A recent decision in the Supreme Court of Queensland has provided an opportunity for lessors of commercial premises to recover land tax from lessees where the lease commenced before 30 June 2009.
If you or your client is the lessor of commercial premises with a lease commencing before 30 June 2009, it is worthwhile to review the lease to determine whether a contribution to land tax can be recovered from the lessee.
Conversely, if you or your client is the lessee of commercial premises, it is also worthwhile to review the lease to determine whether there is an obligation to pay the land tax or make a contribution towards the lessor’s liability.
Background to the recovery of land tax by lessors
The recovery of land tax from lessees was previously regulated under the Land Tax Act 1915 (Qld) (the old Act). A provision of the old Act provided that a term included in a lease entered into after 1 January 1992 which required a lessee to pay land tax was unenforceable.
This provision was repealed by amendments in 2009 which provided that from 30 June 2009 onwards, a lessor of premises which were not residential or retail premises could seek reimbursement for land tax from the lessee. However, in a transitional provision, the old prohibition on passing on the land tax to lessees continued to apply with respect to leases entered into prior to 30 June 2009.
On 30 June 2010, the old Act was repealed and replaced by the Land Tax Act 2010 (Qld) (the current Act). The current Act contains no transitional provision equivalent to the provision described above.
The uncertainty that the lack of transitional provisions created was addressed in the recent case Wyuna Court Pty Ltd v Vikpro Pty Ltd  QSC 216.
A registered sub-lease entered into prior to 30 June 2009 required the lessee to pay all taxes relating to the leased premises. The lessor sought to recover land tax from the lessee for a period after 30 June 2010.
The lessee disputed the lessor’s claim and referred to provisions in the Acts Interpretation Act 1954 (Qld) (AIA) in arguing that, even though the current Act did not expressly include the transitional provision that was enacted in the 2009 amendments, land tax was not payable by the lessee.
This was because the previous operation of the 2009 amendments to the old Act would not be affected by the repeal of the old Act.
The court found that the landlord was entitled seek reimbursement from the lessee for land tax from 30 June 2010 onwards.
The lessee’s argument was rejected and the court noted another provision of the AIA which states that the application of the AIA may be displaced, wholly or partly, by a contrary intention appearing in any Act.
It was therefore determined that the repeal of the old Act and the deliberate failure to re-enact an equivalent transitional provision to the 2009 amendments illustrated that Parliament intended the previous prohibition on recovering land tax from lessees to cease to continue once the current Act was in force.
Key takeaways from this decision
- Lessors of Queensland commercial leases (including transfers, renewals or assignments of those leases) entered into before 30 June 2009 are entitled to recover land tax from lessees from 30 June 2010 onwards as long as there are provisions in the lease allowing such recovery.
- Lessors of Queensland commercial leases entered into on or after 30 June 2009 may continue to recover land tax from lessees from 30 June 2010 onwards as long as there is are provisions in the lease allowing such recovery.
- Lessees who enter into new commercial leases may wish to negotiate with the lessor as to whether land tax is to be recovered by the lessor from the lessee.
- The current prohibition on recovering land tax from lessees under residential or retail shop leases remains unaffected.
The outcomes of future cases on this issue may depend on the individual facts. For example, the terms of the particular lease may not make it clear that the lessee is liable for land tax or there may have been some conduct or agreement which prevents the lessor from recovering land tax.
It also remains possible that this decision will be reversed on appeal or by the enactment of future legislation. But for the moment, the door is left open for lessor’s to seek reimbursement for land tax.