Life interests and land tax - Abraham v Commissioner of State Revenue [2026] VCAT 351
A recent Victorian Civil and Administrative Tribunal (VCAT) case has looked at whether a person had a “life estate in possession” (also called a “life interest”) in a holiday home.
The applicant and her husband held 50% interests as tenants in common in the holiday home.
After her husband passed, his will directed his executors (being his 2 children) to “permit” the applicant to have the ‘use and occupation’ of the property during her lifetime. The executors went on title as the registered owners of the husband’s 50% interest as tenant in common.
The 2 children (being the executors) held the residual estate of the husband in their personal capacities.
The Commissioner assessed her to land tax for the 2023 land tax year on the basis that she held 100% of the holiday home, being:
A 50% interest as registered owner; and
A 50% interest as the holder of a life estate in possession under the will.
The applicant objected on the basis that the executors should be assessed separately for their 50% interest. After the objection was disallowed, the matter was referred to VCAT.
The applicant’s position would have reduced the land tax payable on the land as both 50% owners would have the benefit of the shade-in rates of land tax.
Legal position
It was accepted that as a general rule of construction “that the expression “use and occupation” [as used in the will] prima facie confers a life estate”.
The applicant argued that this presumption had been displaced in the circumstances.
Land tax position
A life tenant is deemed to be the owner of land under section 11 of the Land Tax Act 2005 (Vic):
11 Life tenants
For the purposes of this Act, a person who holds a life estate in possession in land is deemed to be the owner of the land instead of the person entitled to the fee simple in reversion or remainder.
If section 11 applied, the assessment was open to Commissioner as the applicant would have a combined 100% interest in the property for land tax purposes.
Construction of the Will
Under Cline v Rodden [2023] VSC 492and earlier decisions, there is a distinction between:
a life estate or life tenancy in a property that gives exclusive use, enjoyment and possession of a property for the life of the holder; and
a right to reside in a property which is not exclusive and is lost if the holder moves out of the property.
Under Royal Melbourne Hospital and Ors v Equity Trustees Ltd (as trustee of the estate of Langford (deceased)) and Ors [2007] VSCA 162, the words in a will “use and occupy” gives rise to a prima facie presumption that a life interest was intended to be created, subject to any clear indications of a contrary intention in the will.
The applicant raised a number of issues as to why the presumption should be rebutted, but was unsuccessful.
In particular:
Although the will used the terms “permit” to “use and occupy”, this was not evidence of a contrary intention;
The obligation to pay for repairs and taxes relating to the property was held to be evidence of the intention to grant a life interest, rather than the contrary;
The absence of an express right to rent from the property also did not displace the presumption; and
It was noted that the husband was a barrister (although not determinative) and had employed specialist lawyers to draft his will.
On the basis, therefore, that she held a life estate in possession a 50% interest in the property and the remaining 50% interest as tenant in common, the she was deemed to hold 100% of the property for land tax purposes and the assessment was upheld.
Conclusion
This case will have direct relevance where similar wording is used in wills to confer a “life interest” or “life estate in possession” on person.
Typically, there are SRO notification requirements when an executor is appointed to an estate and where property begins to be held by executors subject to a life interest. These should be considered as part of the administration of the estate and penalties can apply where these obligations are not met.
Other comments
Where a life interest is held, three parties can hold be relevant for the property. The life tenant, the person entitled to the fee simple in reversion or remainder and the registered owner of the land are all relevant parties.
This case did not consider whether the registered owner of the land (being the executors) also were deemed to be an owner for land tax purpose where the registered owners were also the holders of the residual estate or whether the wording of section 11 excluded them in both their capacity as executors and as holders of the residual estate.
It was not raised in the case, but under the recent Caloutas as trustee for the Caloutas Family Trust v Commissioner of State Revenue [2025] VCAT 82, the Commissioner would still have the discretion to choose to assess either the Applicant as holder of the life interest or the executors as registered proprietors. Nothing in section 11 of the Land Tax Act 2005 (Vic) prevents the Commissioner from treating the registered owner as owner.
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Phil Broderick
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