In response to QUT’s Commercial and Property Law Research Centre’s review of Queensland’s current property laws, the QLD Government has introduced new regulations under the Body Corporate and Community Management Act 1997 (Qld). ...
Queensland's freeze on evictions of commercial tenants has been extended to 31 December 2020. This means that tenants of “Affected Leases” impacted by the pandemic cannot be evicted from their premises for failure to pay rent or outgoings or failing to open during the hours required by their Lease until 31 December 2020.
For a lease to be an “Affected Lease” it must meet the following criteria:
- it must be a retail shop lease under the Retail Shop Leases Act 1994 (Qld) or a lease under which the lease used for carrying on a business;
- on the 28 May 2020, the lease or an agreement to lease was binding on the tenant;
- the tenant is an SME entity, being an entity:
- which carries on a business (or is a non-profit body) during the current financial year; and
- for which one or both of the following applies:
- the entity's annual turnover for the current financial year is likely to be less than AUD50 million; or
- the entity's annual turnover for the previous financial year was less than AUD50 million; and
- the tenant under the lease, or an entity that is connected with, or an affiliate of, the tenant responsible for, or involved in, employing staff for the business carried on at the leased premises, is eligible for the Commonwealth Government JobKeeper scheme.
The ban on evictions under the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Qld) was due to expire at the end of this month. Attorney-General and Justice Minister Yvette D'Ath said the three month extension was good news for struggling businesses. She said “This extension is about giving businesses, and the thousands of workers they employ, the certainty they need in these challenging times. It’s about supporting jobs and keeping people in work as Queensland builds towards economic recovery.”
No mention has been ...
Trustees of discretionary trusts that hold real property in New South Wales must urgently review their trust deeds in light of the extension of the definition of ‘foreign trustees’ for the purposes of transfer duty and land tax.
The practical consequence of the State Revenue Legislation Further Amendment Bill 2019 is that a trustee of a discretionary trust will now be deemed to be a “foreign person” if the terms of the trust deed allows foreign persons to be beneficiary.
Foreign Trustee Surcharge and Land Tax
A discretionary trust which is a “foreign person” will attract the higher rates of surcharge purchaser duty (additional 8%) and surcharge land tax (additional 2%) in relevant circumstances.
The consequences of these changes can be averted (and refunds of any amounts already paid pursuant to the changes obtained) if the trust deed is amended to the following effect:
- The terms of the trust deed prevent a foreign person from being a beneficiary; and
- The clause preventing a foreign person becoming a beneficiary cannot be amended to allow a foreign person to be a beneficiary at a later time.
The revised deadline for when amendments must be made is yet to be confirmed, but steps to review and amend (where necessary) should be taken as soon as possible.
Importantly, the question of whether to amend will need to be given careful consideration in terms of the broader distribution and tax strategy for the trust and associated entities. Indeed, there may some circumstances where the exclusion of foreign persons as beneficiaries will not be appropriate.
If you have thought about leasing part of your commercial, industrial or agricultural land to increase the returns on your investment, there are a few hidden pitfalls of which you should be aware.
When you lease part of existing commercial, industrial or agricultural land, and that lease is for more than 10 years (including any option periods), that lease is deemed a subdivision of your land and there is a legislative requirement for you to obtain subdivisional approval from the local Council.
This can be very costly in both time and money.
On a positive note, this does not apply to all leases that are over 10 years, it only to those leases that are leases for part of the land. If a lease of any length is of a building on your land and the whole of the leased premises are contained within that building, subdivisional approval will not be required.
If there are open areas such as outdoor dining areas, storage areas, access ways/ drive-thru’s etc and they are included as leased areas, there will be a requirement for you to obtain subdivisional approval from the Council.
If you are intending the tenant to have the use of such areas as part of the lease, it may be more appropriate to licence the use and occupation of those areas to the tenant rather than leasing them.
In order to try and get around the requirement to subdivisional approval from Council, landlords have in the past registered a number of consecutive leases of 10 years or less over part of the land to stay under the ‘10 year’ threshold.
