Land Tax- Exemption for principal place of residence where adjoining properties

11 Oct Land Tax- Exemption for principal place of residence where adjoining properties

The Office of State Revenue has released a new ruling (“LT82v2” on 13 March 2012) setting out

the Commissioner’s interpretation of Schedule 1A to the Land Tax Management Act.  Schedule 1A provides the principal place of residence exemption and says “land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is;

1. a parcel of residential land, or
2. a strata lot or, subject to this Schedule, land comprised of two or more strata lots.”

What is the position when a land owner purchases the adjoining property or when the land acquired is constituted by two separate lots?  The Commissioner’s view is that the exemption may apply to a parcel consisting of two or more lots if they are adjoining, owned by the same person or persons and the site of a single residence.

The question that gives rise to difficulty is whether two lots with two structures erected upon them can constitute “a site of a single residence”.  The ruling provides that when determining whether two lots constitute a single residence, the Commissioner will have regard to whether they appear as a single integrated residence.  The lots may be divided by a fence or wall but access must be readily available between the lots.  The ruling goes on to say that where separate buildings are erected on separate lots they will not be regarded as a single residence if each building is capable of separate occupation.

The question of whether two separate houses could be considered one residence for the purposes of the principal place of residence exemption was considered by the Land & Environment Court in 1999 in the Triguboff case.  In that case Justice Briscoe, in a dispute relating to the Valuer General’s assessment of adjoining houses as separate parcels, said it was relevant that:

1. there was no boundary wall between the two properties;
2. there was easy access between the two houses;
3. both lots were on the one title and that the properties were physically united by use and occupation.

Justice Briscoe said the question as to whether the property was one parcel or two parcels was a question of fact and in this case he determined the two properties constituted one parcel.

It will be interesting to see if the Commissioner, following his new ruling, seeks to impose land tax where the exemption was previously granted.

For further information please contact Ian Smith.