Land Tax Obligations

A recent case heard in the ACT Civil and Administrative Tribunal (‘the Tribunal’) highlights the obligations of property managers under the Land Tax Act 2004 (ACT).

In Wade & Tan v Commissioner for ACT Revenue (Administrative Review), the owners of residential property were living in Singapore and had engaged an agent to manage their property. During this period, the owners became liable for land tax.

What was the issue?

Neither the owners nor their agent notified the Commissioner for ACT Revenue that land tax was not paid. As a result, the owners became liable to penalty tax of 50%, with interest imposed, amounting to approximately $3,000.

The owners applied to the Tribunal for a review of the Commissioner’s assessment of land tax on the grounds that they were unaware of the existence of land tax and had relied on their property manager to advise them of their obligations.

What does the Land Tax Act require?

The Land Tax Act 2004 (ACT) (‘the Act’) imposes land tax on leased residential properties. The Act requires a written notice to be given to the Commissioner by the ‘relevant person’ when a property is leased.

What did the owners argue?

The owners argued that the ‘relevant person’ was the property manager, not the owners. The Act says that an agent authorised to act on an owner’s behalf is obliged to notify the Commissioner if the property is leased. The legislation also imposes a penalty on agents who fail to ensure the obligations of the tax payer are discharged.

What did the Tribunal find?

The Tribunal found that the Act operates to make agents relevant persons in addition to the owner. This meant that either the owner or the agent had an obligation to notify the Commissioner within 30 days, and a failure of at least one party would trigger the penalties under the Act.

The Tribunal found that penalties may apply to both the owner and the agent.

Why should you care?

The case reaffirms agents’ obligations under the Act. While the agent avoided being penalised in this case, the Revenue Office may seek to penalise agents in the future.

What do I do if I am concerned about a failure to pay land tax?

If you have failed to notify the Commissioner that an ACT property you manage is leased, right now is a good time to come clean about it. The Revenue Office is currently offering an amnesty period to tax payers. Until the end of July 2015, owners of leased residential property are able to disclose that they are not paying land tax and will avoid the penalty fee. However, they will still be liable to pay the unpaid tax and interest. Owners who disclose through a property manager or real estate agency will also have the penalty scrapped. Those renting property privately will have the penalty fee ‘substantially reduced’.

What should you do?

If you are concerned about a client’s failure to notify the Commissioner for land tax, the specialist property team at Meyer Vandenberg can assist you.

For more information contact:

Christine Murray — Partner — Property, Commercial and Finance
(02) 6279 4402