Bulk-billing support initiative

To counteract the increased cost of living pressures, the NSW government has introduced an exemption and rebate on payroll tax liabilities for payments to contractor general practitioners (GPs) by medical practices meeting the relevant bulk-billing threshold. The relevant bulk-billing thresholds for Sydney and the rest of NSW is 80% and 70% respectively.

In addition, historical unpaid payroll tax liabilities for pre-4 September 2024 payments made to contractor GPs will be exempt from payroll tax. After the 4^th of September 2024, medical practices meeting the bulk-billing threshold requirements will be eligible to receive a complete rebate for payroll tax associated with the payments made to contractor GPs. 

The aim of this measure is to support accessibility and affordability of health-care by incentivising medical practices to increase bulk-billing to gain eligibility to the rebate. It was projected that this measure is expected to reduce payroll tax revenue for NSW by roughly $180.8 million over the next four years, though the actual impact is likely to be less as medical practices restructure affairs such that the payroll tax obligation does not arise in the first instance.

How SW can help

Medical practices operating in NSW should carefully consider the above changes and how they might take advantage of the upcoming relief initiative. For instance, GP clinics may like to consider the structure of their arrangements with GPs where they meet the threshold requirements, particularly where GPs are engaged as employees.

Some important things to consider are whether the practice is eligible under the bulk-billing threshold requirement as well as reviewing contracts with GPs and the overall billing practices to ensure everything all information is accurately taken into consideration. 

For those practices where the measures do not apply, it is worth considering whether and how contractor arrangements may be restructured to reduce adverse payroll tax implications. In addition, it may be worth considering which payments at or around the cut off time may be eligible for the exemption.

Contributors

Oliver McDonald

The post NSW Bulk billing GP clinics given payroll tax concessions appeared first on SW Accountants & Advisors.

Understanding these rules is vital for developers, landholders, and businesses involved in leasing property, especially with conditions that require the lessee to undertake construction or improvements. This article aims to explain the guidelines, discuss their impact, and offer actionable insights for clients. 

Introduction 

Stamp duty is a tax levied on particular transactions, such as sales and leases of real estate. While it’s a straightforward affair in most circumstances, complex leases involving non-monetary considerations, like property improvements or long-term conditions, can be complicated.  The NSW Chief Commissioner’s guidelines offer examples and conditions under which dutiable value is calculated differently than one might expect. 

The Impact 

Understanding the guidelines has immediate implications for businesses and developers. Depending on the length and conditions of the lease, dutiable values can differ significantly: 

Long-Term Leases: 

Leases exceeding 50 years may have a dutiable value of nil, thereby avoiding stamp duty. 

Conditional Leases:  

Conditional leases often involve stipulations where the lessee (tenant) must undertake certain actions like construction or significant property improvements either as a condition to the grant of the lease or as a condition of the lease itself.  

If a lease is granted for non-monetary consideration comprising improvements to the property, the full cost of the construction (including builder margins) undertaken or to be undertaken by the developer is taken to be the value of the improvements. This value is determined on entry into the agreement for lease or a lease. 

In the absence of evidence of the valuation of the undertaking, the Chief Commissioner has stated in Circular Practice Note (CPN027) that he is prepared to use the following methodology to calculate the proportion of the value attributable to the improvements:  

For instance, in a 15-year lease where the lessee is obligated to make improvements worth $20 million, the dutiable value for calculating stamp duty would be 75% of the improvement costs, which amounts to $15 million. 

Here are some other key points to note for a conditional lease: 

• Valuation Reports: In certain cases, you can provide a professional valuation report to show that the future value of the improvements you have made will be less than the original cost of those improvements. This can help in lowering the stamp duty payable
• Compliance and Documentation: It’s essential to maintain complete documentation of the improvements carried out, including permits, invoices, and reports, to substantiate the dutiable value calculated based on improvement costs
• Implications for Tenants and Landlords: Tenants must be aware that the costs of improvements could impact the dutiable value, while landlords need to consider how these conditions might affect the lessee’s ability to carry out the lease terms. 

Premium and Prepaid Rent:  

Leases may involve upfront payments, which are often categorised as premiums or prepaid rent. These payments can significantly influence the dutiable value of the lease, and consequently, the amount of stamp duty that may be payable. 

In many instances, upfront payments serve as the total consideration for the lease. As a result, these payments could either inflate the dutiable value or, in some situations, completely negate the requirement for stamp duty, depending on the lease terms and other conditions. 

