• High Court decision highlights the importance of a diligent review of land tax assessments

Many clients have received or are soon to receive land tax assessments and a recent High Court judgment acts as a good reminder of the importance of checking them.

Any erroneous assessments or valuations must be notified to the revenue office as soon as possible and certainly within the period prescribed for in the relevant State or Territory legislation. Failure to do so, as happened in this case, may result in an inability to recover any excess payments or even any penalty or interest imposed.

In Commissioner of State Revenue v ACN 005 057 349 Pty Ltd [2017] HCA 6, the High Court overturned the Court of Appeal of the Supreme Court of Victoria decision in which it was held that the Victorian Commissioner of State Revenue refund duplicate land tax paid by the taxpayer.

The High Court decision was made on the basis that the Commissioner did not have the authority to exercise discretion to issue amended assessments and repay excess land tax amounts outside of the time limits allowed for under section 19 of the Land Tax Act 1958 (Vic) (‘LTA’)[1] and the Court of Appeal did not have authority to rule with respect to the expenditure of public funds. Further, the taxpayer was ordered to repay land tax incorrectly refunded by the Commissioner.

The background facts to the case state that the Commissioner notified the taxpayer in early 2012 that the land tax assessments issued for the 2008 to 2011 land tax years in respect of one property (Property A) actually included a valuation of two adjoining properties (Property A and B) owned by the taxpayer, which resulted in the taxpayer paying land tax in respect of Property A twice. Having identified this error, the Commissioner proceeded with refunding the duplicate land tax that had been paid in respect of the 2008 – 2011 land tax years.

The taxpayer subsequently determined that the same duplication error had been made in the assessments issued by the Commissioner in respect of the 1990 to 2002 land tax years. However, the Commissioner refused to issue amended assessments and refunds in respect of the duplicate land tax paid by the taxpayer in these years.

The taxpayer took the matter to the Supreme Court of Victoria, which dismissed the proceedings. However, the taxpayer then appealed the matter to the Court of Appeal of the Supreme Court, which resulted in the Court of Appeal issuing an order requiring the Commissioner to issue amended assessments and repay the excess amounts of land tax the taxpayer had paid in respect of the 1990 to 2002 land tax years.

The Commissioner appealed the decision of the Court of Appeal, taking the matter to the High Court. The High Court ruled that the Court of Appeal erred in its reading and understanding of the applicable section of the LTA, as it did not appreciate that the scope of the Commissioner’s authority to make a refund was provided by, and at the same time limited by, Section 19. Specifically, section 19 provides that the Commissioner has a discretionary power with regard to refunding excess land tax amounts, but must only do so in response to an objection lodged within the time limit expressed in section 90AA, which provides a three-year time limit from the date that the payment of the land tax was made.

As the taxpayer did not lodge an objection within the time limit allowed for in the LTA, the High Court held that the Commissioner did not have authority to repay the excess land tax amounts. Further, having allowed the Commissioner’s appeal, the High Court voided the order issued by the Court of Appeal (being that the Commissioner issue amended assessments and repay the excess land tax to the taxpayer, which the Commissioner had actioned) and ordered the taxpayer to repay the amounts refunded by the Commissioner (as well as interest on these amounts and the Commissioner’s legal costs).

The key learnings from this High Court judgment are to diligently review your land tax assessment on receipt and notify the relevant revenue office within the prescribed period.

 

[1] Note that this Act has been replaced by the Land Tax Act 2005 which came into operation on 1 January 2006.

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