The ACT Government could be hit with demands for refunds of millions of dollars it reaped in stamp duty on house-and-land packages in Canberra's north after accepting defeat in a landmark legal case.
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The territory will not go to the High Court to fight a decision by the ACT's courts knocking down a young couple's stamp duty bill from $16,800 to just $20.
Lawyers for the couple have advised purchasers across the government's land-release scheme to check their stamp duty bills to see if they, too, are entitled to windfall refunds.
The government confirmed on Monday that it has issued instruction to Canberra's lawyers and their peak body, The Law Society of the ACT, on how to deal with what could become a flood of inquiries.
The time limit for an appeal by the territory to the High Court ran out on Friday and government solicitors indicated that they will accept the ACT Court of Appeal's decision that it had no right to charge the stamp duty on a home that had not been built yet.
The Court of Appeal's decision was the second time Treasury failed to overturn the judgment, which could open the floodgates to a torrent of litigation from buyers who bought house-and-land packages in Canberra's north in government affordable housing schemes before 2011.
The Court of Appeal upheld Supreme Court Justice Hilary Penfold's decision in March 2013 in favour of the couple - itself upholding an earlier Civil and Administrative Appeals Tribunal ruling - after the two federal public servants claimed the territory could only impose stamp duty on the land, valued at $80,000, not the whole $430,000 house-and-land package.
The decision meant a stamp duty bill of $16,800 was slashed to just $20 after the reduction left them eligible for a first-home buyer's stamp duty concession.
Justice Penfold had upheld the tribunal's view that the house should not be taxed because there were separate contracts, with separate parties, to buy the land and build the home.
Roozbeh Araghi and his partner Luke Dorsett bought their house-and-land package at the Terrace Development at Crace, a joint venture between the Land Development Agency and builder CIC, in April 2010, after the couple queued overnight to secure an estate place.
But their purchase sparked a four-year legal battle to get their stamp duty payments back.
The couple's lawyer Allan Nelson welcomed the victory on Monday and advised other purchasers of
house-and-land packages to check the fine-print on their contracts.
"If they fit into situation that our people were in, then they'll get a refund of stamp duty they shouldn't have paid on the building contract," Mr Nelson said.
"It certainly applies to this development, I haven't seen the details in the clauses of the contracts of the other ones but if they're similar it could well be the same. If the contracts are similar to the ones they used in Crace then they could be covered by this."
A spokesman for Chief Minister Katy Gallagher said the government had accepted the decision and noted that purchasers were entitled to ask for a reassessment of the stamp duty bills. "The Revenue Commissioner has accepted the judgment and is amending its assessment processes accordingly," the spokesman said. "Taxpayers may apply for a reassessment of the Crace contracts if they believe that duty was applied incorrectly, noting that the Commissioner's discretion to reassess is limited by legislation to a period of five years. "Information has been provided to solicitors and the law society to inform them of the process."
