New Zealander fails to overturn Victorian land tax surcharge

On Wednesday (15 October), the High Court passed down its judgement on Stott v The Commonwealth of Australia, ruling that New Zealand citizen Francis Stott was liable to pay Victorian land tax surcharges despite inconsistencies between Australian state and Commonwealth laws.

Stott owned two homes in Melbourne, but resided in New Zealand for periods relevant to the 2016 to 2024 land tax years. Under Victorian law, additional land tax known as the ‘absentee owner surcharge’ is applied to those who own property in Victoria but live outside of Australia.

However, in 2024, Stott argued that the imposition of the additional land tax was contrary to a tax treaty between Australia and New Zealand, which gave New Zealanders immunity from “more burdensome” taxes than those imposed on Australians “in the same circumstances.”

The treaty, ratified in Australia under the International Tax Agreements Act (ITAA) 1953, was put in place to prevent double taxation and ensure that Australians and New Zealanders did not face discriminatory tax treatment in either jurisdiction.

Stott argued that Victoria’s absentee owner tax surcharges had landed him with “more burdensome” taxes than he would have faced if he were an Australian citizen, thus violating Australia and New Zealand’s tax treaty and Australia’s Commonwealth laws.

The High Court found that, prior to an amendment made in 2024, Victorian land tax surcharges had been ‘inoperative’ as they were inconsistent with Commonwealth laws.

However, in April 2024, the ITAA was amended by the Treasury Laws Amendment (Foreign Investment) Act 2024, to exclude state taxes that were payable from 1 January 2018 from the treaty arrangements.

The High Court judged that this amendment was constitutionally valid, and effective in removing inconsistencies between state and Commonwealth laws. Therefore, it meant that Victorian state taxes could operate without contravening Commonwealth law or the treaty.

Prior to 2024, the High Court found that Stott had not been required to lodge a notice and accompanying documents as an ‘absentee owner,’ as the Victorian land tax laws had been inconsistent with the New Zealand tax treaty, ratified under Commonwealth law, and therefore were inoperative at that time.

Despite this, the High Court found that the 2024 amendment had effectively removed the inconsistency between Australian state and federal laws, and further retrospectively removed any invalidity relating to land tax surcharges payable on or after 1 January 2018.

As such, Stott was found to be not entitled to any relief with respect to the land tax surcharges, and was held liable for legal costs.