Triple tax-whammy for small retailers

A handful of small retailers in Oxford Street have been hit with a Land Tax bill not only for the City-owned premises they rent but also for Council’s vacant premises in the same block.

The six occupied shops, between Crown and Riley Streets, make up only a third of the total floorspace being taxed and the retailers are outraged that they have become the ‘fall guys’ in a game of financial cat-and-mouse between Council and the Office of State Revenue (OSR).

Source of the problem is that government bodies like Council are exempt from state land tax. Strangely, the liability therefore falls on the tenants who say in this case they were never warned of this and that it was not taken into account when their leases were negotiated with Council. Their tax bills vary from around $15,000 to $30,000.

The tenants feel badly misused by Council for passing on the tax in the first place – the Sydney Harbour Foreshore Authority pays the tax for its retail tenants in The Rocks, as is the case for private landlords.

But they are outraged to find they are also being hit for tax on two upper floors, which they say have been left vacant for years through mismanagement.

Council announced some years ago a plan to redevelop the upper floors into a hotel, its foyer fronting Foley St at the rear of the premises, but nothing has been done.

Council is taking no responsibility for the problem, claiming it is a matter for the shopkeepers to fight out with the OSR. There is a history of dispute between Council and a number of its Oxford Street tenants, and wider disagreement between Council and the Darlinghurst Business Partnership over Council’s management of the street.

Nor are the tenants finding the OSR at all sympathetic. When one shopkeeper objected to the tax, his objection was ruled invalid because a “90-day period” had passed.

When he objected to this, the OSR wrote back accepting the objection but then simply denying it and reaffirming the original tax, which is being levied on the total value of the land, nearly $6 million.

“We have considered your matter carefully, but unfortunately we have to disallow your objection to the tax assessed,” wrote the OSR.

The tenants say land tax should not vary according to how many premises may be leased or vacant and do not believe this was the intention of the law.

They say a legal challenge would be prohibitively expensive and they would be unfairly matched against the might of the state government. They are, however, taking the matter to the Administrative Appeals Tribunal.

Meanwhile one retailer says it would be easier to simply shut up shop. “It’s as if Council prefers to have no tenants,” he said.

Vacant prime commercial space is an ongoing problem for the Council, with two floors of the old Woolworths building in Kings Cross, above the Library, also vacant since Council bought and refurbished the building.

by Michael Gormly

Postscript: Council is considering selling the property discussed above (110-122 Oxford St) to developers who would convert some of it into affordable housing, The Sydney Morning Herald reports on 24  November. A local real estate agent describes the idea as ‘crazy’. It does seem a bit odd to put residential housing inside a retail and entertainment precinct.

The tenants say there is a six-month ‘demolition clause’ in their leases, ie they could get 6-months notice to quit if a major renovation was planned.

Oxford Street could be the world’s first retail-free retail street!

MG