Gyms, Yoga & Pilates “Retail” Tenancies?
Are Gyms, Yoga & Pilates “Retail” Tenancies? NSW v QLD (and What That Means for Outgoings)
Key takeaways (1-minute read):
NSW: Since 1 Jan 2023, gyms/fitness studios (including yoga, barre, pilates and dance) are expressly listed as retail shops under the Retail Leases Regulation 2022 (NSW). NSW retail leasing rules apply.
QLD: Not automatically retail. In Queensland, fitness uses are not on the prescribed “retail” list. A gym/yoga/pilates lease in QLD is only a retail shop lease if it sits inside a “retail shopping centre” (location test) and no exclusion applies (e.g., large floor plate over 1,000 m², etc.).
Stand-alone QLD sites (like many Toowoomba sheds/warehouses converted to gyms) are usually commercial / non-retail, so landlords can pass through the full suite of outgoings if the lease says so (including land tax and management fees, which are typically restricted under the retail regime).
NSW: Fitness Uses Are Retail (from 1 Jan 2023)
NSW amended Schedule 1 of the Retail Leases Regulation 2022 to name “Gymnasiums and fitness centres, including yoga, barre, pilates and dance studios.”
Practical effects in NSW:
Landlord disclosure, rent review limits (no certain kinds of ratchets), and outgoings rules under the Retail Leases Act 1994 (NSW) apply.
Some outgoings can’t be recovered in the same way as a non-retail lease, and timing/format of disclosure and annual outgoings statements matters.
If your existing NSW fitness lease predates 2023, review it on renewal/variation—today it will almost always be treated as retail.
Queensland: Usually Commercial / Non-Retail (Unless in a Retail Centre)
Queensland’s Retail Shop Leases Act 1994 captures:
Premises in a retail shopping centre (location test), or
Premises used for a “retail business” prescribed by regulation (use test).
Gyms/yoga/pilates are not currently on QLD’s prescribed “retail business” list. The QLD Small Business Commissioner’s guidance also confirms they’re not generally retail. However, a fitness tenancy inside a retail shopping centre can still be caught by the location test, subject to statutory carve-outs/exclusions (e.g., floor area > 1,000 m², and other centre/percentage-use nuances).
Practical rule of thumb in QLD:
Stand-alone gym/fitness sites (warehouse conversions, street-front premises) → usually non-retail.
In-centre tenancies (within a bona fide shopping centre) → often retail, unless an exclusion applies.
Why the Classification Matters
Issue NSW (Retail) QLD (Non-Retail, stand-alone) Outgoings recovery Constrained by the Act and disclosure rules Lease-driven: if the lease permits, you can usually recover rates, water/sewer, building insurance, base-building services, land tax (often single-holding basis), and reasonable management fees Disclosure mechanics Mandatory Lessor’s Disclosure Statement; annual estimates and reconciliations Governed by the contract (many commercial leases still use annual estimate/reconciliation as best practice) Rent review Certain restrictions (e.g., ratchet nuances) Contractual freedom (market, CPI, fixed, ratchet—subject to general law) Assignment/subletting Act overlays reasonableness and some processes Primarily contractual
Case Study: Toowoomba (Stand-Alone Gym)
For a Toowoomba City stand-alone gym on a commercial net lease:
The Retail Shop Leases Act (Qld) does not apply.
The landlord may recover all outgoings defined in the lease, commonly including:
Council rates & charges
Water & sewerage (usage + fixed)
Building insurance (reinstatement)
Land tax (typically on single-holding basis)
Management fees (if the lease allows—caps vary)
Fire protection, HVAC servicing, common power/cleaning/security, pest control, etc.
Tip: If you’re buying the property, ask for the last 2–3 years’ outgoings budgets and year-end reconciliations actually paid by the tenant. That confirms the pass-through mechanics and helps your lender/valuer.
“When can I start billing the tenant for outgoings?”
If the QLD lease is non-retail and already allows outgoings recovery, you don’t have to wait for the next lease anniversary. The usual commercial approach:
Issue a landlord’s notice confirming the budgeted outgoings for the current period and the method of apportionment (e.g., the whole site or NLA %).
Commence monthly (or quarterly) on-account charges from a practical start date (e.g., the first day of the next month), with a year-end reconciliation against actuals.
Keep the supporting vouchers (rates, water, insurance, service contracts) on file.
Relationship-first: give the tenant clear advance notice, invite questions, and, if this is a change in practice, offer a short ramp-up (e.g., start from next month rather than back-dating) unless you intend to pursue arrears (see below).
Can a Landlord Back-Claim Unrecovered Outgoings?
Short answer: often yes, but check your lease.
If the lease imposes a clear obligation on the tenant to pay its share of operating expenses, and there’s no express time-bar cutting off late reconciliations, landlords commonly back-claim for prior financial years.
Work to a 6-year look-back as a conservative limitation period per year-end reconciliation due dates (different rules can apply if the lease is a deed and/or amounts are characterised as rent—get tailored advice).
Delay ≠ automatic waiver. Non-invoicing alone usually isn’t abandonment, but waiver/estoppel arguments can arise from long periods of silence. Best practice is to reserve rights in writing and table a complete reconciliation pack.
Commercial pathway that lands well: provide the arrears schedule by FY with copies of invoices, invite discussion on any contested buckets (often land tax and management fees), and consider interest concessions for prompt settlement (particularly with strong covenant tenants).
Landlord Toolkit (QLD Non-Retail Fitness Leases)
Classification check: Stand-alone vs in-centre; floor area; any statutory exclusions.
Lease audit:
Outgoings definition & apportionment method
Are land tax and management fees expressly included?
Budget/reconciliation mechanics (timing, interest on late payment).
Onboarding letter (upon purchase or policy reset):
Budgeted outgoings, apportionment basis, start date for monthly charges, and reconciliation timing.
Evidence pack: rates, water, insurance, maintenance contracts, and utility bills.
(Optional) Side deed/clarification: lock in the apportionment method (e.g., NLA %) and list recoverable cost buckets to avoid future debate.
Back-claim strategy (if relevant): reservation of rights now; staged plan for catch-up.
FAQs
Q: Our QLD gym is inside a shopping centre—are we “retail” even if the use isn’t prescribed?
A: Possibly, yes—location inside a retail shopping centre can trigger the retail regime, unless a statutory exclusion applies (e.g., very large floor area). Get specific advice with the centre plan and GFA numbers.
Q: Can we pass through land tax in QLD?
A: Non-retail: generally yes, if the lease allows (commonly on a single-holding basis). Retail: constrained—many retail tenants won’t pay land tax under the Act.
Q: Do we need to wait until the next lease anniversary to start charging outgoings?
A: No. For non-retail, you can start from a stated date (e.g., next month) once you’ve issued a budget/notice in the form required by the lease.
Bottom Line
NSW treats gyms/yoga/pilates as retail (since 2023).
QLD stand-alone fitness sites are typically commercial / non-retail, so full outgoings recovery is usually available if the lease permits.
Get the classification right up-front; it drives your yield, risk allocation, and disclosure obligations.
Need a quick classification check or a one-page outgoings plan for an acquisition? Get in touch and we’ll map the retail/non-retail status, confirm recoverables, and provide the notices/side deed wording so your legal position and underwriting line up.
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For more information, please contact Gavin McInnes on 07 3367 8681 or gmcinnes@grmlaw.com.au.
The information contained in this article is general in nature and cannot be regarded as anything more than general comment. Readers of this article should not act on the basis of this comment without consulting one of GRM LAW 's legal practitioners who will consider their particular circumstances.
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