Aspic Holdings Pty Ltd v Chief Commissioner of State Revenue

[2009] NSWADT 111

CITATION:	Aspic Holdings Pty Ltd v Chief Commissioner of State Revenue [2009] NSWADT 111
DIVISION:	Revenue Division
PARTIES:	APPLICANT Aspic Holdings Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086116
HEARING DATES:	4 May 2009
SUBMISSIONS CLOSED:	4 May 2009
DATE OF DECISION:	18 May 2009
BEFORE:	Handley R - Deputy President
CATCHWORDS:	Land Tax – exemption - land used and occupied for an aged care establishment
LEGISLATION CITED:	Land Tax Management Act 1956 Taxation Administration Act 1996 Aged Care Act 1997 (Cth)
CASES CITED:	Nathan Scott Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 122 Applewood Residential Developments Pty Ltd v CMR of State Revenue [2006] VSCA 207 Commissioner of Land Tax v Christie (1973) 2 NSWLR 526 Lifestyle Retirement Project No 2 Pty Ltd v Chief Commissioner of State Revenue [2008] NSWADT 256
REPRESENTATION:	APPLICANT RM Higgins, counsel RESPONDENT AH Rider, counsel
ORDERS:	The Respondent’s Land Tax assessment is confirmed

1 This matter involves an application by Aspic Holdings Pty Ltd (‘the Applicant’) for the review of a decision of the Chief Commissioner of State Revenue (‘the Respondent’) disallowing the Applicant’s objection to a notice assessing the Applicant as being liable for the payment of Land Tax on five properties in Mortdale on the ground that the properties were not being used and occupied as an aged care establishment.

The Facts

2 The Applicant conducts business as a nursing home under the business name ‘Ferndale Gardens Aged Care Facility’ (‘the nursing home’) on land at Jersey Avenue, Mortdale. Between November 2005 and November 2006, the Applicant, with a view to redeveloping the nursing home and upgrading its facilities, settled the purchase of five adjacent properties: 43 and 45 Jersey Avenue and 26, 28 and 30 Milsop Place, on all of which stood private houses at the relevant time.

3 At midnight on 31 December 2005, 43 Jersey Avenue (purchase settled 2 November 2005) was vacant but was subsequently tenanted from 9 February 2006 to 14 December 2007. 28 Milsop Place (purchase settled 8 May 2006) was tenanted from 16 August 2006 to 13 September 2007. Thus, at midnight on 31 December 2006, 43 Jersey Avenue and 28 Milsop Place were tenanted. The other three properties were vacant.

4 From 18 January 2007 to 29 August 2007, 26 Milsop Place (purchase settled 16 November 2006) was tenanted, and from 1 March 2007 to 28 May 2007, 30 Milsop Place (purchase settled 20 October 2006) was tenanted.

5 On 14 December 2007, the builders engaged by the Applicant to redevelop the properties, for which development approval was granted in 2006, took possession of all five properties and fenced them off. Thus, at midnight on 31 December 2007, all five properties were under development.

6 On 14 May 2008, the Respondent issued the Applicant with a Land Tax Notice of Assessment for 43 Jersey Avenue for the 2006 to 2008 Land Tax years and for the other four properties for the 2007 and 2008 Land Tax years. On 14 July 2008, the Applicant signed an Objection to the Land Tax assessment, contending that the land was used and occupied as an aged care facility and was consequently exempt pursuant to s 10R of the Land Tax Management Act 1956 (‘the LTM Act’).

7 On 8 October 2008, the Respondent disallowed the objection on the ground that use of the lands for meetings and storage of equipment did not fall within the definition of ‘residential care’ and therefore did not attract the exemption under s 10R. Moreover, land being developed for an aged care establishment could not be described as being used and occupied as an aged care establishment: Nathan Scott Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 122 (‘the Nathan Scott case’). On 10 November 2008, the Applicant lodged an application for a review of this decision by the Tribunal.

The Relevant Legislation

8 Pursuant to s 100(3) of the Taxation Administration Act 1996, an applicant for review bears the onus of proving his/her case in the Tribunal.

9 Pursuant to ss 7, 8 and 9 of the LTM Act, Land Tax is chargeable on the taxable value of land that is not exempt based on the ownership of the land as at midnight on 31 December of each preceding year for which Land Tax is to be levied. Thus, the Applicant, being the registered owner of the properties in issue, is presumed to be liable for Land Tax based on its ownership of the land on 31 December of each preceding year, unless the land is exempt from tax. The relevant exemption in this matter is that contained in s10R, which states relevantly:

10R Retirement villages - exemption/reduction

(1) In this section:

"aged care establishment" means:

(a) any building or any part of a building used or intended to be used for the provision of residential care, within the meaning of the Aged Care Act 1997 of the Commonwealth, by an approved provider under that Act, or

(b) any building or any part of a building used or intended to be used for the provision of respite care, within the meaning of the Aged Care Act 1997 of the Commonwealth, by an approved provider under that Act.


