 1 January 2021 and 28 March 2021,
• and, for 2021, you have land tax attributable to the parcel of land leased to that retail tenant.

Financial distress

A retail tenant is considered to be in financial distress where they have experienced a reduction in turnover for the quarter ending 30 December 2020 when compared to a previous comparable period of 30 per cent (or more); or in the case of a non-profit body, 15 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 relief 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 2021 land tax liability at the time your application is determined. If there is any reassessment of your 2021 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 2021 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 lease

Has the same meaning as 'commercial lease', as defined in the Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020.

Retail Tenant

Has the same meaning as 'impacted lessee', as defined in the Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020.

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

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 2021 land tax liability of $169,556. The property is rented to a total of five retail 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 January 2021 and 28 February 2021.

Calculation

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 $169,556 (2021 land tax liability) x 25% = $42,389

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 ($42,389).

For this example, the total relief available is $42,389.

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 2021 land tax liability of $269,556.

Property 1 is rented to a retail 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 all rent for this tenant between 1 January 2021 and 28 March 2021.

Calculation

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 $269,556 (2021 land tax liability) x 25% = $44,926

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 ($44,926) for each period.

For this example, the total relief available is $30,000.