TAX FILES
Is a home residential? PAUL TANTI, PARTNER, THOMSON GEER
U
nder section 71DC of the Stamp Duties Act, no stamp duty is payable on transactions involving what is commonly referred to as ‘commercial land’. Technically, no duty is payable on ‘Qualifying Land’. Qualifying Land is land that is not used for residential or primary production purposes. Issues constantly arise regarding land which does not fit neatly into the ‘used for residential or primary production’ categories? One such issue involves land which is used to provide accommodation for people with various forms of physical or mental disability or whose circumstances requires them to reside in purpose-built accommodation. In this article, such facilities are referred to as ‘residential facilities’. At one extreme a residential facility would include a prison. On one view, it provides accommodation (short, medium or long term) for people who are required to reside there. Even though it is where people reside, it is generally accepted that a prison would constitute an institution, rather than a residence, and therefore the transfer of a prison would constitute the transfer of Qualifying Land. Residential facilities are becoming more common. Such facilities are often located in the general community rather than in isolated, old fashioned, large institutions (such as mental hospitals or homes for physically or mentally disabled). Such facilities can be small, 3-4 residents, which are specially designed to accommodate the residents’ requirements. For example, ramps rather stairs, larger
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doorways to accommodate beds and wheelchairs, supports in bathrooms and walkways and the provision of 24/7 live-in carers. Commonly, personal management services are also provided. These may include arranging travel to and from doctor’s appointments, hairdressers and work, assisting with arranging personal finances and a range of other requirements depending on the resident’s needs. Other residential facilities can be much larger. These large facilities vary. Resident’s rooms may be just a bedroom or may include a private bathroom and a separate kitchen. Often there are large common areas which provide kitchen and recreation areas. A range of personal services are also provided. Such facilities are often operated by a profit-making business. Questions arise as to which, if any, of such properties, would be exempt from stamp duty on the basis that they are not used for residential purposes and therefore, are Qualifying Land. Section 71DC refers to the use of land for residential or primary production purposes. However, the section does not refer to which entity’s use is relevant. Depending on the circumstances, the relevant use could be that of the owner of the land, the lessee of the land, the operator of the business conducted from the land and the resident themselves. Arguably, the resident uses the facility for residential purposes but the others use it for a profit making or altruistic purpose. If there is a distinction to be drawn between a smaller 3-4 person specially
designed house compared to a larger 50+ room facility, what are the relevant factors to be taken into account if one is found to be used for residential purposes and one held to be Qualifying Land? Is it the number of residents, the size of the facility, the level of services provided or a combination of these factors? RevenueSA has released Information Circular 103 which provides some assistance. If the land on which the residential facility is situated comes within certain Land Use Codes (LUC), it will be exempt from duty. However, the more common circumstances are that residential facilities are situated on land which allows both residential and non-residential use and must be submitted to the Commissioner for assessment. It is understood that RevenueSA’s current view is that it is the use by the resident which is the determining factor and therefore, such facilities would be held to be used for residential purposes and therefore subject to stamp duty. Some of these facilities may be subject to the Supported Residential Facilities Act 1992 (SA). Query whether this would be a determining factor in deciding whether the land was being used for residential purposes. It is understood these issues are being considered and may result in the Supreme Court considering the matter. Hopefully this will provide some clarity on what type of facilities will constitute Qualifying Land and what the relevant factors are. B
