Key legislative changes

Commercial and Industrial Property Tax Reform Act 2024

The Bill makes targeted amendments to the Commercial and Industrial Property Tax Reform Act 2024 (CIPT Reform Act) to address technical anomalies and ensure the scheme operates as intended.

The key change is a tightening of the criteria for when a transaction causes land to enter the commercial and industrial property tax scheme. Under the new rules, a transaction will fall within the CIPT regime only if duty is payable on at least 50% of the land’s unencumbered value. This closes loopholes where nominal or minimal duty could previously result in land entering the scheme, such as in certain partitions or concessional transfers.

The Bill also clarifies the calculation of ‘entry interests’ and ‘qualifying transactions’, ensuring that only the portion of the interest on which duty was actually paid is counted for tax reform purposes. Transitional provisions ensure these amendments apply retrospectively from 1 July 2024, aligning the law with its intended operation from the commencement of the CIPT scheme.

Congestion Levy Act 2005

The State Taxation Further Amendment Bill 2025 introduces several important changes to the Congestion Levy Act.

Most notably, parking spaces used exclusively for residential purposes—including those in hotels, serviced apartments, and clubs providing accommodation, are now excluded from the congestion levy. This simplifies compliance for residential property owners and removes the need for a separate exemption provision.

The Bill also increases the congestion levy rates for 2026, setting them at $3,030 for category 1 levy areas and $2,150 for category 2 levy areas, with annual CPI adjustments from 2027 onwards. Additionally, the category 2 levy area is expanded, and the map of levy areas will now be published online by the Commissioner of State Revenue, improving transparency and accessibility for affected businesses.

The new rules introduce exemptions and concessions:

• Parking spaces at government schools and boarding premises are exempt from the levy if provided free of charge.
• Parking spaces set aside exclusively for retail customer parking in the category 2 area receive a 50% concession if provided free for the first hour or to customers making a purchase.

Finally, the Bill imposes new registration requirements for owners and operators of car parks in the expanded levy area, with clear deadlines for registration to ensure proper administration and compliance.

Duties Act 2000

New Zealand citizens

A key amendment relates to New Zealand citizens and the foreign purchaser additional duty. Previously, the exemption for New Zealand citizens was based on holding a ‘special category visa’, which could lead to inconsistent outcomes depending on whether the individual was physically present in Australia at the time of settlement.

The Bill replaces this with a new residency test. The provisions outline that New Zealand citizens will only be exempt from the foreign purchaser duty if they ordinarily reside in Australia for at least six months within a defined period around the transaction. This change ensures that the exemption is available to genuine residents and closes a loophole that allowed non-residents to avoid the surcharge.

Custodian transfers

The Bill also introduces a new exemption for transfers of dutiable property involving custodians and sub-custodians under a trust. This addresses practical issues in trust administration, where property may need to be transferred between different custodians or trustees without any change in beneficial ownership. The exemption applies only to ‘internal’ transfers within a pre-existing and continuing trust, and not to transfers that alter the beneficial interests.

Tax reform scheme land

Further amendments to the Duties Act clarify the treatment of ‘entry interests’ for land entering the CIPT reform scheme. The Bill sets out new rules for calculating the quantum of an entry interest when a transaction is subject to a duty exemption or concession (other than certain reductions), ensuring that only the portion of the interest on which duty was actually paid is counted. This prevents anomalous outcomes where nominal duty could result in a larger interest being recognised for tax reform purposes.

Land Tax Act 2005

The Bill introduces several significant changes to the Land Tax Act 2005, with a focus on integrity and fairness of Victoria’s land tax regime.

The Bill substitutes the definition of a ‘natural person absentee’ to introduce a new requirement that a person who is not an Australian citizen or resident will be an absentee if they were absent from Australia for a total of 6 months during the previous calendar year.

New Zealand citizens

One of the most notable amendments is the introduction of a residency test for New Zealand citizens in relation to the absentee owner surcharge. Previously, New Zealand citizens could avoid the surcharge simply by being present in Australia on 31 December, regardless of their actual residency status. The Bill now requires that only New Zealand citizens who ordinarily reside in Australia will be exempt from the absentee owner surcharge, closing a loophole and ensuring that the surcharge applies more equitably.

Temporary residences

The Bill also creates a new exemption for land with temporary residences with the introduction of new sections 63A to 63H. This exemption is designed to support individuals who use temporary residences as their principal place of residence. Under the new legislation, a temporary residence is defined as any structure or vehicle that is capable of being used for habitation and for which an occupancy permit is not required. The Bill outlines that caravans, motorhomes, trailers, tents, sheds, and barns are examples of temporary residences.

