He bought the lot next door to store a vintage car. The $44,980 land tax bill turned on mould, damp and blocked vents.
Your client buys the rundown house next door to store a vintage car. He never lives in it. Then a $44,980 land tax bill arrives for the “second residence”.
NCAT held the principal place of residence exemption covers that second lot. The taxpayer lost his clever construction argument, then won on the facts, largely out of the Commissioner’s own expert’s mouth.
Boyd v Chief Commissioner of State Revenue [2026] NSWCATAD 209.
What happened
First, the basics. The PPR exemption can cover a parcel of two or more adjoining lots in the same ownership, but only if they are the site of a single residence (Sch 1A, cl 13(1) LTMA). Separate buildings on separate lots are not a single residence if either is separately occupied or capable of being used for separate occupation (cl 13(2)(b)). Capability is tested at midnight on 31 December and for a reasonable time after.
Mr Boyd has lived in his Palm Beach home since the 1970s. In 2012 he bought the lot next door and used its dilapidated house to store a vintage car and household items [9-10]. For 2025, the Commissioner assessed that lot for $44,980 [12].
The chimney argument failed. The mould argument won.
The taxpayer first argued that cl 13(2)(b) never engages: the old house’s chimney encroaches onto his home lot, so there were no “separate buildings erected on separate lots” [28, 50]. Senior Member Redfern rejected this. “Separate” distinguishes the lots being examined, but does not require a building to sit wholly within its own lot [95-97].
The exemption was won on capability instead. The taxpayer’s expert priced rectification at $753,687, whereas the Commissioner’s expert said $82,078 would do [104]. The gap did not matter. Even the Commissioner’s expert accepted the house was not fit for occupation without remediation: mould, damp and water ingress in several rooms, sealed windows and blocked vents stopping airflow, and unsafe balconies, all health and safety issues [138-158]. His own 12 to 24 days of work represented “at least a month of elapsed workdays” [155]. A dwelling needing that much was not capable of separate occupation, and it was not “liveable” while the work happened [141, 157].
The practical takeaway
First, on adjoining lots the question is not what the second building is used for. Storage use was never the issue; capability of separate occupation was [61].
Second, boundary encroachments will not switch off cl 13(2)(b). Argue capability, not geometry [97].
Third, the taxpayer must prove the disentitling provision does not apply [119]. Boyd carried that onus with expert evidence of health and safety defects - inspections done one and two years after the taxing date only complicated the task [129].
How many clients own the lot next door and have never checked?
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.