For example, consider a scenario where XYZ Pty Ltd enters into a 15-year lease for an industrial building with a prepaid rent of $15 million. The lessee has the option to satisfy this prepaid rent either through a cash payment or by undertaking construction improvements with an agreed value of $20 million. In the event of an early termination of the lease for reasons other than the lessee’s default, the lessee would be entitled to a proportionate refund of the prepaid rent. No stamp duty is payable on this lease arrangement, regardless of whether the lessee opts for a cash payment or construction improvements, as both options are considered to be forms of prepaid rent 

Failure to grasp these nuances could result in incorrect stamp duty payments, leading to financial and legal repercussions. 

Other Transactions Triggering Duty 

In addition to standard leases, there are various other transactions that could also attract stamp duty, according to guidelines set out in CPN027. These include: 

• Early Termination by Lessor: When a lessor terminates a lease early for specific reasons, such as granting a new lease to another lessee or selling the premises, duty may be payable on any consideration for these arrangements
• Legal Fees over $1,000: If a lessee pays or agrees to pay the lessor’s legal fees, which are non-refundable and greater than $1,000, then duty may be applicable. However, this does not apply to the extension or renewal of a lease where legal fees are paid as rent
• Option to Lease for a Premium: An option to lease land in NSW for a premium may be dutiable
• Assignment of Lease: The transfer or assignment of an existing lease can also attract stamp duty
• Novation of Agreement: Modifying the parties in an agreement for a lease could trigger stamp duty
• Attornment of Leases: In cases of attornment on the sale of a property, stamp duty may also be applicable. 

Actions Clients Need to Take 

Property leasing can be complicated.  We recommend the following steps: 

• Consult a Tax Advisor: Given the complexities, consulting a tax advisor is paramount for ensuring compliance and financial optimisation
• Conduct Valuation: If property improvements are involved, get a valuation to establish a dutiable value
• Document Thoroughly: Keep thorough records of lease terms, conditions, and any upfront payments or improvements made
• Stay Updated: The Chief Commissioner’s guidelines may evolve. Regularly review any updates to remain in compliance
• Liaise with Legal Teams: Ensure that all legal aspects are squared away, especially in leases involving intricate conditions or non-monetary considerations. 

How SW can help

Understanding the NSW Chief Commissioner’s guidelines is essential for any party involved in complex property leasing situations. SW experts can provide professional advice to help you keep abreast of these rules, helping to avoid surprises in the future.

Contributor

Rahul Sanghani

Robert Parker

The post Grant of an option to lease / grant of lease NSW appeared first on SW Accountants & Advisors.

UPDATE – 29/05/23

On 29 May, Revenue NSW released an update on the foreign owner surcharge, following their announcement on 21 February. Revenue NSW identified four furthe countries as additional nations that have international tax treaties with the Federal Government: India, Japan, Norway, and Switzerland.

Citizens from these countries will no longer be required to pay surcharged purchaser duty or surcharge land tax. The refund period has been extended for purchasers/transferees and landowners from these countries who paid surcharge duty or surcharge land tax on or after 1 January 2021 (previously 1 July 2021).

SW previously noted that other states may follow the NSW lead. At this time, the Victorian State Revenue Office has advised that it will continue to apply the surcharge to all foreign purchasers and absentee owners, and Queensland has taken no action.

ORIGINAL – 24/02/23

Revenue NSW has identified that the surcharge purchaser duty and foreign owner surcharge land tax provisions are inconsistent with international tax treaties entered into by the Federal Government with New Zealand, Finland, Germany and South Africa.

Effective immediately, citizens of these countries purchasing residential-related property (in their own capacity) will no longer be required to pay NSW foreign owner surcharge duty or foreign owner land tax surcharges on those properties. Foreign owner surcharges are significant – currently the stamp duty surcharge is 8% of dutiable value and the land tax surcharge is 4% from the 2023 land tax year onwards.

Surcharge tax liabilities for non-individuals, such as corporations, trusts or partnerships that arise because of an entity’s affiliation with these nations may also be affected by the international tax treaties.

Refunds may be available where surcharge taxes have been paid by investors from these countries from 1 July 2021 onwards. 

Surcharge taxes and International Tax treaties

Certain international tax treaties entered into between Australia and other relevant countries contain a non-discrimination provision. Broadly, the intent of these provisions is to ensure that a resident of the other treaty country is not subjected in Australia to any tax which is more burdensome than that imposed on an Australian resident. This is typically limited to federal taxes, such as income tax and fringe benefits tax.

