Anderson v Chief Commissioner of State Revenue
[2006] NSWADT 172
•06/08/2006
CITATION: Anderson v Chief Commissioner of State Revenue [2006] NSWADT 172 DIVISION: Revenue Division PARTIES: APPLICANTS
Adrian Wallace Anderson and Mary Anderson
RESPONDENT
Chief Commissioner of State RevenueFILE NUMBER: 056105 HEARING DATES: 8/02/2006 SUBMISSIONS CLOSED: 02/08/2006
DATE OF DECISION:
06/08/2006BEFORE: Hole M - Judicial Member CATCHWORDS: Land tax exemption - principal place of residence MATTER FOR DECISION: Principal matter LEGISLATION CITED: Land Tax Management Act 1956 CASES CITED: Crea & Anor v Chief Commissioner of State Revenue [2002] NSWADT 125
Wilkes v Chief Commissioner of State Revenue [2002] NSWADT 248REPRESENTATION: APPLICANTS
RESPONDENT
In person
S Benjamin, solicitorORDERS: 1. The decision of the Chief Commissioner of State Revenue is affirmed
1 The applicants have applied to the Tribunal for review of the decision of the Chief Commissioner of State Revenue to assess land tax for the 2005 year on the land which the applicants had purchased in October 2003 (“the subject property”). The hearing of the matter was by telephone attendance of the applicants.
Facts
2 The applicants owned and lived in a property at Caringbah as their principal place of residence in the period before they purchased the subject property in October 2003.
3 In October 2003, the applicants purchased the subject property with the intention that they build a house thereon and move into it as their principal place of residence as their retirement home.
4 In April 2004 the State Government announced the removal of the threshold (which had exempted part of the value of a property which was subject to land tax) from the calculation of the land tax payable for the 2005 land tax year. The effect being that land not being the principal place of residence of an owner which was owned as at 31 December 2004, was subject to land tax on the full land value of that land. If the threshold had not been removed, the land value of the subject property would have been below the previous threshold.
5 In January 2004 the applicants signed a contract with a builder to construct a house on the subject property. A construction certificate was issued by the Local Council on 13 April 2004. The construction was expected to be completed within four months.
6 The applicants placed their principal place of residence on the market for sale in June 2004. It was sold on 6 April 2005.
7 The Office of State Revenue issued a notice of assessment on 12 June 2005 to the applicants.
8 The applicants completed a Land Tax Variation return on 18 July 2005 which disclosed the principal place of residence at Caringbah up to 6 April 2005 and the subject property as their postal address being as and from 6 April 2005. The applicants also lodged an objection with the Office of State Revenue dated 18 July 2005.
9 By letter dated 11 August 2005 the Chief Commissioner of State Revenue advised the applicants that their objections had been considered and disallowed.
Legislation
10 Land Tax Management Act 1956 (“the Act”)
- Section 3
“Section 3 Definitions
“principal place of residence” of a person means the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person.”
Clause 6 – Schedule 1A
“Schedule 1A – Principal place of residence exemption
6. Concession for unoccupied land intended to be owners principal place of residence
(1) An owner of unoccupied land is entitled to claim the land as his or her principal place of residence, if the owner intends to use and occupy the land solely as his or her principal place of residence. In such a case, the owner is taken, for the purpose of the principal place of residence exemption, to use and occupy the unoccupied land as his or her principal place of residence.
(2) This clause does not apply unless:
- (a) the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence, and
(b) if those building or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since that commencement, and
(c) the intended use and occupation of the land is not unlawful.
- (a) 2 tax years immediately following the year in which the person became owner of the land, or
(b) if the land is used and occupied for residential purposes by a person other than the owner at any time after the person became owner, 2 tax years immediately following the tax year in which the building or other works necessary to facilitate the owner(s) intended use and occupation of the land are physically commenced on the land.
- (a) there is a delay in the completion or, in a case referred to in subclause (3)(b), the commencement of the building or other works necessary to facilitate the owner(s) intended use and occupation of the land, and
(b) the delay is due primarily to reasons beyond the control of the owner.
…”
7 Concession for sale of former principal place of residence
(1) If the Chief Commissioner is satisfied that, on a taxing dated (“the relevant taxing date”):
- (a) a person is the owner of land (“the former residence”) that was the principal place of residence of the person on the relevant taxing date or was the principal place of residence of the person on the preceding taxing date, and
(b) the person is the owner of other land (“the new residence”) that is being or is intended to be used and occupied by the person as his or her principal place of residence.
(2) This clause applies in respect of land owned by a person only if the Chief Commissioner is satisfied that:
- (a) the former residence has not been used or occupied except as the person(s) principal place of residence, and no income has been derived from the use or occupation of the residence, since the preceding 1 July, except:
(i) income derived from an excluded residential occupancy (within the meaning of clause 4), or
(ii) income derived under a lease or licence entered into by the purchaser under a contract fro the sale of the former residence for a period pending completion of the sale, and
(b) the person became the owner of the new residence within the period of 6 months before the relevant taxing date, and
(c) since the person became owner of the new residence the new residence has not been used or occupied except:
(i) as the person(s) principal place of residence, or
(ii) by a tenant under a lease entered into by the previous owner, and
(d) the person intends to dispose of the former residence within 6 months after the relevant taxing date.
