The NSW Administrative Decisions Tribunal has varied the “unencumbered value” of a property for land rich duty purposes, but confirmed a 90% penalty tax.
In October 2007, the taxpayers purchased the only share in a company. At the time of purchase, the company owned a commercial/residential development site (which had development approval for 6 commercial sites and 57 apartments). In April 2008, the taxpayers paid duty at the share transfer rate, but conceded before the Tribunal that it was an underpayment of duty.
The taxpayers accepted the land holding of the company comprised more than 60% of the unencumbered value of all its property, and therefore, land rich duty was payable. However, valuations of the property relied upon by each party to calculate the duty differed – the taxpayer said it was $2.4m, while the Commissioner said it was $3.5m. The taxpayers also contested the Commissioner’s penalty of 90% submitting that they took reasonable care to comply with the law.
The Tribunal preferred the range of values arrived at by the taxpayers, but did not agree the valuation should be fixed at the bottom of the range. It concluded the unencumbered value of the property was $2.5m for duty purposes. However, the Tribunal confirmed the 90% penalty and ordered the quantum to be adjusted to take account of the varied value of the property.
(Touma & Ors v Chief Comr of State Revenue [2012] NSWADT 2, NSW Administrative Decisions Tribunal, Frost JM, 16 January 2012.)
[LTN 10, 17/1]