Covid-19 Land Tax Relief - How Qld and NSW Programs Differ

September 18, 2020 Edward Dever

Covid-19 has shown that Australia is a collection of States and Territories rather than one nation.

Australia has become a quagmire of different rules for travelling between States. We have seen different rules apply to similar events such as funerals depending on your State.

Land tax relief is another example of State differences.

In Qld, land tax relief is offered to landowners where the ability of the #tenant to pay rent is affected by Covid-19 (and their rent is reduced) and also where the landowner's ability to secure tenants has been affected by Covid-19.

Qld relief is self-assessed. (Subsequent auditing is likely.)

Qld is also extending the relief to the 2020-21 land tax liability (applications close on 26 February 2021).

(Qld Land Tax Relief Measures)

In NSW, relief is offered to landowners whose tenants can prove Covid-19 financial distress and have been provided rent reduction.

No relief is currently provided to landowners where their ability to secure tenants has been affected by Covid-19.

NSW is approval based rather than self-assessed.

Relief is currently limited to the 2020 land tax liability.

(NSW Land Tax Relief Measures)

Qld clearly has the more generous relief program at this point.

Update - 23 September 2020

NSW has now extended its Land Tax relief program until 31 December 2020.
Rental support measures in NSW to be extended for six months

September 2020

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.

Will Diminishing Income Returns Affect Residential Property As An Asset Class?

July 15, 2020 Edward Dever

Even before Covid-19, lockdowns and social distancing hit our shores, income returns from residential investment properties were looking suspect.

Flat wage growth has limited the ability to raise residential rents. Not applicable in all property markets but as a general principle.

Meanwhile, costs such as rates, water rates, strata levies and land tax continue their relentless march north.

Then add Covid-19 to the mix.

Investors need to continually focus on cost efficiencies to maintain returns.

The linked articles below highlight one opportunity for cost efficiencies.

Professor Fels calls it the Loyalty Tax. I often refer to it as the Lazy Investor Levy.

Insurance companies rely on customers being lazy and not shopping around for a better deal. Investors who rely on their agents to renew their insurance are unlikely to be getting the best deal.

There are significant cost savings, particularly on landlord protection insurance. Your own insurance company will often offer you a better deal online than in your renewal notice.

In terms of cost savings, it is the ultimate low hanging fruit.

NSW regulator tackles $3.6b in hidden insurance fees

Lifting the lid on home insurance price gouging

July 2020

What Strata Records Won't Show You

July 10, 2020 Edward Dever

Brief overview on what to look for when examining strata records - What to look for when reviewing strata records.

Reviewing fund balances is important. However, much can be learnt from reading Meeting minutes. You will get a sense of the issues within the complex. Many strata reports do not go to this level of detail. However, some strata records are accessible online

Beyond strata records, an experienced property inspection person is essential. Many headaches can be avoided with a detailed inspection. Often the report allows you to reframe an offer to take into account the issues the report raises.

Some issues reports will not reveal.

I have seen instances where the vendor company has been struck off by ASIC, complicating a transfer. In both cases, the investment did not proceed for other reasons so dealing with an asset effectively vested in ASIC did not have to be resolved.

One odd experience was an apartment purchase where the neighbour suffered mental health issues. He had forced a next door neighbour to sell after throwing their newspaper on their roof for months. It became apparent that no tenant would stay beyond an initial six month tenancy. The issue was ultimately solved by finding the right tenant and seven years of peaceful tenancies ensued.

The strangest aspect of that example was that the tenant who moved in and lived there quietly for seven years was from another apartment in the complex. The neighbour had past disagreements with him but, when he moved in next door to him, became quite friendly with him and they actually shared the daily newspaper for many years. (Probably a lesson for the person who lived in the house next door who ultimately sold up and left.)

There are, of course, procedures for resolving disputes between apartment owners. But there seemed little point in pursuing this route given the difficulties of proving that the other owner was responsible for tenants not renewing leases and he was unlikely to attend any mediation process or adhere to any agreement. Better to find a tenant who could deal with the situation.

Sometimes the practical solution is more effective than the legal solution.

July 2020

Landlord Protection Insurance - Market Starts to Reopen

June 16, 2020 Edward Dever

Two months ago, as Covid-19 related restrictions resulted in job losses and a potential crisis among tenants and landlords, insurance companies suspended issuing new landlord protection policies.

The suspension was a reaction to the likelihood of significant evictions and claims under tenant default provisions of policies. The Government freeze on evictions and other support measures helped minimise the risk of claims.

