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Pro bono: A taxing time for tenants

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Cite as: Cite as: March 2012 86 (03) LIJ, p.75

A recent pro bono case highlights a land tax risk for tenants.

A recent pro bono case has highlighted an unusual provision in the Victorian Land Tax Act 2005, under which tenants (including residential tenants) could be held liable for land tax on their rented premises.

Under s98 of the Act the Commissioner of State Revenue, represented by the State Revenue Office (SRO), may seek to recover unpaid land tax from persons other than owners of land. Where the owner of land has defaulted on payment of land tax, a lessee, mortgagee or occupier of the property may, by notice in writing, be required to pay the amount owing.

The requirement for a tenant to pay land tax is not confined to tax referable to the time of the tenancy agreement or occupation. Thus a tenant may be required to pay land tax which became payable before the tenant occupied or leased the property. The section is not limited to tenants who are related to, or associated with, the landlord.

In the present case, the tenants moved into rented premises in 2008. In October 2011 they received a notice from the SRO requiring payment of almost $40,000 within 15 days of receipt. This amount represented unpaid land tax on their residence for six years.

The tenants notified their real estate agent, who could not contact the landlord. The tenants received a further notice from the SRO for the full amount three weeks later – this time due within five days of receipt. The notice stipulated that a failure to pay would result in 13 per cent interest being levied against them.

As a result the tenants contacted PILCH requesting pro bono legal assistance. PILCH referred the case to one of its member firms, Rigby Cooke.

Discussions with the SRO revealed that it was the SRO’s view that the tenants would cease to be liable if they terminated their lease. Although this interpretation of s98 may be correct, it is not beyond doubt. The SRO has not made any public rulings or pronouncements formalising this view (which in any event would not be binding). Accordingly, there is a risk that the SRO will not adhere to its view and may seek to recover land tax from a tenant who has been given written notice of a requirement to pay, even after the tenant has left the premises.

Further, if this were to happen the problem could then be passed on to the next tenants, who would likely be oblivious of the potential for inheriting responsibility for the debt.

In this case the tenants were not in a position to pay $40,000 and wished to remain in their home. The SRO agreed to withdraw the requirement and instead issued a notice under s47(1) of the Taxation Administration Act 1997 (Vic) requiring the tenants to pay their rent directly to the SRO, effectively garnishing the rent for payment of the unpaid land tax.

Section 98(6) provides that a lessee, mortgagee or occupier who pays land tax pursuant to a requirement by the SRO may recover the amount paid to the SRO from the owner or set it off against any money owing. However, unlike the SRO (which has the benefit of a first ranking charge against the property) and a mortgagee (whose payments are deemed to be added to the amount secured by the mortgage), a tenant obtains no security for any payments. Legal proceedings against an impecunious landlord may be futile. There would also be (potentially substantial) legal costs involved.

The breadth of s98 appears to be unique in Australia. Further, insofar as it results in land tax becoming payable by residential tenants, it seems to contradict the legislative intent of s99 of the Act, which prohibits liability for land tax being passed on to tenants.

This case highlights the importance of pro bono assistance. Without it, the tenants may have had to depart their home of three years and, at worst, could have been pursued for their landlord’s debt. The valuable pro bono assistance provided in this case has exposed an unjust law and alerted the legal community to the risks for all Victorian tenants.

Parliament should either repeal s98 or amend it so it applies only to tenants who are sufficiently associated with the landlord to justify such an impost. The current law can result in harsh and unfair treatment of unassociated tenants, exposing them to their landlords’ debts of which they have no knowledge.

Looking to help?

To help lawyers and firms become involved in pro bono work – legal services and otherwise – the LIJ profiles a community group and its needs each month.

Prahran Mission
Contact: Christopher Vogt
Location: Prahran

Prahran Mission provides services and programs to people in the local community who are financially and socially disadvantaged.

This support comes in the form of food from our cafe, material aid from our Goodwill Shop and various programs designed for people recovering from mental illness.

Current needs of group: The project purpose is to ensure the organisation is meeting its legislative and regulatory compliance requirements, both state and federal.

The outcomes we would like to achieve are:

  • A complete list of federal and state legislation and regulations where the organisation is or could be a respondent.
  • A report that verifies where the organisation complies and highlights where it does not.
  • Suggestions for improvement to the level of compliance across the board.

Interested parties should note that the organisation has a register of legislation used in the last three years so we are not asking for a zero-base start.


See for more information on skilled volunteering opportunities.

For more information about volunteering in general see and

BEN ELBAUM is an associate with Rigby Cooke Lawyers.


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