An Update From Our Property Team

As we near the end of 2020, we felt it important to touch base regarding some of the practical considerations we feel clients may need to consider during this time and moving forward into the new year. The below, prepared by Solicitor Morgan Cherry and Licensed Conveyancer Yvonne Reynolds, outlines the latest on retail and commercial leases as well as proposed changes to Stamp Duty.
The NSW Government has recently signaled its intention to begin to phase out its COVID-19 rent relief package after the expiry of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (Regulation) on 31 December 2020. You can read some of our earlier comments on the Regulation here and here.
Subject to any agreements made under the Regulation, this generally means Landlords can take ‘prescribed actions’ (e.g. terminating Leases, calling on Bank Guarantees and other security, recovering damages and charging interest and other fees on unpaid Rent) against their Tenants for breaches of the Lease on and from 1 January 2021. It also means Landlords can begin to apply rent increases and request repayment of any deferred rent.
Notwithstanding the above, the Government has announced a targeted extension to the Regulation so that it continues to apply until 28 March 2021 for retail tenants with an annual turnover of less than $5 million and who are able to re-establish eligibility by demonstrating a 30% reduction in turnover for the December 2020 quarter. Landlords who provide rent reductions under the extension will be eligible for land tax relief of up to 25 per cent for the 2021 land tax year. More information about this further extension is expected to be available soon.
Both Landlords and Tenants are encouraged to consider their affairs ahead of the impending expiry of the Regulation (for some on 31 December and others on 28 March 2021) and whether any further relief is required after that time.

The NSW State Government has proposed changes in the recent Budget which will see the introduction of the option to pay the required property levy up front in full, or by annual instalments.
Currently there are two main property taxes which include:

  1. Stamp duty – this is payable on the value of the property being acquired, and is due and payable within 3 months of the date of exchange of contracts or on completion of the sale.
  2. Land tax – an annual charge calculated on the unimproved land value of property owned as at 31 December each year, excluding your principal place of residence.

The proposed reform is to combine both of these taxes into just one tax, but give people the option of how to pay. It is anticipated that this change will ease the pressure on the upfront costs associated with buying property and in doing so, increase the demand for property (and therefore increase property prices).
If you choose not to pay the tax by instalments, there is no change to the process and the payment of stamp duty would be required upfront.  However, should you choose to pay the tax by instalments, subsequent owners of the property would become liable for payment of the tax. It will also mean there is no more first home buyers stamp duty concessions for eligible properties worth up to $800,000.00, instead the Government will provide a $25,000.00 grant. There is also talk of lower rates for owner-occupiers compared to residential and commercial investment properties.
The proposed reforms will be under review and consultation until March next year with a view to being implemented by the end of 2021.  I am sure this is welcome news for buyers wanting to get into the market.
We will continue to keep you up to date on any changes however in the meantime if you require any advice or assistance regarding the above please contact our Property team on (02) 4927 2900.