A couple of Indian descent – Sharon Kaur and Robby Singh (not their real names) have landed in a soup with their land tax obligations and now owe the State Revenue Office more than $305,207.50 in land tax and $21,088.60 in penalties.
The land tax obligations relate to one of the three properties the couple have. This property in the suburb of Deepdene in Victoria was issued land tax notices as below:
2014 – $45, 337.50
2015 – $52,143.75
2061 – $52,143.75
2017 – $78,975.00
2018 – $76,607.50
There were penalties issued as well. The penalties were:
2014 – $6373.00
2015 – $7357.80
2016 – $7357.80
The matter ended up before Victorian Civil and Administrative Tribunal and was heard in August with the verdict being delivered in September with the Member (like a judge in a court) deciding against Sharon and confirming the liabilities of $305,207.50 in land tax and $21,088.60 in penalties.
Sharon was seeking exemptions from the mighty bill of land tax on the basis of her claim that the property in Deepdene was her principal place of residence and thus not subject to land tax.
The State Revenue Commissioner – the authority to collect land tax – fought Sharon in VCAT and contended that she has failed to prove that she used the property as her principal place of residence during those relevant years.
Exemption from Land Tax
The law examines person’s use and occupation of land in the six month period preceding the applicable land tax year. If the person has sued the property as their principal place of residence during the six months period preceding the applicable land tax year (eg. 1 July to 31 December 2013 for the 2014 land tax year), the exemption can be claimed.
Also, if one were to undertake renovations of their residence, one could move away – to come back. That exemption is covered in Section 56 of the LT Act which allows the principal place of residence exemption to be maintained during a period of absence, provided:
the Commissioner is satisfied—
(a) that the absence is temporary in nature; and
(b) that the person intends to resume use or occupation of the land as his or her principal place of residence after the absence; and
(c) that, in respect of the period of absence, no other land is exempt land under this Division or under a law of another jurisdiction (whether in or outside Australia) as the principal place of residence of the owner
Importantly, under section 110 of the LT Act, on a review or appeal of a land tax determination, the taxpayer has the onus of proving his or her case.
The standard of proof is the balance of probabilities.
Thus in this case the onus was on Sharon to prove that the property was principal place of residence.
Background as recorded by VCAT
Sharon and Robby married in 2003.
Prior to the land tax years in dispute, she lived with her husband at a property located in Surrey Hills. At all relevant times, that property has been jointly owned by both of them. They also jointly owned a commercial investment property throughout the relevant land tax years.
Sharon a professionally employed contributing partner stopped working in 2010. The couple had had their first child Sharon suffered from postnatal depression and anxiety.
Sharon told the tribunal that, in late 2012, she and Robby ‘made the decision to separate’. This was because ‘[a]fter falling ill, living with Robby became increasingly difficult’ and she ‘needed to be on [her] own for the sake of [her] health and wellbeing’.
As part of the separation, she says they agreed that Robby ‘would finance the purchase of a property for Sharon and which Sharon would own 100%) to live in and use and enjoy as her home’.
Further, there was an ‘understanding that Sharon would eventually pass on the property to their son under her will’.
Clarifying their deal, Sharon told the Tribunal that the agreement was that Robby ‘would buy the house and renovate it and furnish it and maintain it for five years’.
Sharon told the Tribunal that the property ‘needed substantial renovations to make it into what [she] wanted for a dream home’.
The Tribunal also heard that she retained a supplementary credit card (with Robby as primary cardholder) which she was free to use for ‘anything [she] got for [her son]’.
Separation kept secret
As she and Robby were ‘from a traditional Indian background in which separation/divorce carry social stigma, [they] kept [their] separation quiet from many family members and friends, and from [their] community’.
Knowledge of the arrangement was limited to immediate family and closest friends, a non-Indian witness, who gave evidence to support the ‘separated’ couple.
The property was renovated over a substantial period and the Tribunal quizzed Sharon about the major renovations at the property against her claim of living there with her 3 years old son. Sharon claimed that the noise of the demolition ‘didn’t bother’ her. She explained that she ‘couldn’t see them’ and either ‘couldn’t hear’ the work or she might have ‘tune(d) out’.
Sharon claimed she lived there from 2013 to 2015. In 2015, when ‘major renovations work commenced on joining the existing part of the house with extension’, made it difficult for her to stay on and at the suggestion of Robby, she moved back in at the same property in Surry Hills.
She suggested to the Tribunal that was done at the insistence of Robby who did not want her to spend money to rent another place when she could come back to Surry Hills.
Subsequent to moving back with Robby although living and sleeping separately, their relationship ‘started to thaw’ and by early 2016 they reconciled.
Sharon claimed she moved into the Deepdene Property ‘immediately’ after the issue of the certificate of occupancy in late 2017.
Tribunal was curious as to why Robby would let Sharon keep 50% of the investment property, 50% of the Surry Hills Property and 100% of the Deepdene Property, particularly when it heard the value of the Deepdene property (after renovations) was $7 million plus.
State Revenue Commission’s lawyers challenged Sharon and Robby’s story and submitted that Sharon had not met the burden of proof to show that the Deepdene Property was her principal place of residence. They sought Tribunal’s attention to the following facts:
Sharon had written Surry Hills and not Deepdene property address on her incoming passenger card in 2017.
All her bills carried Surry Hills property address (which were being paid by Robby).
Sharon’s tax returns also had Surry Hills address.
Changing of her address on her Driver’s Licence in 2016 – was only symbolic as Sharon admitted due to renovations she was not living at the Deepdene property. It was done on ‘the day before the State Revenue Office commenced its investigation’.
The notice of acquisition of land stated the Relevant Property ‘was not purchased as Sharon’s principal place of residence’.
There was a caveat over the Deepdene Property in favour of both Robby and Sharon.
That the water and electricity usage at the property was significantly lower than average.
Sharon had ‘minimal furniture at the [Relevant Property] and no contents insurance’.
On separation agreement – undocumented and implausible
The lawyers for State Revenue Commission submitted that it is inherently implausible that anyone would agree to spend $7 million for his estranged wife, especially without coming to any arrangements in relation to the other two properties.
And the fact the agreement was not documented adds to the implausibility, particularly given the amounts involved and the suggestion that a critical part of the agreement was to provide a valuable property for their son to inherit.
The Tribunal Member concluded, “I am not satisfied on the balance of probabilities that she did so for a sufficient period or with sufficient permanence to establish that the Relevant Property became her principal place of residence for the 2014 and 2015 land tax years”.
For the years 2016 – 2018, the Tribunal took cognizance of declarations they both made on their incoming passenger cards with Surry Hills as their address which was after their claimed date of moving back to Deepdene property.
The Tribunal said, “For the foregoing reasons, I confirm each of the land tax assessments issued … for the 2014 to 2018 land tax years.
Sharon did not seek to have the penalties reduced or waived. Thus their bills of 305,207.50 in land tax and $21,088.60 in penalties were confirmed.
K. Dev with DM