Notification default
TAA-008
| Ruling no. | TAA-008 |
|---|---|
| Status | Current |
| Issue date | 27 February 2024 |
| Date of effect | 27 February 2024 |
Preamble
1. The Taxation Administration Act 1997 (TAA) sets out the administration and enforcement of taxation laws and the reciprocal enforcement of recognised laws. The various taxation laws (Acts and Regulations) that are covered by the TAA are set out in section 4. Relevantly, the Windfall Gains Tax Act 2021 (WGTA) and the Land Tax Act 2005 (LTA) are 2 of the taxation laws to which the TAA applies.
2. Notification default is defined in section 3(1) of the TAA to mean:
a. a failure to lodge a notice under section 34G of the LTA (Vacant Residential Land Notification Default)
b. a failure to lodge a notice under section 46K of the LTA (Trust Notification Default);
c. a failure to give notice to the Commissioner of State Revenue in accordance with section 61B, 61C, 61D, 61E or 61F of the LTA (Construction/renovation of Principal Place of Residence Notification Default)
d. a failure to notify the Commissioner of a change in circumstances in accordance with section 70N of the LTA (Build to Rent Notification Default)
e. a failure to notify the Commissioner of an error or omission in accordance with section 104A of the LTA (Error or Omission Notification Default)
f. a failure to give a notice to the Commissioner in accordance with section 104B of the LTA (Absentee Owner Notification Default), or
g. a failure to notify the Commissioner of an error or omission in accordance with section 26 of the WGTA (Windfall Gains Tax Notification Default).
3. If a notification default occurs, penalty tax is imposed under Part 5 of the TAA subject to the Commissioner’s discretion to remit. No penalty tax will be imposed if a notification default does not result in additional liability.
4. The purpose of this ruling is to explain the circumstances amounting to a notification default as defined in section 3(1) of the TAA. Please refer to Revenue Ruling TAA-007v5 on imposition of penalty tax and interest on a tax default and guidelines on the Commissioner’s discretion to remit.
Ruling
5. A notification default only arises in relation to land tax, vacant residential land tax and windfall gains tax. When a notification default occurs, penalty tax is imposed on the additional land tax, vacant residential land tax, or windfall gains tax that would have been assessed had the notification default not occurred. If no additional tax is assessed, no penalty tax will be imposed.
Vacant Residential Land Notification Default
6. A Vacant Residential Land Notification Default occurs when a landowner fails to notify the Commissioner, in writing, that they were the owner of vacant residential land situated in the specified geographic area in which vacant residential land tax applies as at 31 December, by 15 January of the following year as required under section 34G of the LTA. Once notified, the Commissioner will assume that the land’s existing vacant residential land tax status is current. You must make a subsequent notification if the information in your previous notification is no longer current.
Example 1
Bethany owns a habitable residential property (Sunnyside) in the City of Yarra which was not occupied for at least 6 months during 2018. Sunnyside was a vacant residential property as at 31 December 2018, but Bethany does not notify the Commissioner of this.
In September 2019, the Commissioner becomes aware of the vacant residential land and issues a vacant residential land tax assessment to Bethany for the 2018 tax year imposing $10,000 in vacant residential land tax. The assessment also includes a penalty tax of $2,500, imposed at the rate of 25% on the additional amount of vacant residential land tax assessed because of the Vacant Residential Land Notification Default that occurred for the 2018 tax year.
Trust Notification Default
7. A Trust Notification Default occurs where a trustee fails to notify the Commissioner, in writing, within one month of any of the following events:
- The trustee acquires or disposes of land in Victoria.
- The trust to which the land is subject becomes a different category of trust.
- The trustee has notified the Commissioner of beneficial interests in land subject to a fixed trust (under section 46B of the LTA) and there are changes to the beneficial interests in land, or the trustee has notified the Commissioner of the unit holdings of a unit trust scheme (under section 46C of the LTA) and there are changes to the unit holdings in the scheme.
- The administration of a deceased estate that includes land is complete.
Example 2
DCE Pty Ltd is the trustee of the DCE Family Trust. On 4 April 2019, DCE Pty Ltd entered into a contract to purchase land as trustee for DCE Family Trust and took possession of the land on 4 July 2019. The Notice of trust acquisition of an interest in land form (LTX-Trust-08 Form) was never lodged with the State Revenue Office and therefore, DCE Pty Ltd has failed to notify the Commissioner of its acquisition of this land as trustee as required under section 46K of the LTA.
