On 16 June 2017, the Queensland Government passed changes to the Land Tax Act 2010 (Qld) dealing with a landlord’s right to recover land tax from tenants. The changes are a reversal of the decision in late 2016 in Vikpro Pty Ltd v Wyuna Court Pty Ltd ATF Wyuna Court Unit Trust [2016] QCA 225 (Vikpro decision).

The changes mean that landlords will be prohibited from recovering land tax from tenants after 30 June 2010:

  1. under leases entered into after 1 January 1992 and before 30 June 2009 (pre-existing lease); and
  2. under leases arising from an option to renew, assignment or transfer of a pre-existing lease.

The changes are retrospective to 30 June 2010, except that any amounts paid by a tenant to a landlord in reliance upon the Vikpro decision are not refundable. The issue for landlords who have relied, or intended to rely, on the Vikpro decision is that any amount:

  1. charged, but not yet paid; or
  2. budgeted for, but not yet charged,

will not be able to be recovered after the changes take effect, expected to be 1 July 2017. Landlords may in the meantime seek to recover such amounts, but it seems impractical to do so.

Landlords and valuers will also need to consider the impact the changes will have on market rent reviews undertaken in the period between the Vikpro decision and when the changes take effect.

Legislative Background

The law on recovery of land tax from tenants has oscillated over the past 25 years. There were key changes that occurred in 2009 and 2010. The below table shows the effect of those changes and those just passed:

Lease Land Tax Act 1915 before 2009 amendment Land Tax Act 1915 after 2009 amendment Land Tax Act 1915 repealed; Land Tax Act 2010 commenced and Vikpro decision Land Tax Act 2010 after 2017 amendments
Pre-1992 Lease: Leases entered into before 1 January 1992 and a lease arising from an option to renew contained in such a lease Recovery permitted Recovery permitted Recovery permitted Recovery permitted
1992-2009 Lease: Leases entered into after 1 January 1992 and before 30 June 2009, excluding a Pre-1992 Lease Recovery permitted Recovery permitted

Up to 30 June 2010: Recovery prohibited After 30 June 2010: Recovery permitted

Recovery prohibited, but any amounts paid by tenants do not need to be refunded
Post-2009 Lease: Leases entered into after 30 June 2009, excluding a Pre-1992 Lease or a 1992-2009 Lease Not applicable Recovery permitted Recovery permitted Recovery permitted

Commercial and Industrial Affected, Retail and Residential Excluded

The changes will have the biggest impact on commercial and industrial property owners.

In a retail context, the changes only really affect major tenancies as recovery of land tax under specialty shop leases is prohibited under the Retail Shop Leases Act 1994 (Qld).

In a residential context, recovery of land tax is prohibited in relation to all residential tenancies under the Residential Tenancies and Rooming Accommodation Act 2008 (Qld).