The Bill outlines land will be ‘temporary residence land’ if:

• there is a temporary residence on the land
• there is no building affixed to the land for which an occupancy permit is required (including a building under construction or renovation)
• the land is not used by any person to carry on a substantial business activity
• the land is in a zone other than a non-residential zone
• the taxable value of the land is less than $300,000
• the owner of the land does not own any other land in Victoria.

The new provisions apply only if a natural person or vested beneficiary uses and occupies the property as their principal residence, and they preclude the exemption from applying if rent is paid by or on behalf of the vested beneficiary for use and occupation of the land.

This change recognises the diversity of living arrangements in Victoria and provides relief to those who might otherwise be unfairly taxed.

Vacant residential land tax

The Bill makes several targeted changes to the vacant residential land tax (VRLT) provisions.

Firstly, the definition of ‘alpine resort’ is expanded to include land located within the Dinner Plain locality, meaning residential land in Dinner Plain will be excluded from VRLT, recognising its seasonal nature similar to other alpine resorts.

Secondly, the deadline for owners to notify the Commissioner about vacant residential land and to apply for exemptions is moved from 15 January to 15 February each year, giving property owners additional time to comply with their obligations.

Thirdly, a new exemption is introduced for properties that were residential land at both the start and end of the preceding year but were not residential land for a period during that year, such as when a home is undergoing significant renovations or repairs. This ensures owners are not unfairly taxed when their property is temporarily uninhabitable due to genuine works.

Hardship

The hardship relief provisions have also been updated. The threshold for applications for hardship relief from land tax liability has been increased from $1,000 to $5,000, making relief accessible to a broader group of taxpayers. Importantly, the requirement for Treasurer approval has been removed, streamlining the process and allowing the Commissioner of State Revenue to grant relief directly.

Other changes

The Bill also introduces changes to the First Home Owner Grant and Home Buyer Schemes Act 2000, expanding eligibility for New Zealand citizens. Under the new provisions, New Zealand citizens can qualify for the First Home Owner Grant based on residency, rather than visa status, ensuring fairer access for genuine residents. The Bill also modernises administrative processes by clarifying when electronic service of documents is considered effective.

In relation to the Building Act 1993, the Bill clarifies and strengthens the calculation of building permit levies, particularly for cost-plus contracts, and requires more accurate reporting of building costs. It validates past estimates and calculations to prevent disputes and ensure certainty for builders and property owners. Additionally, consequential amendments are made to related Acts to align with the new calculation methods, supporting a more robust and transparent building permit levy system.

How SW can help

SW’s state tax specialists can help you interpret the new rules, assess your exposure, and optimise your position under the amended legislation. These changes are significant, affecting property, land tax, congestion levies, building permits, and more, and may have a direct impact on your property, business, or compliance obligations. Understanding the amendments is crucial to ensure accurate planning, avoiding unexpected liabilities, and taking advantage of available exemptions or concessions.

Contact your SW advisor to discuss how these changes may affect you and ensure you are well-prepared under the updated legislation.

Key contacts

William Zhang

Robert Parker

Blake Trad

The post Victoria’s State Taxation Further Amendment Bill 2025: What you need to know appeared first on SW Accountants & Advisors.

The session will cover the following topics:

• should you enter into agreements before or after 1 July 2024
• details on how the new CIPT regime will work
• impact on direct and indirect property acquisitions
• what exemptions apply
• the interaction between the CIPT and stamp duty (including landholder duty, lease duty and economic entitlements)
• impact on current projects
• who are the Winners and losers

Event details

Date

Wednesday 17 April 2024

Location

Online or in person at the SW Melbourne office, Level 10, 530 Collins Street, Melbourne

Time

12.30pm – 1:30pm (AEDT)

SW Speakers

Abi Chellapen
Director
SW

Stephen O’ Flynn
Director
SW

Blake Rodgers
Associate Director
SW

Robert Parker
Consulting Director
SW

Contact us

If you have any queries or would like more information, please contact the Marketing team via marketing@sw-au.com.

The post Commercial and Industrial Property Tax Reform webinar appeared first on SW Accountants & Advisors.

The Commercial and Industrial Property Tax Reform Bill 2024 was introduced into the Victorian Legislative Assembly on Wednesday 20 March. This follows the Victorian Government announcement of the final design details of the Commercial and Industrial Property Tax Reform in December 2023. The Government has asked for written submissions or suggested adjustments to the legislation by 3 April.

The CIPT will be an annual property tax with the Bill providing for the transition of qualifying land to the commercial and industrial property tax (CIPT) scheme.

