The recent Queensland Supreme Court decision in Wyuna Court Pty Ltd v Vikpro Pty Ltd [2015] QSC 216 has determined that it is lawful for landlords to recover land tax from commercial tenants from 30 June 2010 under certain leases entered into before 2009. This is despite a widely held belief amongst the property and legal professions, that Land Tax is not recoverable under existing commercial leases that were entered into before 30 June 2009.

Land Tax recovery – a recap

To appreciate the effect of the decision, it is necessary to recap on the recent history of land tax legislation in so far as it relates to recovery of Land Tax from tenants:

  • Section 44A of the Land Tax Act 1915 (the 1915 Act) provided that any obligation to pay land tax in a Lease entered into after 1 January 1992, was unenforceable.
  • In 2009, section 44A was repealed by the Revenue and Other Legislation Amendment Act 2009 (the 2009 Amending Act). The effect of the repeal was that from 30 June 2009, it was lawful for new commercial leases to contain a clause allowing for landlords to recovery Land Tax from tenants. Importantly however, the 2009 Amending Act inserted a transitional provision in the 1915 Act which provided that the prohibition on landlords recovering land tax from their tenants was preserved in Leases that were already in existence immediately before 30 June 2009 (and also for renewals of such leases).
  • In 2010, the Land Tax Act 2010 (the 2010 Act) was introduced, which repealed and replaced the 1915 Act. The 2010 Act came into force from 30 June 2010. The expressed intention of the 2010 Act was to modernise the law of land tax so as to comply with 'contemporary drafting practices.'
  • The 2010 Act did not contain any transitional provision which continued the prohibition on landlords recovering land tax from their tenants in Leases that were already in existence immediately before 30 June 2009.

Despite the 2010 Act not containing any transitional provision preserving the prohibition on recovering Land Tax under leases existing before 30 June 2009, it has been generally accepted that that prohibition remained as a result of the Acts Interpretation Act 1954 and principles of statutory interpretation. Specifically, section 20 of the Acts Interpretation Act relevantly provides that the repeal of an Act does not affect its previous operation or anything done or begun under the repealed Act (unless there is a clearly expressed legislative intention that the operation of the repealed Act is not to continue).

Applying that principle to the land tax legislation, even though there was no express transitional provision in the 2010 Act, the operation of the Amending Act which did include a transitional provision would not be affected by the repeal of the 1915 Act. However, in the case in question, the Supreme Court came to a different conclusion.

The case

The landlord in this case, under a lease commencing before 2009, sought to recover land tax from its commercial tenant, for the period of the lease arising after 30 June 2010.

The sole judge, found that section 4 of the Acts Interpretation Act overcame the effect of section 20 of that Act. Section 4 provides that the principles contained in the Acts Interpretation Act may be 'displaced, wholly or partly, by a contrary intention appearing in any Act.' The judge found that the repeal of the 1915 Act, together with the failure to include a transitional provision similar to that contained in the 2009 Amending Act, showed a clear parliamentary intention that the prohibition on recovery under pre-2009 Leases was not to continue under the 2010 Act. Therefore, section 20 did not have the effect of continuing the prohibition.

What Leases are affected by the case?

The decision will only affect commercial Leases which:

  • commenced before 30 June 2009 (including subsequent extensions/renewal of such Leases); and
  • contain a clause that says the Tenant must pay Land Tax.

The decision does not affect residential tenancies, or Leases governed by the Retail Shop Leases Act – recovery of Land Tax is under such Leases is unlawful in any circumstances.

What does the decision mean for landlords and tenants?

As the decision has been appealed, there is a possibility that is may be reversed. If the appeal is not successful, there also remains the possibility that the decision may be overturned by Parliament.

Landlords under affected leases who are considering now charging Land Tax to their tenants are advised to seek legal advice about their rights. In the case of recovering back charges, statutory limitation periods may apply. Depending on the specific circumstances, it may be preferable for such landlord to await the outcome of the appeal before seeking to charge tenants.

Similarly, tenants who find themselves being asked to commence payment of Land Tax should also seek legal advice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.