A Canberra couple has been hit with a full year’s land tax after an ordinary residential sell-and-buy which happened to span the new financial year. Patricia and Tony Tart wanted to upgrade from their house in Fisher to a house in Waramanga.
They put their Fisher house on the market in April. In May they found the house they wanted in Waramanga before the Fisher house was sold, so they bought it using bridging finance pending the sale of the Fisher house.
They then sold the Fisher house, with settlement expected on June 30. Alas, through no fault of theirs, settlement was delayed until July 7. It was empty up to that time.
They then received a notice for a full year’s land tax of $570 on Fisher house because they were not resident in it.
Under land-tax legislation the owner is liable for a whole year’s land tax if they do not occupy the house as a resident on July 1. The law is drafted so that every Crown lease is liable for land tax unless the owners notify the Government that they are using the place as their residence.
The case has prompted the Real Estate Institute to call for a thorough review of land-tax legislation.
The Commissioner for ACT Revenue, Gordon Faichney, when told of the Tarts’ case, said, “”We will give them an exemption from land tax.”
His office had a policy of giving exemptions where people were changing residences over the critical July 1 date.
Mrs Tart said, “”We have lodged an objection, but we have already had to pay the first instalment because the notice said we would be hit with a 20 per cent late fee, even if we had lodged an objection.
“”Surely the land tax was set up to obtain revenue from landlords on rental properties and not to unfairly obtain revenue from someone who owns an empty house for a few days of the financial year.”
The general manager of the Real Estate Institute of the ACT, Bruno Yvanovich, said he had come across several cases like this.
“”The Government says it is too hard administratively to charge land tax pro-rata, but in fact they would make revenue because many lease out their houses from part way through the year.
“”In any event there should be no land tax if the house is not leased.”
Mr Yvanovich had come across one case where land tax had been levied when the settlement had been delayed because the Government had mislaid the building file.
He called for a thorough review of land-tax legislation to prevent unfair cases such as the Tarts’. Every year saw new anomalies caused by the reverse onus of proof, he said.
People should not have to go through the objection process or take a case to the Administrative Appeals Tribunal. He pointed out that the filing fee for and AAT case and the time and effort involved made it not worthwhile. These cases were clearly not ones of tax avoidance but ordinary transactions of principal residences that happened to span the new financial year.
Apparently, since last financial year, the rating, taxing, land titles and electricity and water authorities got together to provide a single automatic notification system which happened after a conveyance.
Mr Faichney surmised that this was how the Tarts got assessed. He said it was useful to publicise these sorts of cases. He suggested that people in a similar position should notify his office. And people who were likely to be in the position next financial year should notify his office immediately after the conveyance.