11 September 2018
In NSW, a lessee of NSW land owned by the Crown is deemed to be the owner of that parcel of land and is therefore liable to land tax. In contrast, a party with rights to access Crown land in NSW under a licence should not be liable to pay land tax.
This distinction was recently considered in Australia Avenue Developments Pty Ltd as trustee for the SOP Site 3 Partner Trust v Chief Commissioner of State Revenue  NSWCATAD 144 (Australia Avenue Developments).
A project delivery agreement (PDA) between the property developer (Developer) and Sydney Olympic Park Authority (SOPA), being the statutory body representing the Crown, was found to be a lease rather than a licence. Consequently, the Developer was liable to NSW land tax on the Crown land which it leased.
In determining whether there was a lease, the Tribunal considered the following terms of the PDA:
- the parties agreed to do everything necessary to promptly finalise and execute the construction lease and permit it to be registered on the title to the land;
- the Developer had exclusive possession of the land on the terms and conditions of the lease for the duration of the lease;
- the Developer had to pay rent and was contractually obliged to meet all outgoings, charges, levies and developer contributions in relation to the land;
- the Developer granted a licence to SOPA, its employees, agents and contractors to access the land for the purpose of doing certain things which were agreed by the parties;
- the Developer could occupy and have use and enjoyment of the land without interruption or disturbance from SOPA except in the limited circumstances permitted by the lease; and
- SOPA could only terminate the lease by notice or re-entry if the Developer did not comply with an essential term of the lease, or did not comply with an obligation and non-compliance was not remedied or irremediable.
The Tribunal determined that the PDA was a lease and pointed to the following supporting evidence:
- the document signed by the parties was entitled "Construction Lease" and was between two sophisticated commercial parties advised by leading law firms;
- the document provided for exclusive possession and quiet enjoyment;
- the execution of the lease was in the form approved for purposes of the Real Property Act 1900; and
- the lease was registered on the title of the land.
The case is a timely reminder that property developers need to consider how to structure their development projects to ensure they are not inadvertently entering into a lease with the Crown and therefore subjecting themselves to land tax. Furthermore, it is essential that project agreements and documents appropriately reflect the relationship between the property developer, the Crown and any other relevant parties.