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2020 land tax COVID-19 relief - Guidelines

20 October 2020

About the program

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.

Relief available

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.

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 3 months on land tax payments may also be granted to eligible landowners who applied for relief on or before 30 September 2020.

Eligibility criteria

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.

How to apply

2020 land tax COVID-19 relief for the period 1 April – 30 September is currently available via Service NSW.

2020 land tax COVID-19 relief for the period 1 October – 31 December will be available via Service NSW soon.

Access the application

Applications close on 31 January 2021.

You’ll need the following to complete an application:

  • MyServiceNSW Account
  • Land Tax Client ID
  • Land Tax Correspondence ID
  • Land details for parcel of land the relief is being applied for
  • Supporting documentation to demonstrate eligibility.

Examples of supporting documents include, but are not limited to:

  • To demonstrate that you are providing a rent reduction – copies of tenancy agreements, rental ledgers, a letter from the property manager, etc.
  • To demonstrate that your tenant is in financial distress as defined in these guidelines, you should provide one of the following – a statement from your tenants explaining how they have been impacted by COVID-19, copies of written communication between the landowner and tenant, a letter from their landlord or property manager.

You must obtain your tenant’s permission to share their information with us.

Should further evidence be required to determine the eligibility or validity of an application, we’ll contact you.

We’ll endeavour to process your application within 60 days.

Other conditions

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.

Definitions

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

Examples

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).

Frequently asked questions

Does the land tax relief apply to Surcharge Land Tax?

No. There is no relief being applied to Surcharge Land Tax under this program.

Can I resubmit my application if my circumstances change?

Yes. In fact, it is a requirement to notify us by submitting a new application if there has been a change in circumstances from when an initial application is submitted.

Can I apply while I’m still negotiating with my tenant?

There is no requirement for rent reduction negotiations to have been concluded or for all rent reductions to have been waived (or paid) when landowners (or their representatives) apply for land tax relief.

However, if circumstances change after you have submitted your application, for example, the amount of rent reduction differs from the amount in your original application, you will need to notify us of the change in circumstances by submitting a new application.

I lodged an application, but I now have additional information/documents that I want to provide. What should I do?

Submit a new application with the additional information/documentation.

Can I apply for relief for more than one property at a time? ‚Äč

Yes, you can apply for multiple properties at the same time in the one application.

If my application for relief is approved, will I be reassessed for land tax?

If your application for relief is approved, your land tax will not be reassessed for 2020. Your land tax account will instead, be credited with the amount of relief granted. If this results in your account having an overall credit balance, you will receive a refund. If not, the credit will reduce your balance payable. You will receive a confirmation letter for the outcome of your application rather than an assessment notice.

I act on behalf of different clients (e.g. accountant or solicitor). Can I apply for relief for more than one client?

Yes, you can lodge applications for multiple clients. However, you must complete an application before you can commence another one.

I don't have a Service NSW account. How do I apply?

The application is currently only available through Service NSW. Contact Service NSW on 13 77 88 if you need assistance setting up an account. Alternately, you can have a representative submit the application on your behalf, such as an accountant, property manager or family member.

I do not pay land tax. Am I eligible for the relief?

If you're a landowner and you don’t have a 2020 land tax liability, refer to the Service NSW website, which provides other NSW Government support options you may be eligible for.

Who will let me know the outcome of my application?

Revenue NSW will review your application and advise you of the decision.

Can I still apply for the land tax relief if I have already paid or set up an instalment plan?

Yes. Once your application has been processed, you will receive notification of the balance you have left payable. If your account is in credit once the relief has been applied, the credit balance will be refunded.

I own land in a trust. Can I still apply for the land tax relief?

Yes. Landowners that are trusts can apply for relief under this program.

If I have lost income due to my property being vacant or my tenant moving out, am I still eligible for land tax relief?

No. The relief only applies where the reduction of rent has been given to an eligible tenant.

If I get a new tenant, am I still eligible for land tax relief?

Yes, provided that the new tenant meets the eligibility requirement for this program and a rent reduction is being given to the new tenant.

I am providing rental credits rather than a reduction of rent. Am I still eligible for land tax relief?

Yes. Providing a reduction in rent payable by an eligible tenant via rental credits is considered the same as a rent reduction for the purposes of this program; on the condition that the rental credits are not required to be paid back by the tenant at a later date.