For example, if a landlord and tenant agreed on a 20-year lease for part of the land (which, even if it was a 10-year lease with a 10 year option would require subdivisional approval) the landlord and tenant would enter into and register a 10 year lease and then enter into and register another 10 year lease simultaneously.
The commencement date of the second 10-year lease will start when the first lease ends. Although this may have worked ...
In every conveyancing matter where there are two or more buyers, we are required to ask the question “will you be joint tenants or tenants in common?” Commonly, when we poise this question the response is usually a short silence followed by “what’s the difference?”
Regardless of whether the buyers are a married couple, family members, or friends, it is very important to ensure that the type of ownership agreement you have in place is the right one. If everyone understands the type of ownership applicable to them and its effects, this may help to prevent any problems down the track if one of the owners wants to relinquish their share, or the unforeseeable happens and an owner/s passes away. ...
Intergenerational Transfers Affected by Changes to the Duties Act 2001 (Qld)
New transfer duty concessions will now be available for transferees, particularly in relation to intergenerational transfers of prescribed and primary production businesses, pursuant to the Queensland Government’s welcomed changes to the Duties Act 2001 (Qld) .
How does this affect eligibility?
Transfer duty concessions are now available for primary production businesses or prescribed businesses. A primary production business is a business of agriculture, pasturage or dairy farming. A prescribed business solely involves one of the following business activities:
- excavating and earthmoving
- picture framing
- processing and packaging
- printing and publishing
- boot and shoe repairing
- retailing and wholesaling (whether or not it involves repairing or installing goods sold)
- undertaking or funeral directing
- other (being beauty salon or barber shop, bus service, cinema, crematorium, engineering workshop, laundry or laundrette, newsagency, travel agency or real estate agency, repair and service workshop, rental business, restaurant or café, service station, sports complex or gymnasium, warehouse or bulk storage complex).
If eligible, no transfer duty is payable if the business property carries on a primary production business. If residential land, which is adjacent to the land used to carry on a primary production business, is transferred under the same transaction then no transfer duty is payable. Unfortunately, transfer duty on water allocations still must be paid.
If the business is a prescribed business, transfer duty rate must be applied to any purchase. Here, transfer duty is payable on business property worth $500,000 or more. For example, if a property is worth $750,000, duty is payable on $250,000 (being the amount above $500,000). A list of transfer duty rates is available at the Queensland ...
Body Corporate Management Case Study: The Most Expensive Balcony In Queensland?
The High Court has recently overturned a Queensland Court of Appeal decision to find in favour of a body corporate, which was fighting an owner’s attempt to use common property airspace to expand two balconies in his apartment.[i] The essential issue before the High Court was whether the body corporate had acted reasonably in refusing the owner’s request.
Always get advice from a reputable property lawyer if you face challenges with body corporate management.
Body corporate case study – background
An owner at Viridian Noosa Residences wanted to join his two existing balconies, and the space in between them, to create one deck. To do so, he required the exclusive use of common property airspace - 5m2 - between the two balconies.
To proceed with the extension, the owner needed a resolution without dissent at a general meeting of the Body Corporate. In August 2012, the owner put his motion at an extraordinary general meeting, however some lot owners voted against it.
The owner then applied to the Commissioner for Body Corporate & Community Management arguing that the Body Corporate acted unreasonably in voting against the motion. In September 2013, the Commissioner found that the Body Corporate had acted unreasonably and allowed the owner to proceed with the work.
In response to the Commissioner’s decision, two of the dissenting owners appealed the decision to the Queensland Civil and Administrative Tribunal (QCAT). In October 2014, QCAT overturned the Commissioner’s decision stating that the decision of the Commissioner’s had the effect of “overriding the will of a substantial majority of owners”.[i]
The owner appealed QCAT’s decision to the Queensland Court of Appeal who found, in November 2015, that the Commissioner’s decision was not wrong in law and QCAT should not have set it ...
How Will Pending Changes To The Retail Shop Leases Act Affect Your Business?
In November 2016 some important changes to the Retail Shop Leases Act 1994 (Qld) (the Act) will take effect, impacting on both tenants and landlords.
When is a retail lease legally entered into?
