LAND TAX Where is the principal place of residence?

Sourced: Law Society of New South Wales

The most common area of dispute in land tax matters is a person’s entitlement to the principal place of residence exemption, and people should know what sort of supporting evidence they will be expected to produce to claim the exemption.

In convincing the Tax Office of a person’s actual residence, a great deal of emphasis is placed on formal documentation, such as rates and electricity notices, phone bills, driver and boating licences and place of electoral enrolment.

If the principal residence is being renovated, people may move temporarily to a cheaper residence. Some, articularly baby boomers, may own the temporary residence as an investment property. These people would like to continue to claim the exemption on the more expensive property being renovated, but not lived in, and pay land tax on the cheaper.

The appeal courts have found that this will not be possible. In a recent case the courts found that a couple living in their cheaper Coogee unit while their more expensive Point Piper residence was being renovated could not elect to transfer their principal place of residence exemption to the Point Piper property.

From time to time there are reports of people fortunate enough to be able to buy a neighbour’s property to add to their own. They will then want to claim that both the old and the additional property are subject to the principal place of residence exemption.

In one case a judge found that adjacent blocks of land comprise a “parcel of residential land” only where they are undivided either physically or “in use, occupation and title”.

In another the judge found that “undivided by physical separation” meant significantly or substantially undivided. The owner had demolished part of a fence separating two blocks of land to provide an opening.

The courts found that “an opening sufficient to allow a car to pass through on a long, otherwise divided boundary” was insufficient.

In another case a judge found that the exemption would not apply “to independent dwellings on a parcel of land constituted by adjoining lots”.