Legal Tip 299: Liability of Directors for Company Land Tax

If a company owns land it is liable for any land tax on the land. The company is a separate legal person to the directors. But legislation will also make the directors jointly and severally liable if the company doesn’t pay. This also applies to directors who have resigned.


Example

Homer operates No Tax Pty Ltd which holds property in NSW. The property is over the land tax threshold, but it has negative equity so it doesn’t pay its land tax. The Revenue NSW can recover the land tax of the company from Homer who is its sole director.

Homer resigns and puts his drunkard mate Barney in as director – only to find out they can chase former directors so this does not help him escape the land tax.


Legislation under NSW Law

Section 47B Taxation Administration Act 1996 (NSW)
TAXATION ADMINISTRATION ACT 1996 - SECT 47B Liability of directors and former directors of corporation for failure to pay corporate tax liability

 

I also found that unpaid arrears of nsw stamp duty remains a permanent liability of the transferee (ie buyer) : s12 and s13 NSW Duties Act.

Client bought a property. I noted duty hadnt been paid. Accrued this for years and on sale it wasnt detected. CGT was calculated without allowance for the duty. Several years later it was detected by OSR seven (?) years after the purchase. Arrears incl penalties and interest were imposed. Legal advice was s12 and s13 impose the liability on the buyer and there is no time limit. A default occurs after three months from the dutiable event. Interstingly the default notice was issued to the company trustee and each Director. Apparently a joint & several liability attaches to Directors there too. It named a person no longer a Director who was at the time of the default. ie s125 defines another person as an associate (at that time)

They always seem to write taxing laws with few "outs". Many taxing laws will allow multiple avenues of recovery and action.