CIPT key points

• The first purchase of a 50% or more interest in a property (directly or indirectly) after 1 July 2024 will be liable to stamp duty (either upfront or via a Government facilitated transitional loan over 10 years).
• Certain subsequent transactions will not be subject to duty under the Duties Act as long as the property remains qualifying land.
• The land will become subject to an annual CIPT after the expiration of 10 years from the land entering into the scheme. The rate of CIPT will be 1% of the site value of the land or 0.5% of the value of BTR land for qualifying build to rent schemes.
• Interestingly, the first purchaser of a 50% or more interest in a property after 1 July 2024 will be subject to both duty and the VCIP after 10 years (so effectively they will suffer double tax).
• The CIPT will not apply to transactions that occur pursuant to an agreement or arrangement entered into prior to 1 July 2024.

What type of properties and land will this apply to?

The reform will apply to Victorian qualifying commercial or industrial use land that fall within the below ranges of the Australian Valuation Property Classification codes (AVCC):

• 200–499, which relate to commercial, industrial and extractive industry uses
•  600–699, which relate to infrastructure and utilities uses or
• the land has been allocated more than one AVPCC in the latest valuation not all of which are in the above ranges, and the land is used solely or primarily for a use described in an AVPCC in the above ranges. Therefore, mixed use properties will be subject to the CIPT where the sole or primary use of the property is one of the above.

Student accommodation

Land will have a qualifying use if the land is solely or primarily used for eligible student accommodation which is defined to mean residential premises that are:

• designed for occupation by students of a higher education provider (higher education provider is defined later in this clause) and
• occupied or available for occupation by students of a higher education provider; and
• commercial residential premises within the meaning of section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999.

Entry into the Scheme

Land with a qualifying use enters the scheme on the occurrence of:

• certain dutiable transfers or relevant acquisitions under the Duties Act 2000 in respect of that land and
• certain subdivisions and consolidation involving land already in the scheme.

Generally, a dutiable or landholder transaction brings land into the scheme if the transaction is not fully exempt from land transfer duty or landholder duty, and the transaction relates to an interest in land that amounts to a qualifying interest, being an interest of at least 50% in the land. 

Aggregation

There are aggregation rules that apply in determining if the 50% threshold has been met. Interests acquired with associated persons and acquisition of interests which occur with a 3-year period will be aggerated. Examples are provided in the Bill.

Who pays CIPT?

The owner of taxable land is liable to pay CIPT on the land.

The owner of CIPT taxable land is the same as the owner of the land for the purposes of the Land Tax Act 2005, however, the provisions deeming the holders of beneficial interests in certain trusts to be owners of land for the purposes of imposing land tax surcharges relating to trusts, are not applicable to CIPT.

Rate of CIPT

The rate of CIPT will be:

• for land other than BTR land: 1% of the taxable value of the land
• for BTR land: 0·5% of the taxable value of the land.

The taxable value of CIPT taxable land or part of CIPT taxable land is the same as the taxable value of the land or part under the Land Tax Act 2005. This is usually the site value contained in a valuation of land undertaken by the Valuer-General under the Valuation of Land Act 1960.

Exemptions from transfer and landholder duty on subsequent sales

There will be exemptions from transfer duty and landholder duty for certain transactions in relation to land that has entered the CIPT scheme.

Acquisitions of 100% interest in land

If the tax reform scheme land has entered the CIPT scheme through a transaction involving a 100% interest, no further duty is payable on a subsequent transaction.

Acquisitions of less than 100% interest in land

Where an interest of over 50% is acquired (but less than 100%), a subsequent transaction which relates to a different interest in the land may be subject to duty for a 3 year period or until full duty has been assessed on the interest (whichever occurs sooner).

The Bill includes as an example:

Person A acquires a 50% interest in a landholder under a relevant acquisition which occurs on 1 September 2025. The landholder holds a 100% interest in land. This relevant acquisition amounts to an interest of 50% in the land which is a qualifying interest and the qualifying landholder transaction is an entry transaction. Person B holds the remaining 50% interest in the landholder. On 1 January 2026, Person C acquires a 100% interest in the landholder from Person A and Person B. The value of the land holding of the landholder is to be excluded from the calculation of duty to the extent that the interest acquired by Person C is the same, or substantially the same, as the entry interest for the land (50%). The value of 50% of the land is included for the purposes of assessing duty on the relevant acquisition made by Person C.

Change in use

Where there is a change of use of land to a non-qualifying use (such as a rezoning to a residential use) after an exempt transaction, duty becomes payable on that transaction by the transferee.

Duty is assessed on the previous transaction based on the dutiable value of the land at the time of that transaction, not at the time of the change of use.

