The SA Supreme Court has set aside land tax assessments for the 2008-09 and 2009-10 financial years issued to a taxpayer (Kalomel) in relation to a property (a home). It also affirmed the principal place of residence (PPR) land tax exemption previously granted for those years, could not be subsequently revoked by the Commissioner.
Kalomel acted in its capacity as trustee of the M family trust and had 3 directors – Mr M, his wife and a son. In 1980, Kalomel acquired the home. In February 2008, the Commissioner wrote to Kalomel regarding proposed anti-avoidance provisions, which would allow the Commissioner to disregard a minor interest in a property when determining the “owner” who was liable to tax (s 13A of the Land Tax Act 1936 (SA), which came into effect on 30 June 2008). At that time, Kalomel and Mr M were the owners of the home with 99% and 1% interests, respectively. In May 2008, Mr M’s interest increased to 10%.
In January 2009, Mr M sought the PPR exemption for the home and, in February 2009, the Commissioner granted the exemption with effect from 30 June 2008. However, on 29 September 2009, the Commissioner informed Kalomel that he had decided to disregard Mr M’s 10% interest in the land because he was of the view that a purpose of the increase from 1% to 10% was to reduce the amount of land tax payable (per s 13A(5)). The Commissioner also informed Kalomel the PPR exemption would be removed because the owner of the land was not a natural person who had resided on the land. The Commissioner then issued (or purported to issue) land tax assessments to Kalomel for the years in question.
The issue essentially focused on what “opinion” the Commissioner had formed on the “taxing dates” ie 30 June 2008 for the 2008-09 year and 30 June 2009 for the 2009-10 year. The Court noted s 13A(5) is conditioned upon the Commissioner first having formed an opinion under s 13A(3). It found the Commissioned held no opinion as expressed in that subsection either prior to 1 July 2008 or 1 July 2009. However, the Court said it may be reasonably inferred that the Commissioner had formed such an opinion on 29 September 2009. In addition, the Court held the granted PPR exemption remained effective until it was removed on 29 September 2009.
(Kalomel Nominees Pty Ltd & Anor v Comr of State Taxation [2012] SASC 10, SA Supreme Court, Gray J, 3 February 2012.)
[LTN 30, 15/2]