If I have multiple tenants on a parcel of land, am I still eligible for land tax relief? What if not all of these tenants are eligible?

Yes. When completing your application, simply add up the total rent amounts and rent reductions relating to only the eligible tenants on that parcel of land and provide supporting documents for each of these tenancies.

How can a residential tenant demonstrate that they meet the requirements to have had a 25 per cent reduction in household income?

Evidence to support this can be demonstrated with documentation such as a statement from your tenants explaining how they have been impacted by COVID-19, a letter from an employer or accountant, bank statements, payslips or other financial statements.

Any other documentation that helps demonstrate eligibility will be considered.

How can a commercial tenant demonstrate that they meet the requirement to have had a 30 per cent reduction in turnover?

Evidence to support this can be demonstrated with documentation such as a statement from your tenants explaining how they have been impacted by COVID-19, a letter from an accountant, bank statements, BAS or other financial statements for comparative periods.

For example, documentation for the current month or quarter compared to the same month or quarter in the previous financial year.

Evidence the business meets requirements for JobKeeper can also be considered as the same eligibility criteria for reduction in turnover applies for both programs.

Any other documentation that helps demonstrate eligibility will be given consideration.

How can a commercial tenant demonstrate that they meet the requirement to have less than $50 million in annual turnover?

To be eligible, a commercial tenant must have had an annual turnover of less than $50 million in the 2018/2019 financial year. This can be demonstrated with documentation such as a letter from an accountant, a tax return, BAS or other financial statements. Any other documentation that helps demonstrate eligibility will be given consideration.

How does the requirement for commercial tenants to have less than $50 million in annual turnover apply if their commercial activities extend beyond the property where the rent relief is being given?

The requirement for commercial tenants to have less than $50 million in annual turnover to be eligible for relief under this program refers to the tenant’s annual turnover considering their total commercial activities, not just the commercial activities being conducted at the property where the rent reduction is being given. This includes internet sales.

How does the requirement for commercial tenants to have less than $50 million in annual turnover apply if they are part of a group of companies?

Where the commercial tenant who is being given a rent reduction is part of a group of companies (i.e. there is one or more companies that are related to the commercial tenant) the annual turnover of the group of companies must be less than $50 million to be eligible for relief under this program.

I am a lessee of land owned by Crown or Local Government. Am I eligible for land tax relief?

The lessee of Crown or Local Government land is deemed to be the owner for land tax purposes. Therefore, a lessee under these arrangements can only apply for relief if they are subleasing the land to an eligible tenant under this program.

If my commercial tenant is a franchisee, am I eligible for land tax relief?

Where a commercial tenant is a franchisee, the franchisee must meet the requirement to have less than $50 million in annual turnover to be eligible for relief under this program, however some franchise agreements and structures can result in the franchisee and franchisor being considered related companies which can impact eligibility.

Do Hotel Management Agreements meet the eligibility requirements for land tax relief?

Hotel Management Agreements are not considered an eligible ‘lease’ under this program.

Can I pay by instalments?

In addition to these measures, there are several options available, such as extending deadlines for payments and getting leniency for late payment.

Apply for an instalment plan

If the instalment plan can’t be approved online, we’ll contact you.

If I have a variable rent agreement, am I eligible for land tax relief?

Where a variable rent agreement is in place, a reduction in rent will only be considered under this program where it can be shown that the variable amount of rent normally due and payable under the terms of the lease is actually waived or reduced by the landlord (i.e. a reduced amount of rent being paid by the tenant in line with the standard terms of the variable lease agreement is not considered a rent reduction).

My tenant pays outgoings, such as utilities, rates or other fees and charges in addition to rent, as part of their lease agreement. Are these costs considered a rent reduction if they are waived or reduced?

Outgoings, such as utilities, rates, taxes or body corporate fees are not considered rent. As such, if a landowner provides a reduction or waiver of outgoings payable by a tenant, it won't be considered a rent reduction under this program.

Are rent reductions to sublessees considered for land tax relief?

Only rent reductions provided by the landowner to a tenant are considered for relief under this program. Reduction in rent given to subtenants or sublessees are not considered, except for in some crown lease situations.