The amount of duty is to be reduced by 10% for each calendar year that has elapsed since the date of the transaction that is being assessed for duty. Note this is not necessarily the entry date of the land to the CIPT scheme.

Exclusions from the CIPT

As noted above, only commercial and industrial land (as well as student accommodation) is captured by the CIPT. Properties primarily used for residential, primary production, community services, sport, or heritage and culture purposes will not be captured.

The following transactions will also be excluded and will remain subject to duty regardless of whether the land has entered the CIPT transition:

• grant or transfer of leases
• economic entitlements.

Furthermore, transactions eligible for corporate reconstruction and corporate consolidation exemptions or concessions will not trigger entry into the CIPT regime.

Also as noted above, dutiable transactions and landholder acquisitions which are eligible for an exemption will not result in entry into the CIPT transition.

Our observations

• It is clear that there will be a number of complexities in the transition to the new CIPT regime.
• Some transactions, such as the grant of a dutiable lease or an economic entitlement in relation to land that has entered the tax reform scheme will remain subject to duty.
• Some dutiable transactions will not result in qualifying land becoming tax reform scheme land such as an acquisition of a direct interest in land of less than 50% or a landholder transaction involving an interest of less than 50%. Unless aggregated with other transactions to reach the 50% threshold, the land will not enter the scheme. The overlay between the landholder regime and the CIPT regime is complex and require further consideration by the Government.
• If transacted multiple times, the same minority interest may incur multiple amounts of transfer or landholder duty before the land enters the scheme (e.g. a 20% interest in a landholding unit trust that is transferred multiple times may incur duty each time it is transferred but the land will not enter the scheme even though the total duty payable may be equal to or more than the duty payable on a 50% direct interest).
• The application of the aggregation rules are complex but appear to not apply to aggregate interests acquired directly in land with interests acquired in a landholder that holds that same interest in the land.

How SW can help

This is a significant change in the application of duty to commercial and industrial property. For advice on how this will impact acquisitions in your pipeline or for assistance in modelling the tax payable on proposed acquisitions, reach out to your SW contact or one of the key contacts below.

Key contacts

Robert Parker

The post Victorian Property Tax Reform appeared first on SW Accountants & Advisors.

The 2022 Small Business Support Program

The new program is intended to help NSW businesses survive the immediate impact of the COVID Omicron variant wave. Eligible businesses with a turnover of between $75,000 and $50 million that experienced a minimum 40% decline in turnover in January 2022 (and the first fortnight of February 2022) can apply for support through this program.

Employing businesses will be eligible to receive 20% of weekly payroll as a lump sum for the month of February, with a minimum payment of $750 per week and a maximum payment of $5,000 per week. Non-employing businesses will receive $500 per week, paid as a lump sum of $2,000.

The 2022 Small Business Support Program is only for the month of February and businesses will be able to apply through Services NSW from mid-February. Further details on the eligibility rules will be issued shortly.

Eligibility

To be eligible for the program, there must be a decline in turnover due to either public health orders or the impact of the Omicron variant of more than 40% during both:

• The month of January 2022 (compared to January 2021 or 2020), and
• 1 – 14 February 2022, compared to the same fortnight in February in the comparison year which is used to test the January 2022 decline in turnover.

Further, employers must maintain employee headcount from 30 January 2022.

Small business fees and charges rebate

Eligible businesses or not-for-profits only need to apply for the rebate once, but can submit multiple claims until the full value of the rebate is reached. The funds can be used to offset the costs of eligible NSW and Local Government fees and charges due and paid from 1 March 2021. These include, but are not limited to:

• Food authority licences
• Liquor licences
• Tradesperson licences
• Event fees
• Outdoor seating fees
• Council rates
• Road user tolls for business use.

The rebate cannot be used for fines or penalties, fees and charges that have the key purpose of discouraging behaviours or inducing behaviour changes, Commonwealth Government charges, rent on government premises or taxes. However, the rebate can now be used to cover half the cost of Rapid Antigen Tests (RAT).

The rebate will be available until 30 June 2022.

Eligibility

To be eligible for this rebate, small businesses (including non-employing sole traders) and not-for-profit organisations must:

• Have total Australian wages below the NSW Government 2020–21 payroll tax threshold of $1.2 million
• Have an Australian Business Number (ABN) registered in NSW and/or have business premises physically located and operating in NSW.

Note: Only one $3,000 rebate is available for each ABN.

Alfresco Restart Rebate

Small or medium food and beverage businesses wanting to create or expand their outdoor dining area may be eligible for a rebate of up to $5,000 under the NSW Government’s Alfresco Restart Package. The rebate is available to the first 5,000 eligible small or medium food and beverage businesses that register.

