Does the Retail Leases Act apply?
Start with the premises, use, tenant and term. The Retail Leases Act 1994 (NSW) covers prescribed retail businesses and can also cover premises in a retail shopping centre. Calling a document a “commercial lease” does not decide the question. Exclusions include shops with a lettable area of 1,000 square metres or more and certain listed-company tenants. Short-term and long-term arrangements have specific rules; check the Act and current regulations rather than relying on a label.
Section 26: tax paid is not necessarily tax recoverable
Where a retail lease requires a land-tax contribution, section 26 limits recovery by applying a hypothetical assessment: the relevant land is the landlord’s only land, it is not subject to a special trust, and the landlord is not a non-concessional company. The lease must also support the contribution and the disclosure and outgoings rules must be satisfied. Section 26 is a ceiling, not an independent entitlement to charge a tenant.
Aggregation can therefore increase the landlord’s actual bill without increasing the recoverable amount. A discretionary-trust owner may face a similar mismatch because it does not receive the general threshold. For a multi-tenanted property, also check the permitted apportionment and the tenant’s agreed share. Do not divide the assessment arbitrarily by the number of shops.
Compare the ownership options before exchange
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| Owner | Land-tax starting point | Additional questions |
|---|---|---|
| Individual | General threshold can apply to aggregated non-exempt land. | Personal exposure, other holdings, succession and the tax on disposal. |
| Company | A company may receive the threshold, subject to classification and related-company rules. | Companies do not receive the individual general CGT discount; model distributions as well as company tax. |
| Related or non-concessional company | Grouping/classification can affect access to the threshold. | A separate company does not necessarily create a separate threshold. |
| Fixed or unit trust | A qualifying fixed trust may receive threshold treatment under the statutory rules. | The deed and beneficiary entitlements matter; a “unit trust” name does not establish fixed-trust status. |
| Discretionary or other special trust | Generally no general tax-free threshold. | Compare annual holding costs, asset protection, succession, beneficiary provisions and tax on eventual sale. |
Illustrative $1.2 million taxable land value
Illustration only — last verified 29 September 2026. Assume one NSW commercial property, a full-year lease of the whole property covered by the Act, a taxable land value of $1.2 million after applicable averaging, no exemption or surcharge, and no other land. Assume a valid, disclosed lease obligation to pay the maximum recoverable land tax. This is land value, not purchase price or building value.
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| Calculation | Individual with threshold | Special-trust owner |
|---|---|---|
| Actual annual land tax | $100 + 1.6% × ($1,200,000 − $1,075,000) = $2,100 | 1.6% × $1,200,000 = $19,200 |
| Section 26 hypothetical ceiling | $2,100 | $2,100 |
| Actual tax less assumed recoverable amount | $0 | $17,100 |
The $17,100 is a difference under these assumptions, not a universal cost of using a trust. Other holdings, ownership interests, exemptions, land values and lease terms change the result. The current general threshold is $1,075,000 and premium threshold $6,571,000; special trusts have their own calculation without the general threshold. Obtain a property-specific calculation.
Disclosure, estimates and reconciliation
Negotiate outgoings alongside rent. Check the lessor’s disclosure statement against the lease, identify each charge and the method of apportionment, and keep the supporting estimates and accounts. The Act can restrict recovery of undisclosed outgoings and has reporting requirements. A broad “all taxes” clause does not override statutory restrictions.
Foreign-owner surcharge land tax is a separate regime concerning residential land. An apparently commercial investment can include residential land or interests requiring separate analysis. Trust beneficiary provisions can also matter. Do not assume that the ordinary threshold or this example resolves surcharge exposure.
Changing the owner later can be expensive
Moving property to a company, trust or SMSF is not merely an administrative amendment. Consider transfer duty, CGT, GST, finance and lender consent, title registration, leases and guarantees. Depending on the transaction, the lease may need an assignment, novation or other documentation. A federal tax rollover does not automatically provide NSW duty relief.
Before 31 December
NSW land tax generally looks at ownership at midnight on 31 December for the following tax year. A sale contract’s adjustment clause allocates costs between the parties; it does not itself alter Revenue NSW’s statutory assessment or turn annual liability into a daily assessment.
- Confirm the owner, trust terms and related entities.
- Reconcile all NSW holdings and any exemption or surcharge issues.
- Check the land values and which averaging rules apply.
- Model actual land tax and lease recovery separately.
- Review disclosure, outgoings estimates and the next lease review date.
- Obtain advice before committing to any ownership transfer.
NSW and Victoria are different
This NSW recovery model should not be copied into a Victorian retail lease. Section 50 of Victoria’s Retail Leases Act 2003 prevents passing the landlord’s land tax to the retail tenant. Check the law governing the actual premises.
Frequently asked questions
Can I recover my whole land-tax assessment from a retail tenant?
Not necessarily. The lease, disclosure and statutory limits all matter. Section 26 applies a hypothetical single-holding assessment without special-trust or non-concessional-company treatment.
Does every unit trust receive the threshold?
No. The deed and statutory fixed-trust requirements must be examined. The trust’s name does not determine its treatment.
Should I transfer the property out of a trust?
Compare the entire position first. Duty, CGT, finance, succession and lease consequences can outweigh annual land-tax savings.
Can I object to the land value through a tax objection?
A challenge to land value generally belongs with the Valuer General. Revenue NSW deals with tax treatment and assessment issues.
Official sources
- Retail Leases Act 1994 (NSW) — sections 3, 5, 11–12A and 22–30
- Revenue NSW — Land tax thresholds and rates
- Revenue NSW — How trusts are assessed for land tax
- NSW Small Business Commissioner — Land-tax recovery
- Revenue NSW — Company landowners
- Victorian Small Business Commission — Retail leasing FAQs