- (a) the person fails to dispose of the former residence within 6 months after the relevant taxing date, or such further period as may be approved by the Chief Commissioner, or
(b) the person is not actually using and occupying the new residence as his or her principal place of residence by the next taxing date immediately following the relevant taxing date.
(5) For the purposes of this clause, a person “disposes” of a former residence if:
- (a) the person ceases to be an owner of the former residence, or
(b) the person enters into an agreement for the sale of the former residence.”
11 The applicants decided in mid 2003 to relocate to a country area and build a new home for their retirement, they were advised by Centrelink that they should complete this in 12 months. Accordingly they planned to buy a block of land, build a new house, while selling their Caringbah home within the next 12 months.
12 The subject property was purchased in September 2003, they shopped around for a builder and they signed a contract with a builder in January 2004. They were advised that the building would not be commenced until mid March. Ultimately the house construction commenced in April 2004 and was completed in October 2004.
13 Before they were able to prepare the home at Caringbah for sale, Mrs Anderson suffered a broken shoulder in December 2003 and on 26 January 2004 Mr Anderson suffered a heart attack.
14 In June 2004, the applicants’ home at Caringbah was placed on the market. The Real Estate Agent placed a sale price on the property which the applicants submitted was too high for the then current trend in the market. The applicants believed that the Vendor Tax introduced by the State Government had caused a decline in the market. The applicants received two aborted offers on the property in the six months to December 2004 even though they had lowered the price by $80,000.00 over that period. They decided to take the property off the market and then placed it for sale with a new agent in January 2005. The property was then sold on 26 February 2005 with completion on 6 April 2005 when they moved into their new principal place of residence at the subject property.
15 The applicants had secured a loan for the purposes of purchasing the subject property and building a new home, this was by a mortgage over the property at Caringbah. They did not have sufficient funds to buy a second property. The applicants are in their seventies and are pensioners. They believed that they had two options before they purchased being either to stay at Caringbah and mortgage the home to have money to live on or to, as they have done, sell Caringbah and purchase a replacement property in the country. By building a new home, this would reduce maintenance for the future and provide a low key retirement. They intended to coordinate the move in a timeframe that would fit into the rules which unfortunately did not happen.
16 The applicants submitted that they were not aware of the land tax implications, they had heard about the removal of the threshold. That because of the fall in the market, their health problems and delays in building there was not enough time for them to complete the building and sale.
- Respondent’s submissions
17 The respondent’s representative drew attention to the change in the legislation whereby the earlier Section 10T of the Act was replaced by Clauses 6 and 7 of Schedule 1A of the Act. Section 10T has been considered in Crea & Anor v Chief Commissioner of State Revenue [2002] NSWADT 125 and Wilkes v Chief Commissioner of State Revenue [2002] NSWADT 248.
18 The respondent’s representative submitted that Clause 6 provides an exemption where the owner has bought land for the purposes of building a home as a principal place of residence and does not own another property that is the owner’s principal place of residence.
19 The taxing date in this matter is 31 December 2004. The concession provided in Clause 7 Schedule 1A exempts property from land tax in particular circumstances. In this matter, the purchase of the subject property would have needed to have been undertaken on 1 July 2004 or anytime thereafter to 31 December 2004 to have obtained this exemption to comply with Clause 7(2)(b). The property was purchased in October 2003. Then pursuant to Clause 7(2)(d) the applicants needed to sell the former principal place of residence on or before 30 June 2005. The property was sold ultimately on 6 April 2005. However it was submitted that as the exemption provided in Clause 7(2) was unavailable, the sale prior to 30 June 2005 was irrelevant.
20 That, whilst the respondent understands the delay that occurred in the sale of the Caringbah property, that the applicants had health problems and it was unfortunate that the statutory tax liability was imposed on the subject property, the decisions of the applicants had been made for financial reasons. That the land tax in the sum of $780.00 had been paid and no penalties or interest had been applied.
Reasons for decision
21 The applicants had planned their move to the retirement home to be constructed on the subject property carefully.
22 Unfortunately both the applicants suffered health problems over the period December 2003 to January 2004 at the time that they were looking to contract to build and prepare the former principal place of residence for sale. Events overtook them in that the State Government removed the threshold in assessment of land tax. Thus, unless a legislative exemption was available, the applicants needed to have either sold their former principal place of residence before 31 December 2004 or have been able to satisfy the purchase/sale timetable set out in Clause 7(2) Schedule 1A.
23 The applicants did place the former principal place of residence on the market in June 2004 and apparently because it may have been overpriced, it did not sell prior to 6 April 2005. This was a financial decision which the applicants made with the assistance of professionals.
24 To be fair and reasonable to the applicants and to any other land tax payers the provisions of the possible exemption must be applied fairly and reasonably.
25 The applicants have complied with all the requirements of Clause 7(2) except Clause 7(2)(b). With the combination of the removal of the threshold (affecting land tax assessments relating to land owned as at midnight on 31 December 2004) for the 2005 land tax year and having bought the subject land prior to 1 July 2004 the applicants became liable for assessment to land tax for the 2005 land tax year which was correctly assessed.
ORDER
- 1. The decision of the Chief Commissioner of State Revenue is affirmed.
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