There are 2 steps involved in the Alfresco Restart rebate:

1. Register for the rebate

• Businesses must first register to confirm their eligibility
• Registrations will close when 5,000 businesses have successfully registered.

2. Claim the rebate

• Businesses that have successfully registered can claim their rebate from late February 2022 for expenses incurred from 14 October 2021 to 30 April 2022
• Registered businesses will receive an email when the claims process opens
• Claims must be made by 30 April 2022.

Eligibility

To be eligible for the rebate, businesses must:

• Have an active ABN, held before 1 June 2021
• Have operating premises physically located in NSW
• Have an aggregated annual turnover less than $10 million (inclusive) for the year ended 30 June 2021
• Be a small or medium food and beverage business, defined by at least one of the following ANZSIC codes:

• 4511 Cafés and restaurants
• 4520 Pubs, taverns and bars
• 4530 Clubs (hospitality)
• 4400 Accommodation (limited to hotel and motel operation)
• 1212 Beer Manufacturing
• 1213 Spirit Manufacturing
• 1214 Wine and other Alcoholic Beverage Manufacturing

• Have incurred, or will incur, eligible costs and expenses for opening or expanding their outdoor dining areas from 14 October 2021 to 30 April 2022.

When claiming the rebate applicants must also, where applicable:

• Have development approval and approval to use the land from council, Place Management NSW or a private landholder
• Have approval for the liquor licence boundary changes.

Note: Only one application per ABN is allowed. The rebate can be used towards outdoor dining expenses at multiple business locations if eligibility criteria are met.

Commercial Landlord Hardship Grant

Small commercial or retail landlords may be eligible for a grant under the Commercial Landlord Hardship Fund if their main source of income is impacted due to providing rent relief to tenants financially impacted by COVID restrictions.

Grants of up to $3,000 per month (GST inclusive), per property, are available for eligible landlords who have provided rental waivers to affected tenants. Rent waived must comprise at least half of any rental reduction provided. The remaining portion may be a rental deferral. The grant does not apply to rent deferrals.

Grants will be paid as a lump sum amount for the rent waived from 1 August 2021 to 13 March 2022. This is an extension of the period which previously ended 14 November 2021. Applications close on 31 March 2022.

Eligibility

To be eligible for a Commercial Landlord Hardship Grant, applicants must:

• Be the landlord of a property in NSW
• Have an agreement to provide rental relief to tenants from 13 July 2021
• Have not claimed, or will not claim, land tax relief between 1 July 2021 and 31 December 2021
• Have total land holdings valued at $5 million or less as at 31 December 2020, excluding the value of their principal residence
• Have more than 50% of your total income derived from gross rental income for the 2019–20 or 2020–21 financial year

• Where they are a business, attest that providing rent relief to their tenants may cause them financial hardship because they:

• are at imminent risk of closure, or
• are unable to pay for operating expenses, including rent or employee-related expenses for employing business landlords, or
• may be forced to reduce employee headcount if they are an employing business landlord, and
• have not incurred excessive and non-essential business expenses, and
• have experienced a decline in revenue due to the impact of the NSW public health orders, and
• cannot rearrange finances or draw upon non-essential assets to continue operation

• Where the applicant is an individual or holds property on trust, they must attest to financial hardship if they:

• are unable to maintain their current standard of living for themselves or their immediate family, and
• have not incurred excessive and non-essential living expenses.

Performing Arts COVID Support Package

The Package will now be extended from an end date of 14 February 2022 to 30 April 2022.

The funding is to be provided to eligible performances staged between 19 September 2021 to 30 April 2022.

The funding amount per performance will be calculated using a formula of:

• Average ticket price multiplied by the number of tickets available for sale (capped at 10,000) and,
• A specified percentage (up to a maximum of $12.5 million).

Eligibility

To be eligible for funding, the applicant must be one of the following:

• An eligible venue
• A producer of an eligible performance scheduled to perform at one of the eligible venues
• A promoter of an eligible performance scheduled to perform at one of the eligible venues.

Eligible venues have been identified through:

• Sector-wide consultation
• Review of online marketing material of venues, and
• Through assessment of tickets on sale through major ticket selling agencies (list published by Create NSW).

Eligible performances must be evidenced by:

• Marketing collateral (website, social media etc), and
• Have ticket sales managed through one of the eligible ticketing systems (list published by Create NSW).

How SW can assist

Many businesses have found the eligibility criteria difficult to navigate.

