We have had a number of enquires recently about how the “principal residence” exemption for land tax applies when you are away from home on 30 June (the date land tax is assessed in Western Australia), and you have rented out the home in your absence.
Some years ago, we assisted a couple in a similar position who took the case to the WA Supreme Court. They were ultimately successful, but their situation is a warning for everybody who vacates their home on 30 June.
The husband and wife were a retired couple who had lived in their Bicton home for 25 years.
Like many others in a similar position, during the winter months, they headed north to Broome living in a caravan on their own Vacation Village site. While they were away from early June to early September, they rented out the Bicton property on a fully furnished basis, mainly for security reasons. They always intended to return to their Bicton home after their holiday.
Shortly after their return, they were issued with a land tax assessment in respect of three items of taxable land, one of which was the Bicton property. This assessment followed OSR’s conclusion that the Broome Vacation Village was their principal residence at 30 June (a strange conclusion). They objected to the assessment and the Commissioner overruled the objection. They sought a review in State Appeals Tribunal and were successful. Undaunted, the Commissioner appealed to the WA Supreme Court contending that the State Appeals Tribunal Senior Member was wrong. The appeal was dismissed.
The Commissioner based his view on a number of contentions, one of which was that the owners of the home were precluded from using the property for the term of the lease by virtue of the fact that the property was subject to a lease which involved a grant of a legal right of exclusive possession to the tenant.
The Law
Land tax in Western Australia (and other Australian states and territories) is payable each financial year for all land except land that is exempt for the assessment year. The Act exempts private residential property if, at midnight on 30 June in the financial year before the assessment year, it is owned by a husband and wife, at least one of whom uses it as his or her primary residence.
A primary residence in relation to an individual means the individual’s sole or principal place of residence. A private residence is a building occupied and intended by the owner to be occupied, as a place of residence, except a building or part of a building that is ordinarily used for holiday accommodation.
The court noted that it was apparent that the Act is concerned with actual use at midnight on 30 June in the financial year before the relevant assessment year. The nature and extent of the use of the private residential property which is required to constitute use as an individual’s primary residence was the issue in this case.
Conclusion
As the WA Supreme Court noted in its decision, in determining the issue, the governing principle is that the answer is a question of fact and degree. That is, the decision was based on the particular facts and circumstances of the case.
It seems that Revenue WA (formerly the Office of State Revenue) are active in looking at the “use” of a principal residence on 30 June to determine whether land tax should apply. If you are away from your home on the date, beware of the implications of it not being considered your principal residence.
More information
If you have any queries or need assistance relating to land tax assessments, please contact your local Moore Australia advisor.
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