Caratti v Commissioner of State Revenue (WA) [2017] WASCA 128

In the Caratti decision, Mrs Caratti was the registered proprietor of two suburban adjoining properties in Perth. The Commissioner of State Revenue (Commissioner) treated these two lots as a single parcel and exempted the Property from land tax on the basis that they were being used by Mrs Caratti as her primary residence.

Mrs Caratti's passed away, and in her Will, she had left her home and property to her husband as trustee to establish a fund for the benefit of their four children. Mrs Caratti's husband and her son, Michael Caratti, both continued to occupy the Property as their primary residence.

"Section 22 of the WA Land Tax Assessment Act 2002 (the Act) provides private residential property owned by a trustee is exempt from land tax if there is an individual identified in a Will as to having a right to use the property as a place of residence."

The residential exemption continued to be applied to the property. However, upon the Commissioner becoming aware of Mrs Caratti's death, audited and reassessed the Property's land tax, and decided to discontinue the residential tax exemption, on the basis Mrs Caratti's Will did not express or give no 'right' to an identifiable person to use the Property as a place of residence within the meaning of section 22 of the Act.

Mr Caratti appealed the Commissioner's decision, however the Supreme Court of Appeal upheld the Commissioner's assessment pursuant to strict compliance with the legislation, referring that where there is no such express right under the terms of a Will, any pre-testamentary arrangements to allow her husband and children to live at her property for as long as they wished were irrelevant.

This court decision is an everyday example applicable to anyone's estate, highlighting the care that needs to be taken when drafting provisions in a Will, making it clear that where a Will is not worded correctly, there may be serious tax implications. This is important for any person who wishes to make a Will, to ensure their intentions are clearly stated in order to retain and achieve the desired tax treatment.

For your peace of mind and to give your loved ones the right tax advantage, contact Fort Knox Legal to discuss your Wills & Estate Planning needs.