Our experts can guide you through the process and help you gather accepted relevant documentation to ensure your business gains the maximum benefits for these support measures.

Contributors

Tony Principe

E tprincipe@sw-au.com

Jae Debrincat

E jdebrincat@sw-au.com

The post NSW extends COVID-19 support for SMEs appeared first on SW Accountants & Advisors.

Co-hosted with Bridgestone Property Group and Align Law, our experts discussed:

• Commercial real estate market update and recent transactions
• Windfall gains tax
• Build to Rent Concessions

Your guides online

James Ye Director, SW	Robert Parker Consulting Director, SW	Chao Zhang Director, Stonebridge Property Group
Amber Li Property Law Principal, Aglin Law	Barnaby McIlrath Planning & Environment Counsel, Align Law

The post Victorian Property & Tax update appeared first on SW Accountants & Advisors.

The relief comes following amendments to the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 (NSW) (‘the Regulation’) earlier this month.

The amendments were passed on 13 August 2021 and provide greater protections to impacted lessees by reinstating National Cabinet’s Commercial Leasing Code of Conduct. The Regulation seeks to ensure that the economic impact of COVID-19 is shared by both property owners and tenants.

Combined with the land tax concessions and the newly established Commercial Landlord Hardship Fund available to property owners, the Regulation seeks to limit the economic damage of COVID-19 and maximise the number of businesses able to resume normal operation when public health orders are lifted.

What do the Regulations provide for?

Under the Regulation, property owners must negotiate rent relief agreements with eligible impacted lessees in accordance with the leasing principles in the National Code of Conduct.

Under those principles, property owners are required to offer tenants rent relief proportionate to the tenant’s decline in turnover. Waivers should make up at least 50 per cent of any rent relief provided (unless the impacted lessee agrees otherwise). Rental deferrals make up the balance.

Eligibility

In order to be eligible an ‘impacted lessee’ must:

• first qualify for the 2021 COVID-19 Microbusiness Grant, the 2021 COVID-19 Business Grant or the 2021 JobSaver Payment
• have a turnover of less than $50 million for the 2020/2021 financial year.  If the lessee is a member of a group, the turnover of the group is the relevant turnover. If the lessee is a franchisee, the turnover of the business conducted at the premises of the franchisee is the relevant turnover.  In all other cases, the turnover of the business conducted by the lessee is the relevant turnover. Turnover includes any turnover of the business and would therefore include amounts earnt from internet sales (notwithstanding the business may ordinarily operate from a shopfront), and
• have entered into their lease before 26 June 2021.

Decline in Turnover Test

The Regulation does not prescribe a specific period that parties should use to calculate decline in turnover. As such, parties are free to determine an appropriate period that works for them.

Impacted lessees should provide evidence of their decline in turnover to their property owner to help them calculate the appropriate rent reduction. Evidence could include a Business Activity Statement (BAS) or an Accountant’s Letter.

If an impacted lessee’s circumstances change, they can make a subsequent request to negotiate future rent adjustments.

For the purposes of calculating an appropriate rent reduction, payments from Government COVID-19 grants should be included as part of an impacted lessee’s turnover.

Process for agreeing rent relief

The period during which the rules apply is 13 July 2021 to 13 January 2022. Impacted lessees in financial distress and their property owners should start the process of negotiating rent relief agreements as soon as possible. Support measures will be reviewed regularly as required due to the changing environment brought about by the pandemic.

For the six-month period (July 2021 – January 2022), commercial and retail property owners cannot take certain actions against an impacted lessee (e.g. evict an impacted lessee, increase rent level) unless they have first renegotiated rent and attempted mediation.

If a lessee is asked to negotiate rent reduction, they must respond within 14 days of receiving the request, or another period if agreed by both parties.

Commercial property owners and impacted lessees must negotiate rent relief agreements by taking into consideration the following principles in National Cabinet’s Code of Conduct on commercial tenancies (unless otherwise agreed by both parties):

