|Ruling number||LT 020|
|Date issued||8 November 1989|
|Issued by||B Buchanan|
for Chief Commissioner of Land Tax
|Effective from||31 December 1972|
|Effective to||15 August 2008|
|Status||Replaced by LT 082|
Section 10(1)(r) of the Land Tax Management Act 1956 (the principal Act) provides that a parcel of residential land not exceeding 2,100 square metres in area is exempt from land tax if used as the owner's principal place of residence and for no other purpose.
The factors determining whether land is eligible for exemption from land tax as an owner's principal place of residence are specified in Section 3(3) of the Principal Act. Section 3(3) provides:
"For the purposes of this Act, in respect of any year in respect of which taxation is leviable or payable, land or a flat is not used or occupied as the principal place of residence of a person unless:
that land or flat and no other land or flat has, since before the first day of July that last preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for no other purpose; or
in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as his principal place of residence."
This ruling provides guidance on the requirements of Section 3(3) which must be satisfied before an exemption under section 10(1)(r) will be granted.
There are three basic requirements specified in section 3(3)(a), namely:
the land must have been continuously used and occupied by the owner since 1 July preceding the commencement of the tax year;
It must be used for residential purposes and for no other purpose; and
the owner must not have used any other land as a principal place of residence since 1 July preceding the tax year.
As noted above, the owner must use and occupy the land in order to qualify for the exemption. The primary element of "occupation" is possession. However "possession" must extend beyond mere legal possession, to include actual control over the land. If the land has been leased to another person; the owner would not have sufficient control to satisfy the test of "occupation".
An owner need not be continuously resident on the land to meet the "use and occupy" test. Provided the land is maintained as the owner's principal residence whenever the owner wishes to use it, the exemption will apply. This would be so even though the land may not be physically occupied by the owner at any time during a particular year.
An owner may allow other persons to reside in the residence without losing the exemption provided that such residence is at the discretion or control of the owner, and the land is not used for non residential purposes.
If the owner leases the property to another person, and the lessee is given the exclusive right to occupy the property, then the land is not exempt. Note, however, that the exemption is not affected if no more than one room and one flat (or suite of rooms) are rented out for residential purposes (section 10(1 D)(b)).
The land must be used and occupied solely for residential purposes. However, use of land for a non-residential purpose which is consequent upon or ancillary to use as a principal place of residence will not affect the exemption, e.g. overnight parking of a truck used for business purposes, carrying out minor maintenance to the truck, or use of a room as an office to carry out work on an ad hoc basis outside normal working hours will not affect the exemption.
However, if a business is conducted from or on the land, the exemption will not apply. In such cases, a reduction of tax under section 3A, 3B or 3C of the Land Tax Act may apply. Under these provisions, tax is calculated on the total adjusted value of the land. The amount of tax payable is then reduced by the proportion of the buildings used as the owner's principal place of residence.
A person is entitled to claim an exemption for only one principal place of residence. However, a property may be the owner's principal place of residence for a particular tax year even if the owner temporarily resides elsewhere during part (or all) of the relevant year (see paragraph 6 above). Hence a person who takes up a temporary position elsewhere and occupies another residence during that period, may continue to claim an exemption for the original residence (subject to it not being leased - see paragraph 8), but may not also claim an exemption for the temporary residence. Another case where the exemption would continue to apply is where the owner travels from place to place but maintains the property for occupation as and when required.
The Chief Commissioner has a discretion to grant the exemption where one or more of the requirements in section 3(3)(a) are not met. In exercising the discretion, each case will be considered on its merits.
Examples where exercise of the discretion may be justified include circumstances in which:
the owner did not take up residence until after the preceding 30 June, particularly where the owner purchased the land after 30 June;
for part of the period after the preceding 30 June, the residence was rented out, but the arrangement was only temporary, e.g. the owner went on a holiday, or;
part of the residence was used for non-residential purposes after the preceding 30 June, but that use was temporary or was of a relatively minor nature.
In those cases where taxpayers are unsure of whether they comply with the basic requirements, they should write to the Chief Commissioner providing full details, and requesting that the Chief Commissioner exercise the discretion, by 31 January of the relevant tax year.