Land Tax Arrears

[coastymike]

Some people are of the view that you can claim Land Tax Arrears in the year in which you paid the amount from the notice from the OSR.

Not correct. Must be claimed for years to which it relates. Could be nasty if you can only amend 2 years worth of returns and land tax arrears is for many prior years.

Refer ATO ID 2010/192 http://law.ato.gov.au/atolaw/view.htm?docid="AID/AID2010192/00001"

 

[Terry_w]

This is another reason to get your situation in order.

I had a conveyancing matter where the vendor hadn't paid land tax for 10 years and had a large lump sum payable - most of the deductions for this would have been lost.

 

[coastymike]

Yes a good reason to register for Land Tax from the time of purchase. You may not be subject to Land Tax but at least if you have registered you won't be in for a nasty surprise later on.

 

[Hodge]

I learnt not to pay in installments but pay it in full for the year. Otherwise any installment you pay after the financial year can't be claimed this financial year.

So this year my accountant advised me that i can claim the last two installments of last financial year and all of this years land tax.

 

[coastymike]

Whether you pay by instalments or not makes no difference. According to the ATO ID above it is based in when the liability was incurred as to when the deduction can be claimed.

 

[Hodge]

So what you're saying is my accountant is wrong? If you've not finished paying the land tax bill in full you can still claim the full amount for that financial year?

Do you have the link to this? I'll be seeing my accountant this week and if it's true will blast him.

 

[coastymike]

Refer ATO ID 2010/192 http://law.ato.gov.au/atolaw/view.htm?docid="AID/AID2010192/00001"

It deals with arrears but as it states

"In the present circumstances, the taxpayer incurred a liability to pay land tax under the provisions of the state legislation at the start of each calendar year for which the land tax was payable. The taxpayer was 'definitively committed' or 'completely subjected' to the debt at that time, even though unaware of it. As the liability to pay land tax was ascertainable in the year to which the assessment giving rise to the liability relates, land tax payable was incurred in that year ( Case B5 70 ATC 24; 15 CTBR (NS) Case 67 ). The Federal Court confirmed this principle, in the context of payroll tax, in Layala Enterprises Pty Ltd (in liq) v. Federal Commissioner of Taxation (1998) 86 FCR 348; 98 ATC 4858; (1998) 39 ATR 502.

In these circumstances, the taxpayer incurred the land tax expenses for the purposes of section 8-1 of the ITAA 1997 in each income year for which each land tax liability was payable, and not in the income year in which the arrears were paid. "

NOTE the words when it was payable NOT when it was paid

print it out and take it along with you.

if you have a notice of assessment for Dec 2013 and it was $3k lets say then you can claim the $3k in the 2014 financial year. Doesn't matter whether you pay it over the next 12 months or not. You have incurred the liability on Dec 2013.

ATO ID confirms that position.

 

[Hodge]

Thanks for that coastymike. I will definitely show him this.

 

[Paul@PFI]

I have always found that ruling somewhat of a problem. Nobody seems to have appealed as far as I can determine.

Some states impose land tax on 30 June year end. So liability arises prior to an assessment could even be issued. This process is at odds with other potential liabilities such as accrued entitlements to leave and statutory obligations such as annual leave, PAYG withheld for employee pay which is deductible as if were paid prior to 30 June. The costs may well be incurred also..There are many examples. All inconsistent.

Sure s8-1 says incurred. Can rental owners apportion monthly interest incurred ?? No. Its deductible when PAID. ie prepaid or based on date debited to loan.

The Commissioners own GIC rules differ also although now are closer to the view on land tax. The Commissioner doesn't allow taxpayers to self-assess and estimate accrued GIC and deduct that. I argue its as easily calculated as land tax where the taxpayer self-assesses their liability also. However no GIC can only be deducted when a tax liability has been determined. One rule for the land owner another for a taxpayer.

In an example I know of the OSR took 18months to accept that the client trust was a fixed trust and then issue assessments on that basis. Sometimes these review can occur years later. What would the deduction have been if the OSR found against the trust being a fixed trust and imposed a higher liability ??

How may this be a deduction when the trust has resolved and made distribution of the higher income which would now be LOWER ? It may well be a carried forward loss which reduces future year income ??

Just my two bobs worth. Rant ends.