1. Landlords must not terminate leases for non-payment of rent
2. Impacted lessees must remain committed to the terms of their lease, subject to any amendments negotiated, and material failure to do so will forfeit additional COVID-19 protections provided to impacted lessees
3. As noted above, landlords must offer impacted lessees proportionate reductions in rent (in the form of deferrals and waivers) of up to 100 per cent of the amount ordinarily payable, in proportion to the decline in the impacted lessee’s trade.
4. Rent waivers, as opposed to deferrals, must constitute at least 50 per cent of the rent reduction provided by landlords (in negotiating this, regard must be had to the landlord’s financial ability to provide such a waiver)
5. Any rent deferral must be amortised over the balance of the lease term and for a period no less than 24 months, whichever is greater, unless otherwise agreed by the parties
6. Landlords must pass any reduction in statutory charges (e.g. land tax, council rates) to the impacted lessee
7. Landlords should seek to share any benefit received due to deferral of loan payments by a bank or otherwise with the impacted lessee in a proportionate manner
8. Landlords should, where appropriate, seek to waive recovery of any other expense (or outgoing payable) by an impacted lessee under the lease terms during the period the impacted lessee is unable to trade
9. Repayment of other (non-rent) expenses should not commence until the earlier of the COVID-19 pandemic ending (as defined by the Australian Government), or the existing lease expiring
10. Landlords must not charge fees or interest on rent or fees that are waived or deferred
11. Landlords must not draw on a impacted lessee’s security for the non-payment of rent (be this a cash bond, bank guarantee or personal security) unless agreed by the impacted lessee and landlord
12. Impacted lessees should be allowed to extend their lease for an equivalent period of any rent waiver/deferral period.
13. Landlords must freeze rent increases (except for retail leases based on turnover)
14. Landlords may not apply any prohibition or levy any penalties on impacted lessees that reduce operating hours or cease to trade during the COVID-19 pandemic.

Requirements for both parties

Commercial property owners and impacted lessees should work together to negotiate a rent relief agreement. Where parties are unable to do this, they must attend mediation through the Small Business Commission.

Interim arrangements for urgent matters involving a threatened or actual eviction, can be sought through the NSW Civil and Administrative Tribunal or the courts.
For standard matters, the Small Business Commission aims to offer a date within five weeks of application.

For urgent matters, mediation can be arranged within days. The mediator cannot impose any outcome but, if a mediation is successful, parties can enter a binding deed.
Where mediation is unsuccessful, parties can pursue action through the NSW Civil and Administrative Tribunal or the NSW civil courts.

As a result of the Regulation a landlord may not:

• try to regain possession of premises with respect to a relevant lease,
• try to terminate such a lease, or
• exercise or enforce any other right of the landlord with respect to such a lease

unless the Small Business Commissioner has first certified that mediation has failed to resolve the dispute, whilst also enunciating the reasons for the mediation being unsuccessful.

It is important that impacted parties obtain advice from their legal advisers with respect to the matters noted above to ensure their obligations and rights are appropriately dealt with as provided by the Regulation.

Landlord’s assistance/relief

Where landlords have provided rent relief to ‘impacted lessees’, they are entitled to land tax relief of an equivalent amount of their land tax liability for 2021, with the relief limited to the actual land tax liability. The relief will be a rebate for those landlords who have already paid land tax and a waiver for those landlords that have not paid their land tax. Please refer to our previous update on land tax relief for further information.

The New South Wales government is also in the process of establishing a new $40 million Hardship Fund. This Fund will provide a monthly grant of up to $3,000 for qualifying landlords who provide a rent waiver of at least the same value of the Hardship Fund grant, as well as any land tax relief that the landlord is granted.

How SW can assist

Whether you are a commercial landlord or business tenant, our experts are highly experienced in assisting with calculations of decline in turnover, eligibility assessment, the application and negotiation process.

Reach out to one of our tax and property experts below for a conversation about your circumstances.

Get in touch

Tony Principe

E tprincipe@sw-au.com

Helen Wicker

E hwicker@sw-au.com

Blake Rodgers

E brodgers@sw-au.com

The post NSW rent relief for COVID-19 impacted lessees appeared first on SW Accountants & Advisors.

The scheme seeks to provide rent relief to commercial tenants affected by COVID-19 and operates in a similar manner to the Regulations released in March 2020, which expired on 28 March 2021. However, there are key differences including more specific details as to how to calculate the tenant’s decline in turnover and a mandatory reassessment process which will adjust the relief percentage from 31 October 2021.

Outlined below are the key eligibility requirements, the turnover reduction calculation methodology and the processes to be followed.

Eligibility

Decline in Turnover Test

Turnover means Current GST Turnover as defined in the GST Act, with some modifications in Regulation 11.

Decline of at least 15% for ACNC registered charities (with some exclusions); or 30% for all other entities.

Turnover test, periods to compare:

• If a tenant commenced trading before 1 April 2019,
• Any consecutive 3-month period between 1 April 2021 and 30 September 2021; compared to either:

1. the equivalent period in 2019; or
2. the tenant’s chosen applicable alternative comparison periods (see table on page 4 for alternative options).