In welcome news for residential property landlords, some insurance companies are starting to recommence issuing these policies. This allows for some price shopping on renewals. However, new policies are not currently being offered with optional tenant default cover nor, in some cases, cover for theft or malicious damage by tenants.

Among the Suncorp Group, AAMI continues to offer new policies. Suncorp and Terri Scheer policies are still suspended as are policies of Australian Landlord Insurance. Coles Insurance (backed by IAG) has recommenced issuing policies as have companies such as EBM RentCover and Allianz.

Examples:

AAMI Suncorp Terri Scheer Australian Landlord Insurance Coles Insurance

EBM Rent Cover Allianz SGUA

June 2020

Covid-19 and Landlords Practising the Art of Cautious Optimism

June 13, 2020 Edward Dever

Many landlords have been practising the art of cautious optimism for the past few months - crossing their fingers and hoping for the best.

Since the COVID-19 restrictions commenced, residential property landlords have been through three end-of-month payment cycles. Sufficient time to judge the impact of COVID-19.

The impact on landlords would obviously vary depending on the exposure of their tenant mix to industries most affected by shutdowns. Landlords with a tenant mix skewed towards, e.g., healthcare workers and pensioners, would be faring better than those skewed towards hospitality workers.

The current staged reductions of restrictions is no guarantee future problems will not emerge with tenancies. A resurgence in COVID-19 cases and the ultimate withdrawal of support measures such as JobKeeper payments are factors which could still impact residential tenancies. Tenants who have so far resisted requesting assistance may ultimately make requests if their employment prospects do not improve.

It remains unclear whether the Qld land tax rebate will be extended beyond 30 June. For those eligible for this rebate, it is conceivable that circumstances allowing them to access the rebate could arise only after 30 June.

Coronavirus, a recession and renters not paying up — here's why some landlords are struggling right now

June 2020

Qld's RTA - Reporting On COVID-19 Dispute Resolution Requests Is Wrong

June 7, 2020 Edward Dever

Qld's Residential Tenancies Authority has taken issue with claims in the media that there are 30,000 Covid-19 related requests for dispute resolution.

Either in search of clicks or lazy journalism, the article got the figures completely wrong.

While the RTA Covid-19 Hotline has handled 28,042 phone calls since late March, there have only been 1,281 conciliated disputes, with 80% resolved.

The RTA’s conciliation data does not indicate that tenants and landlords are “going to war” as the article states. Rather, where Covid-19 related issues have arisen, the parties are negotiating in a reasonable manner.

The total number of phone calls comprises calls by all parties, not just tenants. As one real estate agent has indicated, they have rung the Hotline multiple times to clarify various issues.

As the RTA states: “The RTA thanks the Queensland renting community for doing their absolute best to work cooperatively and constructively together during these challenging times."

RTA responds: COVID-19 dispute resolution data article

June 2020

Qld Land Tax Covid-19 Relief - How Does It Work?

June 1, 2020 Edward Dever

Qld landholders who pay land tax may be entitled to relief if a tenant's ability to pay normal rent is affected by Covid-19 or you cannot rent the property for the same reason.

If tenanted, you need to provide rent relief to the tenant for at least the rebate amount. For vacant properties, you may apply the relief towards financial obligations. In each case, you must comply with these leasing principles. https://bit.ly/3ck3w1t

You need to access your online OSR account to apply for the rebate. Fortunately, the OSR's online system has resolved the bugs that plagued this system in late 2019.

The relief relates to the property nominated. For multi-dwelling buildings (i.e non-strata-titled), the relief applies to all units, not just the one affected.

The rebate is restricted to 25% of the 2019 land tax liability for that property. It is not a cash bonanza but can cover a rent reduction for a number of weeks.

As you are self-certifying that you meet the requirements, expect the OSR to subsequently audit claims to ensure compliance.

The deadline for applications is 30 June 2020. Without an extension, landholders only impacted by Covid-19 issues after that date may be adversely affected.

To obtain the rebate, you need to add your bank account details to your online OSR account. By doing so, you agree that the OSR may direct debit any future liabilities and, once added, you can't directly delete your bank account details. You need to adjust the end date for those details so they lapse before the next land tax notice is issued. You can them avail yourself of all payment options.

https://bit.ly/3gF99dO

June 2020

Residential Property - Are The COVID-19 Solutions Worse Than The Disease?

April 15, 2020 Edward Dever

A patchwork of different proposals is emerging in dealing with the potential residential tenancy fallout from COVID19.

There are common themes. In a number of States, land tax relief will be given in proportion to rent concessions by landlords. This ignores any investors below the land tax thresholds.