Due to this notification default, land tax was assessed and paid at the general rates for the 2020 land tax year. When calculated at the surcharge rates, the additional land tax liability is $50,000. The Commissioner becomes aware of the circumstances in September 2020 and issues a reassessment for the 2020 land tax year of $50,000 plus $12,500 (being 25% penalty imposed on $50,000 [the additional land tax liability] as a consequence of the trust notification default).
Construction/Renovation of Principal Place of Residence Notification Default
8. A Construction/Renovation of Principal Place of Residence Notification Default occurs when a landowner is exempt under section 61 of the LTA fails to notify the Commissioner, in writing, of any of the following events within the relevant timeframe:
| Section | Event requiring notification | Timeframe for notification |
|---|---|---|
| 61B | The completion of construction or renovation, if a building permit in respect of the construction or renovation was not issued. The date of completion and supporting evidence must be provided. | Within 30 days after the date on which the construction or renovation was completed. |
| 61C | It is 4 years after the works start date, and the works finish date has not occurred. | Within 30 days after the date that is 4 years after the works start date. |
| 61D | A qualifying person in relation to the land does not start using and occupying the land as the qualifying person's PPR on or before the qualifying occupation date. | Within 30 days after the qualifying occupation date. |
| 61E | A qualifying person does not continuously use and occupy the land as the qualifying person's PPR for at least 6 months commencing on or before the qualifying occupation date. | Within 30 days after the date that is 6 months after the qualifying occupation date. |
| 61F | The owner intends to cease to be the owner before a qualifying person in relation to the land completes a period of continuous use and occupation of the land as the qualifying person's PPR for at least 6 months commencing on or before the qualifying occupation date. | At least 30 days before the person ceases to be the owner of the land. |
Example 3
Lucy owns vacant land. On 1 August 2023 Lucy obtains a building permit for the construction of a residence on the land, which states that an occupancy permit is required before the residence can be occupied. Lucy intends to use and occupy the residence as her principal place of residence (PPR) for at least 6 continuous months commencing within 6 months after the occupancy permit for the construction is issued. Lucy applies for an exemption for the land under section 61 of the LTA and the Commissioner determines that Lucy is eligible for the exemption.
On 1 December 2027 the Commissioner becomes aware that an occupancy permit was not issued for the residence on the land as at 1 August 2027 (the date that is 4 years after the works start date), and that Lucy failed to notify the Commissioner in writing of this within 30 days of that date as required under section 61C. In accordance with section 61G of the LTA the Commissioner revokes the exemption under section 61 because the works finish date for the construction the residence on the land has not occurred within 4 years after the works start date, and issues land tax assessments to Lucy for the 2024 to 2027 land tax years imposing land tax on the land. The assessments also include penalty tax because of the Construction and Renovation of PPR Notification Default that occurred.
Example 4
Sage owns vacant land. On 1 February 2024 Sage obtains a building permit for the construction of a residence on the land, which states that an occupancy permit is required before the residence can be occupied. Sage intends to use and occupy the residence as his PPR for at least 6 continuous months commencing within 6 months after the occupancy permit for the construction is completed. Sage applies for an exemption for the land under section 61 of the LTA and the Commissioner determines that Sage is eligible for the exemption.
On 1 March 2026 the Commissioner becomes aware that an occupancy permit was issued for the residence on the land on 1 February 2025, and that as at 1 August 2025 (the qualifying occupation date) Sage had not commenced using and occupying the land as his PPR. Sage failed to notify the Commissioner in writing of this within 30 days of that date as required under section 61D. In accordance with section 61G of the LTA the Commissioner revokes the exemption under section 61 because no qualifying person commenced using and occupying the land as their PPR for a period of at least 6 months commencing on or before the qualifying occupation date, and issues land tax assessments to Sage for the 2025 and 2026 land tax years imposing land tax on the land. The assessments also include penalty tax because of the Construction and Renovation of PPR Notification Default that occurred.
Build to Rent Notification Default
9. A Build to Rent Notification Default occurs when an owner of land (to which a build to rent (BTR) benefit has been applied) fails to notify the Commissioner, in writing, that there is a change in circumstances that results in the land or part of the land no longer being eligible for the BTR benefits, within 30 days of the change in circumstances as required under section 70N of the LTA.
Example 5
ABC Pty Ltd owns land that is wholly used for an eligible BTR development. It has been receiving BTR benefits in respect of the land for 5 years. The BTR development comprises 60 residences and a car park reserved for the exclusive use of tenants of the BTR development.