However, the treaties entered into between Australia and the now exempted countries (New Zealand, Finland, Germany and South Africa) provide a more encompassing non-discrimination provision which broadly applies to taxes of every kind imposed by Australia – which would include state taxes such as land tax and duty.

In this regard, Revenue NSW have conceded that the current NSW surcharge provisions are contradictory to the tax treaty applying to these countries.

Implications for other nations

It is not yet known how the recent changes will impact on residents from other countries. There may be other international treaties with non-discrimination provisions which may also need to now be considered in light of these changes.

Application for refunds

Revenue NSW have stated that they will proactively identify customers and transactions that may be eligible for the removal of surcharge purchaser duty and surcharge land tax. Where a transaction has been identified for the removal of surcharge taxes, a Revenue NSW representative will contact the relevant person to make arrangements for the payments to be refunded.

To ensure you are eligible for the refund, Revenue NSW will require a certified copy of your current passport or citizenship certificate. Once this information has been received, refunds will be processed within 28 days. 

If Revenue NSW does not contact you and you believe that you may be eligible for a refund, you can contact Revenue NSW directly in relation to the matter. If you require assistance with the application for a refund, please reach out to us at SW.  

Action from other states

The Victorian State Revenue Office has stated that it has taken note of the changes in NSW and is currently considering the implications of this in relation to surcharge taxes in Victoria.

At the time of writing no other revenue office has commented on this matter, however, the relevant DTAs would potentially apply to surcharges imposed by all Australia States, and further announcements may follow.  

How SW can help 

In some cases, property owned by a Trust or company may be considered for the refund where the foreign citizen of these countries has a substantial interest in the entity.

If you need any assistance determining whether you are eligible for a refund or how the surcharge taxes will apply to you going forward, please reach out to us.

Contributors

Robert Parker

Carmelin De Francesco

The post NSW removes foreign owner property taxes for certain countries appeared first on SW Accountants & Advisors.

First home buyers purchasing properties up to $1.5m as their principal residence will now be able to choose to pay an annual property tax instead of stamp duty. Announced in the 2022/23 NSW State Budget, this proposed reform gives first home buyers a choice of opting out of stamp duty and instead paying an annual property tax.

How does it work?

The property tax will only be payable by first home buyers who choose it. Unlike earlier consultation proposals, the property tax will not automatically apply to subsequent purchasers of a property unless they are a qualifying first home buyer who also elects to pay the property tax.

Existing stamp duty concessions for first home buyers are available for purchases of up to $800,000, and these concessions will continue. [It is not clear at this stage if the election affects any entitlement to the First home Owners Grant. The First Home Buyer Assistance Scheme which provided a full exemption for new homes up to $800,000 and a concession for new homes up to $1m ceased from 31 July 2021.]

Who is eligible?

• you must be an individual (not a company or trust)
• you must be over 18 years old
• you, or at least one person you’re buying with, must be an Australian citizen or permanent resident
• you or your spouse must not have previously owned or co-owned residential property in Australia or received a First Home Buyer Grant or duty concessions.
• the property must be worth less than or equal to $1.5m
• you must move into the property within 12 months of purchase and live in it continuously for at least 6 months

Additionally, the contract of purchase must be entered on or after the scheme commencement date:

• for a contract of purchase on or after 16 January 2023 an eligible purchaser may opt into the property tax and will not be required to pay stamp duty in order to complete their transaction.
• for a contract of purchase between the passage of the legislation and 15 January 2023, an eligible purchaser will be required to pay any applicable stamp duty within the usual required periods and from 16 January 2023, will be able to apply for and receive a refund of that duty.

Stamp duty or annual property tax?

Eligible purchasers can choose between:

• paying the usual amount of stamp duty based on the ‘dutiable value’ of the property (i.e. the value including any improvements) or
• paying an annual property tax based on the unimproved land value of the property.

Property tax rates

The property tax rates for 2022-23 will be:

• $400 plus 0.3% of land value for properties whose owners live in them
• $1,500 plus 1.1% of land value for investment properties.

These tax rates will be indexed each year. Unlike land tax, annual property tax assessments will be issued in respect of financial years and not calendar years.

What about principal residences?

Whilst the property is occupied as a principal residence it is likely to be exempt from land tax. However there was no announcement that the property would be exempt from land tax whilst subject to the annual property tax.