Different approaches are taken to rent arrears. In NSW, a rent deferral model has been adopted. Qld is proposing a rent waiver model.

Qld's approach also appears to allow tenants to request rental relief without providing any financial basis for that request. This increases the risk of strategic defaulters.

Landlords' inability to request financial information would require them to make decisions in a vacuum, unable to determine if a tenant's request is genuine or not.

Landlords who know their tenants will be able to determine if a request is genuine and some tenants will be forthcoming with their financial details.

However, many landllords will be flying blind. They are unlikely to agree to any relief request with the matter being sent to compulsory conciliation. This process should help to determine if the request is genuine or not.

Qld Parliament will consider these proposals on 22 April.

Coronavirus: Queensland introduces new measures to protect tenants, support landlords https://www.domain.com.au/news/queensland-introduces-a-raft-of-new-measures-to-protect-tenants-support-landlords-during-covid-19-crisis-948013/

REIQ leads revolt against Queensland Government's COVID-19 tenancy protections https://www.propertyobserver.com.au/forward-planning/investment-strategy/property-news-and-insights/112574-reiq-attack-queensland-government-s-covid-19-tenancy-protections.html

Open Letter to Landlords from The Real Estate Institute of Queensland https://www.reiq.com/wp-content/uploads/2020/04/REIQ-Open-Letter-to-Landlords.pdf?utm_campaign=MessagefromAM-14April2020-ProtectQueensland&utm_medium=email&utm_source=autopilot

Special COVID-19 Protections for residential tenants and owners http://statements.qld.gov.au/Statement/2020/4/9/special-covid19-protections-for-residential-tenants-and-owners

RTA - New forms for temporary COVID-19 tenancy arrangements https://www.rta.qld.gov.au/Newsroom/New-forms-for-COVID19.html

Land tax - Coronavirus land tax relief https://www.qld.gov.au/environment/land/tax/covid-19

Relief package for landlords and tenants – leasing principles https://www.treasury.qld.gov.au/budget-and-financial-management/revenue-and-taxation/leasing-principles/

Qld - The Residential Rental Hub https://www.covid19.qld.gov.au/the-hub

Postscript:

Qld Government to now consider stakeholder views in formulating COVID19 residential property measures. http://statements.qld.gov.au/Statement/2020/4/16/government-continues-to-listen-on-temporary-covid19-tenancy-measures

April 2020

Residential Property - NSW Proposes Support To Eliminate Evictions and Rent Strikes

April 13, 2020 Edward Dever

The NSW Government has proposed the following initiatives during COVID19:

Amount - $220 million for residential tenancy relief.

Eligibility - Applies to tenants who have lost at least 25% of their income.

Rent deferral - Any unpaid rent accrues as arrears and needs to be eventually paid by the tenant.

Moratorium - Interim 60-day moratorium for new applications to NSW Civil and Administrative Tribunal for forced evictions over COVID-19-related rent arrears.

Land Tax - Waiving land tax or providing up to a 25% rebate if accommodating tenants under financial stress.

This article sketches some broad strokes. It will be interesting to see the detail on exactly who qualifies and the limits of any relief.

NSW Government to announce $440 million coronavirus rental assistance with moratorium on forced evictions

https://www.abc.net.au/news/2020-04-13/nsw-coronavirus-to-announce-440-million-dollar-rental-assistance/12143646

April 2020

Residential Property - Fear and Confusion

April 9, 2020 Edward Dever

Media reports indicate fear and confusion in residential property markets in the absence of clear government direction in some States.

Landlords rushing to throw out tenants. Tenants planning a rent strike. Landlords cutting rents to try to secure tenants ahead of an uncertain future.

The Qld Government recognised the delay in Federal government payments stepping in with the COVID19 Rental Grant, a one-off payment of up to 4 weeks rent ($2000 max) available to those affected by the COVID19 pandemic without access to other financial assistance. The Grant is paid direct to the lessor. https://bit.ly/3e4xwR0

A sensible move tha t should ensure many Qld tenants who have lost their jobs can continue paying their rent until Federal government assistance kicks in.

It is surprising that other States do not appear to have followed Qld's lead as it should minimise evictions and possible strike action while States put in place stop gap legislation.

Landlords rush to throw out tenants in eviction ban confusion https://bit.ly/3bTqm02

Real estate agents 'abused' as coronavirus rent-strike grows https://bit.ly/2RmZzRP

Sydney landlords slash asking rents to secure tenants amid coronavirus https://bit.ly/2yCjtSi

April 2020