ABC Pty Ltd decides to lease the car park to a commercial operator to be used as a public car park. As the change in use occurred within the 15-year eligibility period for BTR benefits, ABC Pty Ltd is liable for BTR special land tax in respect of the car park part of the land for the years that it had been receiving BTR benefits, being 5 years. The BTR special land tax liability is single amount calculated by reference to each year that the part of the land was receiving BTR benefits and is assessed separately from normal land tax assessments. However, ABC Pty Ltd does not notify the Commissioner of the change in use as required under section 70N of the LTA and continues to receive land tax assessments with BTR benefits applied.
In year 8, the Commissioner becomes aware that the car park is no longer used exclusively as part of the eligible BTR development. ABC Pty Ltd is issued with a BTR special land tax assessment for the 5 years that it had been entitled to BTR benefits (prior to the change in use). For the following years, ABC Pty Ltd is issued with land tax reassessments which calculate the land tax payable on the car park land without any BTR benefits applied. In addition, the assessments, both the BTR special land tax assessment and the land tax reassessments, include penalty tax at the rate of 25% of the BTR special land tax liability/additional land tax liability because of the Build to Rent Notification Default. If the Commissioner determines that the notification default was wholly or partly caused by the intentional disregard by ABC Pty Ltd, then the penalty tax rate applied will be 75%.
Error or Omission Notification Default
10. An Error or Omission Notification Default occurs where a taxpayer who receives a land tax or vacant residential land tax assessment fails to notify the Commissioner within 60 days from the date of issue of the notice of assessment that they own land in Victoria, which is not specified in the assessment, or have received an exemption for which they are not eligible.
Example 6
Annabel received her 2017 land tax assessment.
The assessment omitted one of Annabel’s investment properties and Annabel failed to notify the Commissioner of that omission within 60 days of her 2017 assessment being issued. The Commissioner subsequently became aware of this omission and issued Annabel a 2017 land tax reassessment imposing an additional $1,000 in land tax. The reassessment included penalty tax of $250 imposed at the rate of 25% on the additional amount of land tax assessed because an Omission Notification Default had occurred.
11. If land is owned jointly, notification may be made by any one of the joint owners named in the assessment within 60 days from the date of issue of the joint assessment.
Absentee Owner Notification Default
12. An Absentee Owner Notification Default occurs when a taxpayer fails to notify the Commissioner that they were an absentee owner as at 31 December, by 15 January in the following year.
13. Section 104B of the LTA requires a taxpayer to notify the Commissioner in writing for each year that they are an absentee owner. Penalty tax will be imposed if a taxpayer fails to notify the Commissioner of a change that results in them becoming an absentee owner. Once notified, the Commissioner will assume that your existing absentee owner status is current unless you notify the Commissioner otherwise.
Example 7
ABC Investments Pty Ltd, an absentee corporation and therefore, an absentee owner has been the owner of a commercial property in Melbourne since 2012. It is an absentee owner as at 31 December 2015 and 31 December 2016 but does not notify the Commissioner of this.
In August 2017, the Commissioner becomes aware that ABC Investments is an absentee owner and issues land tax reassessments for the 2016 and 2017 tax years imposing an additional $10,000 in land tax across the 2 years. ABC Investments is also charged penalty tax of $2,500 over these 2 years, imposed at the rate of 25% on the additional amount of land tax assessed because an Absentee Owner Notification Default occurred in both 2016 and 2017.
Windfall Gains Tax Notification Default
14. A Windfall Gains Tax Notification Default occurs if a taxpayer, who receives a notice of assessment of windfall gains tax in relation to a WGT event as defined in section 3(1) of the WGTA, fails to notify the Commissioner within 60 days from the date of issue of the notice of assessment that:
- they owned any other land at the time of the WGT event that was rezoned by the same WGT event but is not specified in the notice of assessment, or
- if the taxpayer is a company or trustee of a trust that is part of a group, that another member of the group owned land at the time of the WGT event that was rezoned by the same WGT event but is not specified in the notice of assessment.
Example 8
Joe owns Land 1 and Land 2 which were rezoned by the same WGT event.
Joe received a notice of assessment of windfall gains tax in relation to the WGT event which specified Land 1 but omitted Land 2. Within 60 days of the assessment being issued, Joe failed to notify the Commissioner of this omission.
The Commissioner subsequently became aware of the omission and issued Joe a reassessment of windfall gains tax in relation to the WGT event which imposed an additional $100,000 in windfall gains tax. The reassessment included penalty tax of $25,000 imposed at the rate of 25% on the additional amount of windfall gains tax assessed because a notification default had occurred.