Once it ceases to be the principal residence, it is possible that both the annual property tax (at the 1.1% rate) plus an annual land tax could apply – for instance, where the owner decides to move interstate after 6 months occupation and then rent out the property.

It is assumed that there will be some process to adjust any election if the property Is not occupied for the continuous 6 months and retrospectively assess transfer duty.

For properties that are owned for less than a full financial year, a pro rata adjustment to the annual property tax will be made based on the number of days in the year the property is owned. There will therefore be no need to adjust for the annual property tax on the sale of the property.

Click here for more information about NSW considering signifcantly expanding the stamp duty regime.

How can SW help?

Please reach out to one of our tax and property experts below for assistance navigating the implications and opportunities of the property tax reform.

Contributor

Robert Parker

The post NSW 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.

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.

Following a similar scheme provided in 2020, the current program provides a reduction in land tax payable for the 2021 land tax year for eligible landowners providing rent relief to tenants between 1 July 2021 and 31 December 2021. Applications will be open until 31 January 2022.

Residential landlords have the option of choosing between the land tax relief or the Residential Tenancy Support Payment of up to $1,500 per tenancy agreement if they agree to reduce rent for COVID-19 impacted tenants from 14 July 2021 to 31 December 2021. If the residential landlord has claimed the Residential Tenancy Support Payment they will be ineligible for land tax relief.

How is land tax relief calculated and provided?

• The land tax reduction will be the lesser of:
  • The amount of rent reduction provided to an eligible tenant for any period between 1 July 2021 and 31 December 2021, or
  • 100% of the 2021 land tax attributable[1] to the parcel of land leased to that tenant.
• If eligible, the land tax relief will be available in the form of:
  • A refund if 2021 land tax has already been paid in full, or
  • An offset for the amount of land tax payable if the payment has not been completed.

Landlord eligibility requirements

• Must be leasing a parcel of land to:Must have reduced the rent of the affected tenant for any period between 1 July 2021 and 31 December 2021.
  • A commercial tenant who has an annual turnover of up to $50 million and is eligible for the Micro-business COVID-19 Support Grant, the 2021 NSW Business Grant and/or the JobSaver scheme, or
  • A residential tenant who has had a reduction in household income of 25% or more due to COVID-19.
• Must have provided the rent reduction without any requirement for it to be paid back at a later date.
• Must have land tax attributable to the parcel of land leased to that tenant for 2021.

Key evidence required

For all landlords

• Details of all eligible tenants, including ABN/ACN for commercial tenants.
• Confirmation of total rent reduced or waived for the 1 July 2021 to 31 December 2021 period. Examples include:
  • Copies of tenancy agreements proving rental reduction
  • Rental ledgers
  • A letter from an accountant or property manager
  • Tenant’s financial statements

For commercial tenants

• Documentation demonstrating an annual turnover of less than $50 million in the 2021 financial year in the form of a letter from an accountant, tax return, business activity statement, or other financial statements.
• Evidence of the tenants’ eligibility to be approved for the Micro-business COVID-19 Support Grant, 2021 COVID-19 NSW Business Grant, and/or the JobSaver scheme.

For residential tenants

• Documentation demonstrating a 25% reduction in household income in the form of
  • a statement from the tenants explaining how they have been impacted by COVID-19
  • copies of written communication with the tenants
  • a letter from an employer or accountant, bank statements, payslips, or other financial statements.

How we can help

Our teams can assist both commercial and residential landlords of all sizes to review evidence documentation, financials, and provide accountant letters to ensure your application is successful. Reach out to one of our experts for a conversation about your circumstances.

Get in touch

Leo Luan

E lluan@sw-au.com

Tony Principe

E tprincipe@sw-au.com

Blake Rodgers

E brodgers@sw-au.com

Dilushi Wijesinghe

E dwjesinghe@sw-au.com

The post NSW COVID-19 land tax relief appeared first on SW Accountants & Advisors.

Updated on 30 July 2021

COVID-19 business grant (refer to detailed criteria below)

• Tax exempt grants between $7,500 and $15,000 are available to eligible businesses with annual wages up to $10 million, to cover the first three-weeks of restrictions
• Three different grant amounts will be available depending on the decline in turnover experienced during restrictions:
  • $7,500 for a decline of 30% or more
  • $10,500 for a decline of 50% or more
  • $15,000 for a decline of 70% or more.

