Landlords of Queensland commercial properties can recover land tax from 30 June 2010 under leases entered between 1 January 1992 and 30 June 2009 (pre-existing leases)1. This applies even though when the pre-existing leases were entered, land tax recovery was unenforceable.
Where pre-existing leases provide for the recovery of land tax, landlords should not delay in recovering any outstanding amounts.
Court of Appeal Decision
In a split decision that has taken some in the industry by surprise, the Queensland Court of Appeal has found2:
- if a commercial lease was entered between 1 January 1992 and 30 June 2009; and
- the lease contains a clause allowing the landlord to recover land tax from the tenant,
then the landlord can recover land tax from the tenant post 30 June 2010.
The decision has major financial implications for landlords and tenants.
Laws about land tax recovery under commercial leases have oscillated for the last 30 years.
- In 1991, the Land Tax Act (Qld) 1915 was amended to prevent the recovery of land tax from tenants under commercial leases entered after 1 January 19923.
- The 1915 Act was again amended to allow the recovery of land tax from tenants under commercial leases from 30 June 2009. The 2009 amendment included a transitional provision which prevented landlords recovering land tax from tenants under pre-existing leases1.
- The 1915 Act was repealed and replaced by the 2010 Land Tax Act from 30 June 2010.
- Importantly, the 2010 Act did not contain the same transitional provision preventing the recovery of land tax under pre-existing leases.
This decision only affects commercial leases and does not apply to residential or retail shop leases.
Landlords and tenants should, without delay, review pre-existing leases to check if there is a right for the landlord to recover land tax. This could be drafted in a number of ways including an express provision or an expansive definition of outgoings or future taxes. Detailed consideration of lease terms may be required to determine the liability for land tax.
At the time of writing this alert, it is not known whether the Queensland government will take any legislative action in relation to the issue or whether the tenant will seek leave to appeal the decision to the High Court.