The recent Victorian Civil and Administrative Tribunal’s (Tribunal) decision in Petroulis v Commissioner of State Revenue [2022] VCAT 1054 dismissed the taxpayers’ request for review of the land tax assessments issued by the Commissioner.

Background

The taxpayers were issued with a land tax assessment in respect of their principal place of residence (PPR) for the 2021 land tax year.
Between March 2020 and March 2021, the taxpayers lived at another property (which they rented) to enable their daughter to enrol at a different and preferred secondary school.
The taxpayers were entitled to the PPR land tax exemption for each land tax year up until the 2021 land tax year.
While the taxpayers were living at the other property, they rented out their PPR (the Property) to third parties to generate income to assist with funding mortgage repayments on the Property.

Issue

Does the Commissioner have a discretion to apply the temporary absence from PPR exemption under section 56 of the Land Tax Act 2005 (Vic) (Act) despite the requirements for the exemption not being satisfied?

Tribunal decision

The taxpayers did not dispute that the Property was rented out for 9 months during the 2021 land tax year.

Likewise, the taxpayers did not dispute that they had not satisfied the requirement under section 56(5) of the Act which necessitates no income being derived by the owner should the owner intend to claim the temporary absence exemption under section 56 of the Act.

The taxpayers’ main contention instead was that there should be a discretion for the Commissioner to apply the temporary absence exemption on the basis that the taxpayers wished to return to the Property and would have done so had it not been for the COVID-19 restrictions on the eviction of tenants imposed on them as landlords under the Residential Tenancies Act 1997 (Vic) during the height of the pandemic.

The Tribunal ultimately agreed with the Commissioner that there is no discretion under the temporary absence from PPR exemption provisions to vary the operation of section 56(5) under the Act.

Consequently, the Tribunal found that the taxpayers were liable to land tax for the 2021 land tax year as the taxpayers had not satisfied the exemptive requirements under section 56(5) of the Act.

Key takeaways

The Tribunal’s decision clarifies that the Commissioner (or the Tribunal on review) does not have the power to vary the legislative requirements for the temporary absence from PPR exemption when it is not satisfied.

The decision is also a timely reminder that should you intend to be temporarily absent from your PPR, and choose to rent your PPR during the period of your absence (up to a maximum of 6 years), it will automatically invalidate your ability to claim the temporary absence from PPR exemption.

Further information on the application of the various land tax provisions can be found in our recent Sladen Legal Land Tax Series, including our article which looks into detail the principal place of residence land tax exemption and the temporary absence exemption.

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au

Jan Oh
Graduate Lawyer
T +61 3 9611 0158
E joh@sladen.com.au