Micro business grant (refer to detailed criteria below)

• Grants up to $1,500 per fortnight of restrictions will be available under a new grants program for micro businesses with annual turnover between $30,000 and $75,000 which experience a decline in turnover of 30% or more.

JobSaver (refer to detailed criteria below)

• From week four of lockdown, the Federal Government will help fund the cost of a new business support payment for entities with annual turnover between $75,000 and $250 million (up from $50 million) who can demonstrate that their turnover is 30% lower than an equivalent two-week period in 2019
• Eligible businesses, including not-for-profits, will receive payments equivalent to 40% of their ‘weekly payroll’[1] for work performed in New South Wales:
  • The minimum payment will be $1,500 per week, and
  • The maximum payment will be $100,000 per week (up from $10,000).
• Eligible non-employing businesses (e.g. sole traders) will receive a set payment of $1,000 per week
• To receive the payment, eligible entities will be required to maintain their full time, part time and long-term casual staffing levels as of 13 July 2021
• This payment made to eligible businesses will be tax exempt.

Other Measures

• Businesses will also benefit from payroll tax waivers of 25% for businesses with Australian wages of between $1.2 million and $10 million that have experienced a 30% decline in turnover
• Land tax relief equal to the value of rent reductions provided by commercial, retail and residential landlords, up to 100 per cent of the 2021 land tax year liability
• No recovery of security bonds, or lockouts or evictions of impacted retail and commercial tenants prior to mediation.

Detailed Criteria

NSW COVID-19 business grant 

Applications open from 19 July 2021 to 13 September 2021

NSW COVID-19 micro-business grant

Applications open from 26 July 2021 to 18 October 2021

NSW JobSaver criteria 

Applications open from 26 July 2021 to 18 October 2021

How we can help

Many businesses have found the eligibility criteria difficult to navigate, particularly for newer businesses without 2019 records.

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

Leo Luan

E lluan@sw-au.com

Helen Wicker

E hwicker@sw-au.com

Tony Principe

E tprincipe@sw-au.com

Jae Debrincat

E jdebrincat@sw-au.com

Dilushi Wijesinghe

E dwijesinghe@sw-au.com

[1] ‘Weekly payroll’ can be determined by referring to Item W1 in the most recent Business Activity Statement (‘BAS’) provided to the Australian Taxation Office prior to 28 June 2021 for the 2020-21 financial year.

[2] For businesses grouped by Revenue NSW, ‘total annual Australian wages’ should be calculated using the rules set out by Revenue NSW. Businesses not grouped should apply the ownership grouping provisions under the Payroll Tax Act 2007.[1]  ‘Weekly payroll’ can be determined by referring to Item W1 in the most recent Business Activity Statement (‘BAS’) provided to the Australian Taxation Office prior to 28 June 2021 for the 2020-21 financial year.

[3] The Australian Taxation Office income assessment concept of ‘aggregated annual turnover’ will be applied.

[4] The Australian Taxation Office Goods and Services Tax (‘GST’) concept of ‘decline in turnover’ will be applied.

[5]  https://www.service.nsw.gov.au/2021-covid-19-business-grant-guidelines#attachment-a-list-of-highly-impacted-industries

[6] https://www.service.nsw.gov.au/2021-covid-19-micro-business-grant-guidelines#attachment-a-ineligible-businesses

[7] If the associated person has more than one non-employing business, payments can only be claimed for one business.

[8]  https://www.service.nsw.gov.au/jobsaver-payment-guidelines#attachment-b-ineligible-businesses 

The post NSW COVID-19 Support package appeared first on SW Accountants & Advisors.

The case involved the acquisition by SPIC on 12 May 2016 of the shares and units in the entities operating the Taralga Wind Farm. The case involved an assessment under the landholder provisions of the NSW Duties Act applicable at the relevant time. These have now been amended although the case remains relevant to some issues under the current NSW provisions as well as the landholder provisions of other States.

Taralga was an operating wind farm with leases of approximately 25 years. Taralga as the tenant had installed wind turbine generators (WTGs) and associated infrastructure such as roads, hardstands, met masts, and control and switching stations. The tenant had a right to remove the plant & equipment at any time and an obligation to remove the WTGs and restore the land at the end of the term under the terms of the leases.

The Court considered 5 issues:

Issue 1

What, if any, of the plant and equipment installed on the leased land is a fixture?