According to commercial law in Australia, a retail lease is legally considered ‘entered into’ on the earlier of two important dates: the date the lease becomes binding on the parties, or when the tenant takes possession of the premises.
The changes to the Act now provide that a lease is entered into the earlier of:
1. when the lease is signed by all parties
2. when the tenant takes possession of the premises or
3. when the tenant first pays rent (other than a deposit to secure the premises).
Leases covered by the Act
In order to be covered by the Act, a lease must be for a retail shop situated in a retail shopping centre or used predominantly for carrying on a retail business. There are further detailed conditions which apply to meeting these criteria.
The changes to the Act now exclude the following from the definition of a retail shop lease:
1. premises with an area over 1,000 square meters
2. premises used for a non-retail business, which are located within:
a. a multilevel retail shopping centre where the proportion of retail businesses on that level is less than 25%
b. a single level building and the retail area of the building is less than 25% of the total lettable area of the building
3. ATMs and
4. vending machines.
Other key changes to note in the revised Retail Shop Leases Act
At the end of each period for which a tenant pays outgoings, a landlord must provide an audited statement that details the outgoings. These statements must now provide a breakdown of centre management costs. Outgoings will also now exclude excess paid by landlords on insurance claims.
If a tenant is required to contribute towards a promotion fund, then the ...
Australian Sellers Beware! 3 Things You Need To Know About The New Withholding Tax Regime
From 1 July 2016, new legislation requires Australian residents selling real estate and other assets with a market value of $2million or more to obtain a clearance certificate from the ATO by settlement. The aim of the new withholding tax regime is to protect the integrity of the foreign resident capital gains tax regime, by ensuring that foreign sellers do not escape their liability to pay capital gains tax.
What is the new law?
The new law applies to certain assets worth at least $2million, including:
• real property (land, buildings, residential and commercial property)
• lease premiums and mining, quarrying or prospecting rights
• indirect interests in an entity that hold such assets
• an option or right to acquire such assets.
Should each seller within a transaction fail to provide a valid clearance certificate by settlement, the buyer is required to withhold 10% of the purchase price which is payable to the ATO immediately after settlement.
How does it work?
At the crux of this new legislation is the requirement that anyone selling property or assets in this cost bracket must obtain a clearance certificate, which confirms that the withholding tax is not to be withheld from the transaction. A seller must apply to the ATO for a clearance certificate and provide it to the buyer by the settlement date of the transaction. A seller’s failure to meet this deadline will cause a deduction in the sale proceeds, as 10% of the purchase price will be paid to the ATO.
A seller may apply for a clearance certificate at any time they are considering the sale of property, even before the property is listed for sale. The clearance certificate will be valid for 12 months and must be valid at the time the certificate is given to the buyer prior to settlement.
There are a number of forms, in relation to the clearance certificate, which are available from the ATO’s ...
Property Development Tax Structures: Who May Benefit
The choice of property development structures adopted for any property development project often has a key bearing on the tax implications and commercial viability of that particular project.
Capital gains tax (CGT) is an important consideration for investment property or development projects in Australia as is the relationship between property development and company tax rates.
In this article we consider property development structure options for:
- Landowners that have held land for investment (e.g. farm, lifestyle property or family home) now suitable for development;
- Property developers.
In particular, the following advantages will be achieved with proper documentation of the development arrangements:
- Landowners - ensure the unrealised gain at commencement is taxed as a capital gain rather than as ordinary income without incurring tax restructure costs. This may trigger concessions including the exemption for pre-CGT assets and the CGT discount for post-CGT assets;
- Property developers - offsetting the profit of one project against expenditure of the next project leading to a tax deferral.
Property Development Structures for Landowners
The circumstance we are dealing with is where a landowner has held a property on capital account (for example, a farming property or family home) which is now suitable for development.
A simple sale of the property may be eligible for capital gains tax concessions in Australia, including the CGT discount and small business concessions.
If the landowner undertakes a development activity, the activity will usually comprise the carrying on of a business or a profit-making undertaking in respect of which the profit will be taxed as ordinary income (not as capital gains).
To avoid this result, the usual recommendation is to transfer the property to a ...