State governments pump billions into land tax and rent relief

State governments pump billions into land tax and rent relief

The Victorian Government is acting on the new commercial tenancies code by pledging half a billion dollars to tenants and landlords as they struggle with the impacts of coronavirus-related economic disruption.

The package is the largest state-backed initiative of its kind to date, compared to $440 million from the NSW Government and $400 million from the Queensland Government over the past week. In late March the South Australian Government also announced six-month land tax deferrals.

The lion's share of the Victorian funding will come in the form of $420 million for land tax relief, while the remaining $80 million will go to a rental assistance fund for renters facing hardship due of coronavirus.

"More than ever, we need to be working in partnership. Landlords working with tenants. Tenants working with landlords. And Government willing to help those most in need," says Premier Daniel Andrews (pictured).

"This is about supporting tenants, landlords and small business and making sure that everyone can make it to the other side of this pandemic," adds Treasurer Tim Pallas.

Businesses will only be eligible for the measures if they have an annual turnover under $50 million per year and have experienced more than a 30 per cent reduction in turnover due to the coronavirus.

Key aspects of the bill include:

  • Land tax relief for landlords who give rental relief to tenants;
  • A ban on evictions for six months for residential and commercial tenants;
  • A ban on rental increases;
  • Rent relief for tenants experiencing hardship;
  • Fast-tracked dispute resolution access for tenants and landlords;
  • The establishment of a Coronavirus Relief Deputy Commissioner to handle land tax relief claims; and
  • Implementation of the mandatory code of conduct for commercial tenancies as agreed upon by the National Cabinet.

If a landlord provides tenants impacted by Covid-19 with rent relief, they will be eligible for a 25 per cent discount on their land tax, while any remaining land tax can be deferred until March 2021.

A new Coronavirus Relief Deputy Commissioner will be established at the State Revenue Office to manage these land tax relief claims.

The government has encouraged partnerships between tenants and landlords, and landlords and their banks, to help people continue to pay the rent and have a roof over their heads through the crisis.

But if tenants and landlords struggle to strike deals over rent reductions, they will be given access to a fast-tracked dispute resolution service with Consumer Affairs Victoria or the Victorian Small Business Commission mediating to ensure fair agreements are reached.

Evictions will banned for six months for the non-payment of rent for commercial tenancies involving small and medium-sized businesses, while rental increases will also be banned for commercial or residential properties.

Evictions will also be banned for residential properties for the same period, except in some circumstances. 

Consistent with the National Cabinet agreement to implement a mandatory code of conduct for commercial tenancies, the Government will also urgently legislate so that eligible small and medium sized businesses can be granted rental waivers or deferrals.

"This support will help small businesses keep their doors open, keep employing and keep driving the state's economy," says Minister for Small Business Adem Somyurek.

"These are unprecedented measures - but we are facing an unprecedented crisis. With this support, we'll help tenants cover the rent and keep a roof over their head," adds Minister for Consumer Affairs Marlene Kairouz.

WA takes action to support tenants and landlords

The move follows an announcement yesterday from the Western Australian Government it would introduce the Commercial Tenancies (COVID-19 Response) Bill 2020 to State Parliament this week.

The WA Government's bill, aimed at minimising financial impacts from the pandemic on both commercial and residential tenants and landlords, will include:

  • A moratorium on eviction for six months except in limited circumstances including, for example: if a tenant is causing serious damage to the property or injury to the landlord or a person in adjacent premises; the landlord or tenant is experiencing undue hardship; a tenant is experiencing family violence and the perpetrator needs to be evicted; the tenant abandons the premises; or the agreement is frustrated;
  • A prohibition on rent increases during the emergency period;
  • That any fixed term tenancy agreement due to expire during the emergency period will continue as a periodic agreement;
  • Relieving lessors of the obligation to conduct ordinary repairs if the reason they cannot do so is Covid-19 related financial hardship or a lawful restriction on movement; and
  • Enabling a tenant to end a fixed term tenancy prior to its end date without incurring break lease fees (tenants will still be liable for damage and rent arrears).

"Under the proposed reforms, tenants must continue to pay rent. If a tenant can't pay their rent they will still have to pay it later, so continuing to pay rent will increase your chances of keeping debt to a manageable level," says WA Premier Mark McGowan.

"Tenants in financial distress due to Covid-19 should contact their landlord or property manager to try and make an arrangement. This could include a reduction to the amount paid for a period of time, for example.

"What we're introducing are sensible amendments to help landlords and tenants to work together during these challenging and uncertain times."

Commerce Minister John Quigley says there are expectations of a spike in disputes during the emergency period.

"As a result of these concerns, the legislation will provide a mandatory conciliation step in the dispute resolution process," says Quigley.

"This will act as a buffer between complainants and the Magistrates Court and the State Administrative Tribunal (SAT) protecting the Magistrates Court and SAT from being flooded by residential tenancy dispute applications.

