At the beginning of the week, the New South Wales government announced a $440 million-dollar package to support tenants and landlords.
The financial relief involves a land tax break for landlords, which is to be passed on to hard hit tenants in the form of rent reductions. Both the residential sector and commercial sector are to receive about $220 million each.
Here’s a breakdown of the important aspects of the tax break, and how it affects your Sydney commercial lease.
How much financial assistance has been allocated?
The New South Wales government has allocated $440 million in total for land tax relief. $220 million of this is devoted to the residential sector, and $220 million for commercial and retail lease agreements.
Who gets the assistance?
Landlords can apply for the concession of up to 25 per cent of their land tax on relevant commercial properties for the year. However, the concession must be passed on to tenants who are struggling with the economic impact of the COVID-19 pandemic.
The NSW code stipulates that businesses with a turnover of less than $50 million and a loss in revenue of at least 30% or more will receive the assistance through rental deferrals or reductions, via their landlord.
This includes businesses with a yearly turnover of less than $50 million, which are eligible for the Commonwealth’s JobKeeper program.
How is the assistance provided?
The financial assistance will be provided in the form of a land tax concession, which is passed onto the tenant through a rent reduction.
Landlords and tenants must come to an agreement through negotiation for the rent relief. The NSW Small Business Commission has been given $10 million for the purpose of mediating these negotiations when an agreement can’t be met.
Alternatively, a tenant advisor experienced in Sydney commercial lease negotiation can also help to reach a good result for both parties.
How long will the arrangements last?
There is not yet an end date to the assistance.
It will depend on when the social distancing restrictions are lifted and should take into account the ongoing impact of the COVID-19 pandemic on businesses.
When can a landlord evict a tenant?
A ban has been placed on termination of a commercial lease for the non-payment of rent.
Therefore, landlords can’t evict tenants in the current climate, where they are suffering financially due to COVID-19.
However, landlords can evict tenants for the other reasons as detailed in their commercial lease agreement. In this respect it is business as usual.
To discuss your Sydney commercial lease arrangement, get in touch with Niche Tenant Advisory here.
