Why 'Landlord Incentives' are worthless to most Investors!

covid19 landlord incentives.jpg - Why 'Landlord Incentives' are worthless to most Investors!
Why Landlord Incentives are worthless to most Investors - Why 'Landlord Incentives' are worthless to most Investors!

LANDLORDS LEFT DISAPPOINTED: Most Australian residential landlords have been left holding worthless incentives as each state passes down COVID-19 relief packages to Tenants and Landlords nationally.

Over recent weeks the Federal Government has made many comments around upcoming announcements to give comfort to more than 8 Million tenants across Australia.  And, the millions of Mum & Dad investors anxiously awaiting further knowledge around what incentives would be passed onto Landlords if rents needed to be adjusted through this period.  An early 'Eviction Ban' announcement by the Prime Minister only adding to Landlord anxiety levels as they awaited any benefits handed to Tenants to be also passed onto the property owner in a comparable ratio.

And while a National Cabinet composed of the Prime Minister, State Premiers and Chief Ministers met six times, every highly anticipated decision only resulted in further delays.  Last week the responsibility was finally handed back to each state and Territory to confirm and pass down their independent incentives.

Fewer than half of the States & Territories have passed down their incentives as yet, but early indications are that these independent guidelines will feature two particular items:

1: Landlords forced to negotiate with Tenants

One clear expectation passed down by many states was an expectation for landlords to negotiate rents with Tenants struggling to pay their rent.  While designed to protect the tenant, this may serve as an underestimated benefit to Landlords that could look back in the months ahead and be grateful to be receiving reduced rental amounts rather than seeing their property sit vacant.  With substantial Government stimulus packages resulting in most job losses being offset by some government stimulus payment, it's fair to believe the Tenants who qualify for payments can pay some rent, even if the amount needs to be reduced.

As for an Eviction Ban, this becomes even more of a grey area that appears to be more of a 'slogan' to make headlines than a black and white ruling, or a policy that will be easily enforced.  Unless clearer and fairer incentives are offered to Landlords authorities, fear that there will be little reason for landlords to negotiate, particularly in the postcodes with strong rental demand.

2: Tax Relief for Landlords

At the surface, an offer to offset all rent reductions passed onto tenants has put a band-aid on a highly anticipated topic.  Still, few have pointed out how meaningless these incentives are to more than 80% of residential landlords around the country.  Under many of the current arrangements being established, Landlords would be entitled to claim a reduction in Land Tax to offset the losses incurred due to rent adjustments.  The primary issue with this incentive is that most Landlords don't pay Land Tax!

Land Tax is an annual tax applied at a State level, and as the name suggests, this tax is paid on the land value, not the property value.  Every State and Territory have subtle differences in how they calculate the amount deemed payable, with each offering varying Land Tax thresholds that land values would need to exceed before any Land Tax is payable.  For example, this threshold in NSW is a massive $734,000.  This means that Investors who own an investment property that has a land value (not the total property value, just the land) below $734,000 will not pay a cent in Land Tax.

These thresholds allow informed investors to build large portfolios across many states without the need to pay any Land Tax.  And, given that the vast majority of Australian property investors only own one investment property, most Landlords will never benefit from the current COVID-19 Tax Relief packages. 

How do you calculate your Land Tax threshold?

covid19 landlord incentives2 - Why 'Landlord Incentives' are worthless to most Investors!

Here is a handy link that will give you easy access to all relevant Australian Land Tax thresholds and essential information around a range of finer details every property investor should understand.

LANDTAX OVERVIEW - Why 'Landlord Incentives' are worthless to most Investors!

What are the latest Landlord announcements?

ABC NEWS supplied the following updates on April 15, 2020


• Forced negotiation: Yes*

• Tax relief for landlords: Yes*

Despite being the second-most populous state, Victoria has been one of the last to flag its plan for how to deal with renters and landlords through the coronavirus.

On Wednesday, it announced a temporary ban on evictions and rent increases for six months and offered land tax relief for landlords who offered rent reductions.  With most states only offering cash to landlords (Victoria is offering $420 million in land tax relief for them), the Education State is also offering $80 million in relief payments for renters.

Tenants Victoria chief executive Jennifer Beveridge welcomed the package.

"We need to be able to work together. We see the new engagement between renters and landlords in this situation as, hopefully, the start of something better, of compassion and partnership between the parties," she said.