Example 9
Apple Pty Ltd owns Land 3 and the trustee for the Blueberry Unit Trust owns Land 4. Land 3 and 4 were both rezoned by the same WGT event. At the time of the WGT event, Apple Pty Ltd and the trustee of the Blueberry Unit Trust constituted a group under the WGTA as the same person had a controlling interest in Apple Pty Ltd and the Blueberry Unit Trust.
The trustee for the Blueberry Unit Trust did not receive a notice of assessment of windfall gains tax in relation to the WGT event as the taxable value uplift of Land 4 was $50,000.
Apple Pty Ltd received a notice of assessment of windfall gains tax in relation to the WGT event which assessed windfall gains tax of $300,000 on the taxable value uplift of $600,000 for Land 3. Apple Pty Ltd’s assessment omitted Land 4. Within 60 days of the assessment being issued, Apple Pty Ltd failed to notify the Commissioner of this omission.
The Commissioner subsequently became aware of the omission and issued the group an assessment of windfall gains tax in relation to the WGT event. The assessment assessed windfall gains tax of $325,000 on the aggregate taxable value uplift of $650,000 for Land 3 and 4. The assessment included penalty tax $6,250 imposed at the rate of 25% on the additional $25,000 of windfall gains tax assessed because a notification default had occurred.
Example 10
Orange Pty Ltd owns Land 5 and Banana Pty Ltd owns Land 6. Land 5 and 6 were both rezoned by the same WGT event. At the time of the WGT event, Orange Pty Ltd and the Banana Pty Ltd constituted a group under the WGTA as Orange Pty Ltd held 100% of the issued shares in Banana Pty Ltd.
Orange Pty Ltd received a notice of assessment of windfall gains tax in relation to the WGT event which assessed windfall gains tax of $62,500 on the taxable value uplift of $200,000 for Land 5. Orange Pty Ltd’s assessment omitted Land 6.
Separately, Banana Pty Ltd received a notice of assessment of windfall gains tax in relation to the WGT event which assessed windfall gains tax of $187,500 on the taxable value uplift of $400,000 for Land 6. Banana Pty Ltd’s assessment omitted Land 5.
Within 60 days of their notice of assessment being issued, neither Orange Pty Ltd nor Banana Pty Ltd notified the Commissioner of the omission of the other group member’s land from their assessment.
The Commissioner subsequently became aware of the omissions and issued the group an assessment of windfall gains tax in relation to the WGT event. The assessment assessed windfall gains tax of $300,000 on the aggregate taxable value uplift of $600,000 for Land 1 and 2. The assessment included penalty tax $12,500 imposed at the rate of 25% on the additional $50,000 of windfall gains tax assessed because the notification defaults had occurred.
15. If land is jointly owned, it is sufficient if notification is made by any of the joint owners named in the assessment within 60 days from the date of issue of the joint assessment.
16. If a member of a windfall gains tax group (the first member) notifies the Commissioner of any land owned by another member of the group (the second member) that was rezoned by the same WGT event but is not included in the first member’s assessment, it is not necessary for the second member to notify the Commissioner of a corresponding error or omission in their assessment. This concession only applies if the first member notifies the Commissioner within 60 days of the issue of the first assessment.
Example 11
Orange Pty Ltd owns Land 5 and Banana Pty Ltd owns Land 6. Land 5 and 6 were both rezoned by the same WGT event. At the time of the WGT event, Orange Pty Ltd and the Banana Pty Ltd constituted a group under the WGTA as Orange Pty Ltd held 100% of the issued shares in Banana Pty Ltd.
Orange Pty Ltd received a notice of assessment of windfall gains tax in relation to the WGT event which assessed windfall gains tax on the taxable value uplift Land 5. Orange Pty Ltd’s assessment omitted Land 6.
Shortly after, Banana Pty Ltd received a notice of assessment of windfall gains tax in relation to the WGT event which assessed windfall gains tax on the taxable value uplift of Land 6. Banana Pty Ltd’s assessment omitted Land 5.
Within 60 days of the issue of Orange Pty Ltd’s notice of assessment, Orange Pty Ltd notified the Commissioner of the omission of Land 6 from their assessment. In these circumstances, it is not necessary for Banana Pty Ltd to notify the Commissioner of the corresponding omission of Land 5 from its assessment.
Commissioner of State Revenue
Rulings do not have the force of law. Each decision made by the State Revenue Office is made on the merits of each individual case having regard to any relevant ruling. All rulings must be read subject to Revenue Ruling GEN-001.
