Tag: real estate

Govt sets mandatory code for rent relief

Prime Minister Scott Morrison has revealed that he has reached an agreement on a mandatory code for the provision of rent relief by commercial landlords to tenants.

On Tuesday, 7 April, Mr Morrison said the mandatory code agreed to with the national cabinet will be legislated and regulated as appropriate in each state and territory jurisdiction.

Mr Morrison said the code will apply to tenancies where the tenant or landlord is eligible for the JobKeeper program and where they have a turnover of $50 million or less.

“The code is designed to support those small and medium-sized enterprises, be they a tenant or indeed a landlord,” Mr Morrison said.

“The code brings together a set of good faith leasing principles. Landlords must not terminate the lease or draw on a tenant’s security. Likewise, tenants must honour the lease.”

Landlords will be required to reduce rent proportionate to the trading reduction in the tenant’s business through a combination of waivers of rent and deferrals of rents over the course of the pandemic.

Waivers of rent must account for at least 50 per cent of the reduction in the rental provided to the tenant during that period, while deferrals must be covered over the balance of the lease term and in a period no less than 12 months.

“If the lease term goes for three years, you can advertise the cost of the lease of the rental deferral over that three-year period, after the end of the pandemic period. But if the lease only has another six months to run, then the tenant would have a minimum of 12 months after the pandemic period in order to cover up on the deferrals of the rental payments,” Mr Morrison explained.

A binding mediation process

Mr Morrison also said the rental relief arrangements negotiated by the tenant and landlord will be overseen through a binding mediation process that will be run by the states and the territories.

“The point here is simple: it’s the same request we made of landlords and tenants about 10 days or so ago when I stood up on this issue, and that is they sit down and they work it out. This must be shared,” he said.

Further, Mr Morrison said banks also must “come to the table” and provide support to landlords.

In particular, he wanted to send that message to international banks operating in Australia which he said that in many cases are providing that support, especially to many larger landlords.

“We will expect those banks to be providing the same levels of support and co-operation as we are seeing from the Australian banks who are aware of these arrangements,” Mr Morrison said.

“What this does is preserve the lease. It preserves the relationship. It keeps the tenant in their property and it keeps a tenant on the lease, which is also good for the landlord, and it preserves the lease that is in place that underpins the value of those assets.

“This is seen as a proactive, constructive and co-operative mechanism for landlords and tenants to see this through together.”

NSW Land Tax Assessment includes Foreign Person Surcharge when property owned by Family Trust

Revenue NSW (Formerly known as the Office of State Revenue) considers Family Trusts to be subject to the Foreign Persons Surcharge on stamp duty and Land Tax for any New South Wales residential property owned through the Trust, including Trusts that are based outside of NSW.

Revenue NSW has confirmed that they automatically apply the 2% foreign person land tax surcharge on properties where the title indicates that it is owned through a Family Trust.

Revenue NSW gives trustees 6 months (from the assessment date) to update their Trust Deed to remove foreign persons as beneficiaries. After the deed is updated, the trustee can then apply for the surcharge to be refunded.

In short, Family Trusts may have to pay the tax first and then apply for a refund (after they have updated their Deed), regardless of whether there is any history of the trust distributing to a foreign person.

The situation is slightly different for properties in other states held by Family Trusts. Victoria, Queensland and South Australia also impose foreign person surcharges on Stamp Duty and/or Land Tax, with Western Australia due to follow in 2019. Each state has its own legislation which deals with how these surcharges apply to Family Trusts and the legislation in each state differs.

Proposed changes to GST on property transactions

Measures to strengthen compliance with the GST law in the property development sector have been introduced into parliament this week.

The Treasury Laws Amendment (2018 Measures No 1) Bill 2018 will amend several tax laws to require purchasers of new residential premises and new subdivisions of potential residential land to make a GST payment directly to the ATO as part of settlement from 1 July 2018.

This was announced in the 2017-18 Federal Budget, is designed to counter tax evasion where some developers collect GST from their customers but dissolve their company to avoid paying it to the ATO. Currently, developers may have up to three months to remit GST after the sale of newly constructed residential premises and new subdivisions, allowing dishonest developers to avoid their GST obligations.

The government claims that the cost impacts on purchasers using conveyancing services are expected to be minor, given this change leverages the existing disbursement process and the use of standard contracts.

CPA Australia understands and agrees with the intent of the Bill, though disagrees with the assumption that the change will have minimal impact on most purchasers.

The impact on the cash flow of builders could be quite significant

In its submission on the draft legislation, CPA Australia stated that it is the experience of its members that GST on property transactions can be complex, including calculating the GST payable, and that such transactions may be outside the skills of many BAS and tax agents, let alone conveyancers.