"We will also be introducing a code of conduct that will apply broadly to all tenancies for small to medium enterprises that are suffering financial stress or hardship as a result of the pandemic."

NSW divvies up $440m to commercial and residential sectors

On Monday the NSW Government announced a $440 million land relief package to be distributed roughly 50-50 between the commercial and residential property sectors hit by the economic impacts of the pandemic.

Commercial landlords will be offered a land tax concession if they pass savings on to tenants through a rent reduction.

Eligible landlords will be able to apply for a land tax concession of up to 25 per cent of their 2020 (calendar year) land tax liability on relevant properties.

A further land tax deferral for any outstanding amounts for a three-month period will also be offered to landlords who claim the land tax concession.

The Government will give effect to the Code of Conduct, which will operate for a temporary period during the pandemic, and include the following key measures:

  • Landlords must negotiate rent relief agreements with tenants in financial distress due to Covid-19 by applying the leasing principles in the Code;
  • A ban on the termination of a lease for non-payment of rent;
  • A freeze in rent increases.

To facilitate these changes, and deliver increased mediation and advisory services to commercial parties, the NSW Small Business Commission will be bolstered with extra staff and an injection of $10 million from the $1 billion Working for NSW Fund.

The policy will apply to business tenants with a turnover of less than $50 million that experience a 30 per cent (or more) reduction in revenue as a result of the COVID-19 pandemic, in line with the Prime Minister's announcement on 7 April.

This will include any business with annual turnover of less than $50 million who is eligible for the Commonwealth's JobKeeper program.

Treasurer Dominic Perrottet welcomed the initiatives, saying they would help businesses stay afloat and provide greater surety for tenants and landlords.

"This provides a way forward for tenants and landlords so they can reach an agreement during this difficult period and includes an incentive in the form of a land tax reduction." Perrottet said.

"I thank the many landlords who are already supporting their tenants through this period and the banks for showing flexibility with deferring loan repayments - we are all in this together and need to work together."

Finance and Small Business Minister Damien Tudehope said the package demonstrated the need for a united effort to endure the COVID-19 pandemic.

"Breathing room on rent is one of the most frequently raised issues by businesses, and we want to ensure we protect retailers and offer landlords an incentive to do so. We also want to ensure retail tenants have more time and options," Mr Tudehope said.

"For any small business rent is one of the biggest fixed costs, easing this burden will help operators survive and keep people employed."

Perrottet said it was important that both landlords and tenants understood that the policy only applied to those businesses significantly impacted by COVID-19.

"If your circumstances have not significantly changed you need to fulfil the terms of your existing agreement." Perrottet said.

Queensland Government pledges $400m in land tax relief

Last Thursday, Queensland Deputy Premier and Treasurer Jackie Trad said her Government had heard "loud and clear" people's concerns about losing their homes or businesses through no fault of their own.

The Queensland Government announced $400 million in land tax relief for property owners, which must be passed on to tenants.

"Since February, we have announced more than $3 billion in measures to sustain businesses through the coronavirus downturn, but when it's over, they need to know their shops and tenancies are still there," Trad said.

"Whether they've been required to close their doors or not, many businesses have seen their cash flow dry up, making it harder to pay the rent.

"To ensure commercial or residential property owners don't face undue hardship on their own, we will be offering a three-month rebate of land tax for 2019-20, followed by a three month deferral of land tax 2020-21 for property owners who agree to provide rent relief for tenants affected by the coronavirus downturn."

A landowner can apply for land tax relief if they meet criteria including:

  • The landowner rents all or part of a property to a tenant/s OR all or part of a property is currently available for lease;
  • At least one tenant's ability to pay their normal rent OR the landowner's ability to secure a tenant is affected by the Covid-19 pandemic;
  • The landowner provides rent relief to an affected tenant/s commensurate with the amount of the land tax rebate or if the property is unable to be leased, the landowner requires land tax relief to meet their financial obligations (such as debt repayments); and
  • The landowner complies with new leasing requirements, even if the relevant lease is not regulated.

Property Council Queensland executive director Chris Mountford said the land tax relief was an effective way for the Government to support businesses through this crisis.

"By granting this relief, landlords will have a greater capacity to support tenants that have been adversely affected COVID-19, taking pressure off their cash flow at this critical time," Mountford said.

"We know the circumstances that landlords and tenants are finding themselves in vary greatly. A 'one size fits all' approach to these challenges simply does not work.

"Today's announcements are a demonstration that the State Government is stepping up and supporting tenants and landlords as they work this through."

The Deputy Premier said the ban on eviction would be underpinned by new laws.

"We'll make changes to legislation that will ban evictions on the grounds of financial distress, prevent rent increases, except in cases where business turnover has increased, and allow leases to be extended for the term of a rent waiver that has been agreed to by property owner and tenant," Trad said.

"By working together, we can protect homes, businesses and jobs as much as possible through this downturn."

Updated at 12:09pm AEST on 15 March 2020.

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