Issue 2

To the extent that any plant and equipment installed on the leased land is a fixture, to what, if any, interest in land did this give rise on the part of the Holdco Land Trust (through its linked entities)?

Issue 3

Having regard to the answers to issues 1 and 2, was the Holdco Land Trust a “landholder” for the purposes of the relevant provisions of the Duties Act?

Issue 4

How are any interests in land on account of fixtures to be valued?

Issue 5

Is the power under s 163G of the Duties Act available and, if so, should it be exercised?

1. Were the plant & equipment a fixture

The Court found that the WTGs and most other installations were fixtures due to the degree of annexation and the expectation that the WTGs and associated equipment would likely remain in place for their effective useful life.

SPIC argued that the WTGs were “strongly affixed to the land” because otherwise they would fall over. Therefore, the affixation was for the better use of the WTGs as chattels. Payne JA concluded:

116: I find that every item was fixed in place on the land for the better enjoyment by the tenant of the land as an integrated wind farm operated on the land. The Wind Farm was purpose-built after an extensive (18-year) wind study of the area establishing its suitability as a wind farm. The location of the WTGs was selected based on this wind assessment. A characteristic of the land was that 80 metres above the land the wind blew at a speed conducive to the operation of a wind farm.

123: I find that the function served by the annexation of the items was the use of the land as a wind farm. The wind turbine generators need to be upright and 80 metres high in order to capture the wind. Hence, the concrete foundations are significant and the turbines are secured to those foundations so that they may stand and function upright safely and efficiently to capture the wind. The function of the annexation of each of the eight met masts (through guy wires and the connection of the masts to the ground by concrete) is to have the masts upright at the same height as the turbines so that wind and weather conditions can be monitored.

The Court’s conclusion is very much one of characterisation where different courts may take different approaches. The answer depends upon whether a court focuses on the use of the land as an integrated wind farm or the use of the WTG as an asset that generates electricity with the use of the land being incidental. The judge may have equally concluded ‘… the function served by the annexation of the items was the use of the WTG to generate electricity.’

The judge considered the right and obligation to remove the plant and equipment at the end of the term was a factor but was not determinative.

120: The rights and obligations in the leases no doubt demonstrate that the parties to the leases have turned their minds to the question of rights of severance, ultimately to ensure that ownership of the plant and equipment to be installed on the property throughout the term of the lease will revert to the tenant upon severance and to the obligations of the tenant to remediate the land at the end of the lease. Those rights and obligations are relevant to, but not determinative of, the purpose of the affixation of the plant and equipment to the land. If those rights and obligations were determinative, there would be no need for the doctrine of tenant’s fixtures. As I have said, I am bound to conclude that the intention of the party making the improvement ultimately to remove it from the land, will not, by any means, be a controlling fact.

121: I am not satisfied that, no matter how firmly relevant plant and equipment is affixed to the land and regardless of the objective purpose of the affixation, a requirement for remediation at the conclusion of commercial and industrial undertakings means that plant and equipment affixed to land is therefore not a fixture.

In coming to this conclusion the judge distinguished a series of Victorian cases: Commissioner of State Revenue v Uniqema Pty Ltd [2004] VSCA 82; Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 and AWF Prop Co 2 Pty Ltd v Ararat Rural City Council [2020] VSC 853. AWF Prop Co 2 involved another wind farm where the court considered the tenant’s rights and obligations to remove the wind turbines at the end of the lease led to the conclusion that the plant and equipment had not become a fixture.

However, the Victorian cases may be influenced by the existence of section 154A of the Property Law Act 1958 (Vic). Uniqema and Vopak determined that the effect of that section is that tenant’s installations retain their character as a chattel, and do not become a fixture. The SPIC Pacific Hydro case therefore has limited application to Victorian matters.

2. Taralga’s interest in the fixtures

The Court found that the WTGs and associated plant and equipment were tenant’s fixtures. The roads and below ground structures (wiring, hardstands) had become landlord’s fixtures as there was no intention of removing these.

Nevertheless, legal title to the fixtures vested in the landlord, not Taralga until Taralga exercised its rights to sever and remove the asset at the end of the lease.

This is consistent with the High Court decision in TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576.