New South Wales

• Forced negotiation: Yes

• Tax relief for landlords: Yes

The $440 million NSW package aims to keep everyone in place for the next six months.  There's a six-month moratorium on new forced evictions if the tenant is in rental arrears because they've lost 25 percent or more of their income due to coronavirus.

Unlike the suggestions for renters to proactively approach landlords if they're in trouble, the scheme insists that landlords or the managing agent must begin negotiations with a tenant who is struggling to make rental payments.

In a sign of the seriousness of the measures, there's a 60-day stop on new applications to force evictions over rent arrears.  At the end of that time, landlords can recover their property — if they're in financial hardship — and tenants won't get a 'black mark' against their name.


• Forced negotiation: Yes

• Tax relief for landlords: Yes*

The Sunshine State's new provisions haven't been made into law yet but will be backdated to March 29, like other jurisdictions. There's an eviction ban for six months, as well as no rent increases during that time.

Forced negotiation between parties is already part of Queensland law and essentially means there can be no arbitrary evictions. The package offered tax relief for landlords if they're paying land tax.

Alone among the states, Queensland has provided a $500-per-week rental relief payment to bridge the four-week gap until expanded Centrelink payments begin.


• Forced negotiation: No

• Tax relief for landlords: No

The Apple Isle went out hard in late March, passing the nation's first laws shielding renters from eviction if they lost their income due to coronavirus.

Tasmanian Parliament has also passed new legislation that would ban inspections, maintenance, and evictions for non-payment of rent during the crisis, except in emergencies. The laws also have provisions for either party to end a lease if they are experiencing severe hardship.


• Forced negotiation: No

• Tax relief for landlords: Yes*

Our national capital has measures that link financial aid to landlords that reduce rents for tenants.

If landlords agree to lower rents by at least 25 percent, they can get tax relief.  Additionally, households that have experienced a 25 percent drop in income can defer rates for 12 months.

Emergency legislation passed last week has cemented some of the changes, such as a ban on evictions for being unable to pay until at least June 30. The Attorney-General can make others without the need to recall Parliament.

Tenants' Union ACT spokesperson Deb Pippen said the initial response was promising but lacked detail.

"The potential is there, but we just don't know what's going to happen. Tenants are still being given rent increases. Just something that says 'No rental increases in this period of time' would be a start.  We don't want people trying to make money out of this situation," she said.

South Australia

• Forced negotiation: No

• Tax relief for landlords: No

If you can't pay the rent, you won't be evicted in South Australia.  Measures passed into law also prevent landlords from increasing rent, and let tenants use video services like Face-time or video or time-stamped photos to replace routine inspections.

Not-for-profit organisation SYC, which helps people on low incomes who rent, welcomed the changes.

"SYC is pleased that the SA Government is moving towards these sensible and timely changes," Chief Executive Paul Edginton said in a statement.  A sign of the crisis has been a 700 percent surge in visits to the organisation's website since the pandemic began.

"The huge spike in enquirers to our service clearly shows that some of our most vulnerable residential tenants are very concerned about their housing outlook, particularly those who have been so severely impacted by recent business closures and job losses," 

Chief Executive Paul Edginton

Western Australia

• Forced negotiation: Yes*

• Tax relief for landlords: Expected

West seems best for renters so far, with the state to introduce a six-month stop on evictions and rent increases, allowing the extending of fixed-term leases and letting tenants end their tenancy early.

Premier Mark McGowan said on Tuesday it was important landlords and tenants negotiated in good faith towards a "shared beneficial outcome."

The Premier has said he was prepared to amend the laws, which aren't yet passed if renters who haven't seen their income affected by coronavirus stop paying rent.

Northern Territory

•  Forced negotiation: Announced

• Tax relief for landlords: Only for commercial landlords

Darwin Community Legal Service's Ms. Spence has concerns about the slow pace of the response in the Territory.  The Government has said it is working on measures to create "fairer terms" for new leases and longer negotiating periods between tenants and landlords.

"But we don't know what this will look like, and we don't know if they are going to consider measures similar to those of other states … these comments give us no reassurance," she said.

"We have implored that they consider measures which reflect the Prime Minister's announcement of a moratorium on evictions and other tenant protections similar to Western Australia's."

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