Off-the-plan buyers who were hit with bills for hundreds of dollars due to the new vacancy tax will be reimbursed, after the Barr government acknowledged the charge was an "unintended consequence".
Empty properties in Canberra began to incur land tax from July 1 last year, a policy designed to stop landlords sitting on vacant property and improve housing affordability.
But the extension of the tax has led to unforeseen complications.
One property owner who reached out to The Canberra Times said her tenants moved out on January 2 and she moved in on January 3, but she was charged a full quarter's land tax - $1900.
Another woman said she was charged $450 in land tax after her off-the-plan apartment settled on October 4 last year - four days into the quarter.
She was a first home buyer who'd purchased the property in March 2017, well before the vacancy tax legislation passed.
"I was effectively charged an investor tax before I even owned a property. I qualified for the first home buyers grant, clearly I'd never owned a property. This completely came out of the blue for me," she said.
Solicitor David Claxton has been trying to get the charges waived for several of his clients but said the Revenue Office even refused to acknowledge the minister had discretion in remitting part or all of land tax under the legislation.
But late on Tuesday, an ACT government spokesman said the government would fix the problem "as a priority".
He said "any unintended consequences from this legislation be addressed and charges will be waived".
The promise came after heavy criticism for the way the policy had affected home buyers.
ACT Opposition leader Alistair Coe said people should not have to foot the bill for an entire quarter if their property has only been vacant for a few days.
“When you have a tax regime designed to hurt everyday Canberrans, you have to ask who is this government for. It’s policies like this that makes living in Canberra harder and harder for so many people," Mr Coe said.
“This sort of revenue raising practice adopted by Labor is akin to the ‘fee for no service’ scandal, highlighted in the banking royal commission and widely condemned by Australians.”
However retired solicitor Peter Waight, who spent 38 years working in conveyancing, said it was likely "just unfortunate and unintended consequence which ought to be looked at by government".
Nevertheless, he described the situation as "absolutely bloody ridiculous" and "absolutely inequitable".
He said there was another problem that arose when a tenant moved out in one quarter and a buyer moved in during the next.
While there is an exemption if an owner moves in to make the property their principal place of residence within three months of the tenant vacating, Mr Waight said the Revenue Office had taken the inexplicable view that only applied to the existing owner and not a buyer and had sent the new owners a land tax bill.
"It shouldn't matter if the owner moves back in after three months or a new buyer, the gap is the same," Mr Waight said.
He said the new provisions also did not give people enough time to settle property.
"The problem is when people move out immediately because they have to move interstate for a job or something, they're only given the rest of that quarter and the next quarter not just to sell but to settle," Mr Waight said.
Between the time it took to list the property, get builders reports, find a suitable buyer, exchange contracts and get finance, Mr Waight said the process could be lengthy. If the seller moved out just before the end of the quarter, it would mean they would have a little over three months to complete all that.
"A six-month period would be fairer," Mr Waight said.
He also said there was a question mark hanging over what happened when people went on extended holidays, particularly in the case of grey nomads who hit the road for 12 months at a time.
"They may have lived in the house for decades but the question is when does it stop being their principal place of residence? It's not in the legislation," Mr Waight said.
He also suggested these people may be more reluctant to let their property out now due to changes to tenancy laws that give renters greater rights to have pets.
"A retiree coming back to their property might be very reluctant to let in that sort of situation," he said.