Payne JA quoted the High Court decision in Tec Desert:

78: The Court in TEC Desert (HCA) quoted C Harpum, S Bridge and M Dixon, Megarry & Wade The Law of Real Property (7th ed, 2008, Sweet & Maxwell) at p 1072 [23-010] to this effect:

“Prima facie, all fixtures attached by the tenant are ‘landlord’s fixtures’, i.e. must be left for the landlord at the end of the lease. But important exceptions to this rule have arisen, and fixtures which can be removed under these exceptions are known as ‘tenant’s fixtures’. This expression must not be allowed to obscure the fact that the legal title to the fixture is in the landlord until the tenant chooses to exercise his power and sever it. The tenant may do so only during the tenancy or (except in cases of forfeiture or surrender) within such reasonable time thereafter as may properly be attributed to his lawful possession qua tenant.” (Footnotes omitted.)

The Commissioner submitted that a tenant has a separate equitable interest in the tenant’s fixtures as well as a legal interest created by the lease. Payne JA rejected that there was any separate equitable interest, the tenant’s only interest in land was its rights under the lease.

These issues were intertwined, but effectively revolved around how the interest as tenant under the lease was to be valued.

The Court accepted the approach of one of the valuers (Mr Thomas) involving the following steps:

1. Having regard to the unencumbered value of the plant and equipment as at the date of the Acquisition, Mr Thomas estimated what it would cost to rent that plant and equipment each year. By comparing this to the much lower actual rental paid under the leases each year, he determined the per annum value of the right to use the plant and equipment during the term of the leases
2. Mr Thomas then calculated this value to the tenant over the unexpired term of the leases at the time of the Acquisition, discounted to “present” value as at the date of the Acquisition
3. He then deducted from this the expected costs to the tenant to remediate the site, again discounted to present value as at the date of the Acquisition.

On the facts of the matter, the Court rejected the discount rate adopted by SPIC’s valuer and adopted a valuation closer to the Commissioner’s assessment. Nevertheless, the approach taken to valuing the lease, including the right of use of the plant and equipment during the term of the lease, was correct.

As the value of the leasehold interest was above $2m, Taralga was a landholder.

In light of the conclusions above, the plant and equipment were not ‘goods’ and therefore sec 163G was not applicable.

Get in touch

Please contact your SW advisor or one of our experts below should you have any questions.

Contacts

The post SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue appeared first on SW Accountants & Advisors.

In August 2020, the NSW Government introduced certain tax concessions for approved Build to Rent (BTR) schemes in New South Wales, being;

• A 50% reduction in the value of the land for the purposes of calculating land tax (Land tax concession);
• A refund or exemption from surcharge land tax for an Australian corporation where an approved BTR property has been constructed on the land or the Commissioner is satisfied that such a building will be constructed (Surcharge land tax exemption); and
• A refund or exemption from the foreign purchaser additional duty where an Australian corporation purchases residential land for the purpose of constructing an approved BTR property that qualifies for the land tax concession (Surcharge transfer duty exemption).

The 3 exemptions / concessions are interrelated as the Surcharge land tax exemption and the Surcharge transfer duty exemption depend upon the land satisfying the Land tax concession once the building is completed.

The Land tax concession and Surcharge land tax exemption apply to residential land owned by an Australian corporation at midnight on 31 December in any year commencing with midnight on 31 December 2020 and ending with midnight on 31 December 2039.

However, if within the period of 15 years after a refund or concession is first applied, the land concerned is subdivided or the ownership of the land is ‘otherwise divided’ then the exemptions and concessions may be revoked, and reassessments issued retrospectively for up to 15 years as if the exemptions or concessions never applied.

The Surcharge land tax exemption and Surcharge transfer duty exemptions apply only to an Australian corporation, which is a corporation incorporated or taken to be incorporated under the Corporations Act 2001.

Such a corporation may nevertheless be a ‘foreign corporation’ if it is subject to foreign control.

It is not apparent whether an Australian corporation acting as a trustee of a trust may be exempted.

In addition, the term may not include bodies incorporated under other Australian legislation (such as an incorporated association, a co-operative society or a statutory body).

Land Tax Concession

For the purpose of assessing land tax, the land value of a parcel of land is to be reduced by 50% if—

a) a building is situated on the land, and

b) construction of the building commenced on or after 1 July 2020, and

c) the Chief Commissioner is satisfied that a significant proportion of the labour force hours spent on the construction of the building involves or involved work performed by persons whom the Chief Commissioner considers belong to any one or more of the following classes of worker—

  i. apprentices or trainees,

  ii. long-term unemployed workers,

  iii. workers requiring upskilling,

  iv. workers with barriers to employment (such as persons with disability),

  v. Aboriginal jobseekers,

  vi. graduates, and

d) the Chief Commissioner is satisfied that the building is being used and occupied for a BTR property in accordance with guidelines approved by the Treasurer for the purposes of this section, and

e) an application for the reduction is made in accordance with the requirements.

