Land Tax ... Retail Specific

Land Tax ... Retail Specific

As Lease Administrators check the budgeted outgoings for 2010 against the budgeted outgoings for 2009, one major increase in outgoings expenses stands out above all others; namely, the massive increases in land tax in shopping centres recoverable from tenants - particularly in shopping centres located in New South Wales and Victoria.

Whilst Victoria doesn't allow the recovery of land tax from tenants under the Act, the NSW legislation certainly does allow such a recovery. However, in Victoria many well known public company retail tenants don't fall under the Retail Tenancy legislation - nor do the warehouses and head offices of most retail organisations but they are all liable for land tax.

In Victoria where land valuations are based on a bi-annual valuation we are now using land values as of 2007 which is probably the highest land values you can have. In addition, the State government removed the cap on increases in land tax of not being able to exceed 50% of the previous year's land tax. This has resulted in an outcry from many tenants in the State.

In New South Wales' mini budget last year the State Government included a new tier premium rate threshold of rating namely for land values. In previous years the land tax was assessed at the highest level at 1.6% plus $100 over the land tax threshold up to any value.

This year, land tax is calculated on the combined value of all the taxable land the landlord owns. The threshold for 2009 has been set at $368,000. This means that the landlord's tax assessment is calculated on the combined value of all the taxable land above this threshold. The amount of tax is $100 plus 1.6% of the value above this threshold until we get to the premium rate threshold of $2,250,000 when it jumps to 2% which hits many shopping centres whose land values are much higher.

Most Lease Administrators are finding that as this land tax is being passed on to retailers via their leases, the cost of such land tax that they are being charged as an outgoing is now up by 25% or more. This is at a time of an economic recession in Australia.

Now comes the news that in Queensland, where all retailers were previously not required to pay land tax, this exception will only apply to retailers who fall under the Retail Tenancy legislation. This change is applicable to all leases entered into after 30 June 2009.

Lease negotiators of public company retailers who have entered into current deals in Queensland need to go back and see what this announcement will do to the gross rental deal they have entered into with landlords.

For your information and action.

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HYMIE ZAWATZKY
www.thetemplargroup.com.au