CPN 031: Clause 6 - Concession for unoccupied land intended to be owner’s principal place of residence

Purpose/Background

Schedule 1A, Clause 6 of the Land Tax Management Act 1956 (“Act”) provides a concession for unoccupied land to be treated as a principal place of residence (“PPR”) if the owner is not entitled to the PPR exemption for other land and intends to use and occupy the land as the principal place of residence. This concession can now apply for up to six years following the year in which the person became the owner of the land.

An owner of unoccupied land may claim the land as their PPR if the owner intends to use and occupy the land solely as their principal place of residence once any building works are completed, and they meet the timing requirements. The following criteria need to be met:

1. the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate their intended use and occupation of the land as a principal place of residence, and
2. if those building or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since the commencement, and
3. the intended use and occupation of the land is not unlawful.

If the owner fails to use and occupy the land as a principal place of residence before the end of the required period, the exemption is revoked and the land is reassessed for land tax for the whole period.

The Revenue Legislation Amendment Act 2023 which received assent on 31 May 2023 amended the Act to permit the Chief Commissioner to extend the availability of the concession from four tax years to up to six .

Under the new clause 7A the Chief Commissioner may offer the extension where satisfied:

1. there has been a delay in the completion of the building or other works necessary to facilitate the owner’s intended use and occupation of the land as a principal place of residence,
2. the delay is due to exceptional circumstances beyond the control of the owner, and
3. the delay could not reasonably have been avoided by the owner.

The amendment commenced from 1 July 2023.  However, the Chief Commissioner has the power to apply the extension to an exemption that ended on or after 31 December 2019[i].

The purpose of this Practice Note is to provide guidance on what the Chief Commissioner may classify as exceptional circumstances beyond the owner’s control and what could not reasonably be avoided by the owner.

Commissioner’s Practice Note

For the concession to be granted the owner must satisfy the Chief Commissioner that the reason for the delay was exceptional and beyond their control.

Circumstances the Chief Commissioner may consider exceptional and beyond the owner’s control include:

• unforeseen delays in obtaining approval from Council
• unforeseen works necessary to stabilise the land for building
• shortage of skilled tradespersons
• shortage of basic building materials
• extraordinary events such as fires, floods, earthquakes, and pandemics
• defective building works requiring remediation that delays occupation of the dwelling
• builders becoming insolvent or ceasing business.

The Chief Commissioner will generally not classify the following as exceptional circumstances where the delays were due to:

• conflict with the builder
• variations to designs or scope of the project by the owner
• disputes with adjacent owners or residents
• delays in obtaining building materials which are unusual, bespoke or normally require significant production or delivery lead-times
• delays by the owner in lodging plans with council or changing the plans
• delays in obtaining finance.

The above examples may not by themselves be classified as exceptional circumstances, but a combination of circumstances may be determined as exceptional and beyond the control of the owner. For example: financial hardship itself may not be classified as exceptional circumstance, but financial hardship following a lock down such as occurred during COVID could be classified as exceptional.

In Nulty v Blue Star Group Pty Ltd [2011] FWAFB 975, the Full Bench of Fair Work Australia (renamed Fair Work Commission) said that in order to be exceptional, circumstances must be out of the ordinary course, or unusual, or special, or uncommon but need not be unique, or unprecedented, or very rare. Circumstances will not be exceptional if they are regularly, or routinely, or normally encountered. Exceptional circumstances can include a single exceptional matter, a combination of exceptional factors or a combination of ordinary factors which, although individually of no particular significance, when taken together are seen as exceptional.

Evidence

In order to apply for an extension, an applicant must lodge a detailed written submission explaining:

• the reason or reasons for the delay
• why the circumstance is exceptional, and
• why the delay is beyond the owner’s control.

Evidence must also be provided to substantiate the reason for the delay. Evidence could include:

• medical certificates
• correspondence from the council
• correspondence from the builder
• correspondence from liquidators/administrators
• insurance claims relating to a natural disaster such as bushfires and floods
• Home Building warranty claims
• any other evidence to support the request for the extension.

Footnotes