The Treasurer has now released the guidelines for the land tax reduction for BTR properties.

The purpose of the concession

The Guidelines state the purpose of the concession as follows:

• The purpose of this tax concession is to address one of the barriers to the institutional provision of rental services and, by doing so, improve the rental experience for tenants. By limiting the benefit to new developments, this measure is expected to help support new construction.
• The concession is expected to support the supply of large-scale rental housing that are professionally owned and managed, and that provide tenants with greater security of tenure and greater quality rental services than that typically offered by small retail investors.

Eligibility

A building (including a group of buildings or parts of buildings on the same parcel of land) must satisfy the following conditions in order to be considered as used and occupied for a BTR property:

1. Planning requirements

1. • All requirements of the relevant development consent must be complied with.
2. Building requirements
   • 50 self-contained dwellings: At least 50 self-contained dwellings used specifically for the purpose of BTR must be constructed on the parcel of land;
     • Dwellings can be spread across multiple buildings on the same land parcel.
     • Where an adjacent site is consolidated with a land parcel that already qualifies for the concession, and the adjacent site provides additional BTR dwellings to the property, the additional dwellings do not have to separately meet the 50-dwelling threshold of Requirement 2a. as these dwellings will be added to the total number of dwellings on the original land parcel.
     • Where an adjacent site is not consolidated with a land parcel that already qualifies for the concession (e.g. by remaining as a separate adjacent land parcel), eligibility for the concession will be determined separately and the 50-dwelling requirement will be applicable.
   • Affordable housing policies: properties must comply with all relevant affordable housing policies that may be imposed under the Environmental Planning and Assessment Act 1979;
     • Note that these concessions and exemptions form part of a larger reform package which includes new state environmental planning policies under the Environmental Planning and Assessment Act 1979 to promote the development of new affordable housing and social housing.
   • Available to general public: BTR dwellings must be made available to the general public without restriction;
     • This is subject to any restrictions necessary to ensure public health and safety, to promote announced Government policy, or to ensure dwellings designated for affordable or social housing are used for that purpose.
3. Ownership structure
   • Unified Ownership structure: The dwellings and common land that comprise the BTR property must be held within a unified ownership structure;
     • This can include a group of entities holding joint ownership.
     • The property must not be held in such a way as to constitute, in the opinion of the Chief Commissioner, a de facto subdivision or divided ownership of the land, or otherwise contrary to the intention to restrict subdivision or division of the land.
4. Management structure
   • Single management entity, with on-site access: The dwellings that comprise the BTR property must be managed by a single management entity, with on-site access to management for tenants;
     • This does not apply if those specific dwellings are made available for use as affordable housing or social housing for a continuous period of 15 years.
     • The management entity can be different to the landholder. That is, the landholder may outsource the provision of the management services, provided that the services are delivered by a single entity.
5. Lease conditions
   • Option for fixed term lease of at least 3 years: Each tenant must be provided a range of lease term choices, including a genuine option to enter into a fixed term lease of at least 3 years;
     • A landlord will not be in breach of this condition if a tenant who has been provided the option of a fixed term lease of at least 3 years opts for a lease of a shorter duration instead.
     • Each tenancy must be subject to a Residential Tenancy Agreement under the Residential Tenancies Act 2010. The requirement for tenants to be offered a Residential Tenancy Agreement likely means that the concessions will not be available for various types of “commercial residential premises” (such as rooming houses, serviced apartments, student accommodation and similar arrangements where residents are granted a licence to occupy their accommodation.
6. Other factors
   • The Chief Commissioner may have regard to any other factors that he or she considers relevant in deciding whether a property is being used for BTR

If a part of a parcel of land is used for purposes other than BTR purposes, the value of land tax concession may be reduced on a proportional basis.

The Guidelines suggest that floor space and area may provide a reasonable basis of apportionment.

How ShineWing Australia can help

Should you be interested in accessing these concessions please contact your ShineWing Australia advisor regarding how you can lodge an expression of interest of interest in the BTR Concessions with Revenue NSW.

Contacts

The post NSW Build to Rent land tax and duty concessions appeared first on SW Accountants & Advisors.