• If a tenant commenced trading after 1 April 2019, but before 1 April 2021:

1. any consecutive 3-month period between 1 April 2021 and 30 September 2021; compared to
2. the tenant’s chosen applicable alternative comparison periods (see table on page 4 for alternative options)

• If tenant commenced trading on or after 1 April 2021,

1. the period that is agreed to by negotiation between landlord and tenant; compared to
2. the tenant’s chosen applicable alternative comparison periods (see table on page 4 for alternative options)

Process for agreeing rent relief

1. Tenant assesses eligibility.
2. Tenant requests relief. A request must be in writing and include a statement from the tenant that:
   • the tenant is an eligible tenant
   • the tenant satisfies the decline in turnover test including:
   1. Turnover for the test period
   2. Turnover for the comparison period
   3. Whether an alternative comparison period used
   4. Details of the calculation of decline in turnover
   5. The decline in turnover percentage
   6. The reduction in rent that would satisfy the minimum requirements of the regulations, consistent with the proportion of decline in turnover percentage provided
   7. Any other circumstances that the tenant would like to include.
   • Within 14 days of making the request, the tenant must provide evidence of the turnover figures used including at least one of the following:
   1. Accounting record extracts
   2. Business Activity Statements
   3. Bank statements
   4. A statement prepared by a practising accountant.
      The evidence must be accompanied by a statutory declaration from the tenant.
      If a tenant fails to provide evidence within the required 14 days then the request automatically lapses.  Up to 3 requests for relief can be made, i.e. 2 more if the first lapses. If they let 3 requests lapse then the tenant cannot apply again.
3. Landlord makes offer within 14 days, unless otherwise agreed, of receiving everything required from the tenant including the request noted in 2. above, supporting evidence and the statutory declaration:
   • the offer must be for rent reduction which at a minimum is proportionate to the decline in turnover
   • at least 50% of the reduction must be a waiver and the balance can be a deferral.
4. Tenant and landlord to negotiate.
5. If no agreement is reached within 15 days of the landlord’s offer of rent relief, the tenant is deemed to have accepted the landlord’s offer unless the tenant has referred the matter to the Small Business Commissioner or the landlord’s offer does not comply with the requirements noted in 3) above.
6. Agreed position to be documented by lease variation or other agreed approach.

Rent relief period

The period commences on either:

• 28 July 2021
  • For complete and successful requests made on or before 30 September 2021
• The date of the request
  For complete and successful requests made after 30 September 2021

The period ends 15 January 2022.

Mandatory Reassessment – before 31 October

For agreements reached on or before 30 September 2021, the tenant must provide the following by 31 October 2021 for re-assessment:

• Turnover for the quarter ended 30 September 2021.
• Turnover for the comparison period being:

1. If the tenant began trading before 1 July 2019, the quarter ended 30 September 2019; or
2. If the tenant began trading between 1 July 2019 and 31 March 2021, the quarter ended 30 June 2021; or
3. An alternative test period (should be same as used for first request), including details of the comparison method.

• The percentage change in the above two periods
• Another statutory declaration.

The net percentage change is then used for the purposes of calculating rent relief from 31 October 2021.

If the tenant fails to provide the necessary information by 31 October, the rent relief agreement no longer applies to the extent that it relates to any waiver of rent from the assessment date.  That means only the deferred portion of any rent relief will continue after 31 October.

Subsequent relief

Tenants can apply for further relief if their financial circumstances materially change, following the process described above under “Process for agreeing rent relief” subheading.

Any new rent relief agreement will apply in substitution of the original agreement.

Extension of term

The landlord must offer an extension on the same terms as were in place on 28 July equivalent to the period for which rent is deferred. E.g. if 3 months rent is deferred, 3 months must be added to the term of the lease.

Deferred rent

The landlord cannot request payment until after 15 January 2022.

Deferred amount is to be paid over the greater of the remaining term of the lease, including any extension, and 24 months.

Previous deferrals

Any leases subject to rent deferrals under the previous (2020) rent relief scheme, must have the repayment of those deferrals paused and resumed after 15 January 2022.

Dispute resolution

Either party can refer a dispute to the Small Business Commissioner for mediation.

Further powers are provided to the Small Business Commissioner to make a binding order in certain circumstances.

Application can be made to VCAT for review of a binding order in certain circumstances.

Alternative comparison periods

How SW can assist

Our teams can assist commercial landlords and tenants to calculate the decline in turnover, assessing eligibility, the application and negotiation process.

Reach out to one of our experts below for a conversation about your circumstances.

Stephen O’Flynn

E soflynn@sw-au.com

Abi Chellapen

E achellapen@sw-au.com

Blake Rodgers

E brodgers@sw-au.com

The post VIC COVID-19 commercial rent relief appeared first on SW Accountants & Advisors.