...

(2) Land is exempt from taxation under this Act if the land is used and occupied as any of the following, or any combination of the following, and for no other purpose:

(a) an aged care establishment,

(b) a retirement village.




...

(4) For the purposes of this section, land does not cease to be used and occupied for the purpose of an aged care establishment or a retirement village merely because any building or improvement on the land is used or occupied for a purpose ancillary to that purpose.

(5) This section applies to land tax payable in respect of the year commencing on 1 January 1991 and any succeeding year.

10 The Dictionary in Sch 1 of the Aged Care Act 1997 (Cth) states that unless the contrary intention appears:

"residential care" has the meaning given by section 41-3.

...

"respite care" means residential care or flexible care (as the case requires) provided as an alternative care arrangement with the primary purpose of giving a carer or a care recipient a short-term break from their usual care arrangement. However, it does not include residential care provided through a residential care service while the care recipient in question is on * leave under section 42-2 from another residential care service.

11 Section 41-3 states:

Meaning of residential care

(1) Residential care is personal care or nursing care, or both personal care and nursing care, that:

(a) is provided to a person in a residential facility in which the person is also provided with accommodation that includes:

(i) appropriate staffing to meet the nursing and personal care needs of the person; and

(ii) meals and cleaning services; and

(iii) furnishings, furniture and equipment for the provision of that care and accommodation; and


(b) meets any other requirements specified in the Residential Care Subsidy Principles.

(2) However, residential care does not include any of the following:

(a) care provided to a person in the person's private home;

(b) care provided in a hospital or in a psychiatric facility;

(c) care provided in a facility that primarily provides care to people who are not frail and aged;

(d) care that is specified in the Residential Care Subsidy Principles not to be residential care.

The Applicant’s Evidence

12 The Applicant provided affidavits from Frank Moschella and George Fotoulis, both dated 23 February 2009. Neither witness was called for cross-examination.

13 Mr Moschella is a Director and the Chief Executive Officer of the Applicant. He said that as a part of the Applicant’s 10 year forward plan, it sought and obtained an allocation of a further 60 low care residential places at its principal place of business in Jersey Avenue from the Commonwealth Minister for Aging. The allocation was subject to conditions. The Applicant purchased the five additional properties in Jersey Avenue and Milsop Place for the express purpose of developing an extension of its existing aged care facilities.

14 Mr Moschella said apart from the short term tenanting of some of the five properties, they were only ever used for ancillary purposes related to aged care and in conjunction with the nursing home.

15 Mr Fotoulis is the Director of Nursing at the Applicant’s nursing home and has been employed by the Applicant for four and a half years. Mr Fotoulis said he has had many discussions with Mr Moschella about the redevelopment of the nursing home and was aware of the Applicant’s program of purchasing surrounding properties for the purpose of the redevelopment. He is also aware of the approval for an additional 60 beds.

16 Mr Fotoulis said he inspected the five adjacent properties purchased by the Applicant: the two properties in Jersey Avenue were single storey houses and the three properties in Milsop Place were two storey houses. He is aware some of the properties have been rented for short periods, but said that, otherwise, because the nursing home was short of space, the properties were used in conjunction with the nursing home for temporary storage of chairs, beds, furniture and stock, and for meetings. The properties were never used for any private purpose. Meetings held in the properties – in relation to maintenance, cleaning, domestic staff and administration, had the advantage that they avoided the constant interruption of meetings held in the nursing home. Mr Fotoulis said he attended a lot of such meetings. If the meetings involved only three or four persons, they used the smaller properties in Jersey Avenue; if the meetings involved larger numbers, they used the larger properties in Milsop Place.

17 Mr Fotoulis said that on 14 December 2007, the builders who had been engaged to undertake the redevelopment and renovations, fenced off the properties and the Applicant no longer had access to them.

The Applicant’s Submissions

18 Mr Higgins, for the Applicant, contended that the five properties were used to provide ancillary services for an aged care facility and should be exempt from Land Tax under s 10R of the LTM Act. While there were no nursing home residents living in the properties, they were primarily used for storage and meetings for the nursing home.

19 Mr Higgins referred to the requirement in s 10R(2) of the LTM Act that for land to be exempt it has to be “used and occupied” as an aged care establishment. The Applicants do not press for an exemption in respect of the properties rented during the relevant periods, but contend that otherwise the properties are exempt because they were used and occupied as an aged care facility. Mr Higgins submitted that the application of the exemption in the Applicant’s case was consistent with the Respondent’s Revenue Ruling No LT31, dated 26 March 1991, which states, in paragraph 5:

It should be noted that any part of the land which is used for purposes which are ancillary to use as a retirement village and/or a nursing home is also exempt. Such uses include leisure areas for the use of residents such as a swimming pool, a tennis court or a park, or a kiosk or shop(s) whose principal functions is to serve residents.

20 Mr Higgins submitted that while the only specific ancillary uses referred to relate to leisure, the language of this paragraph is clearly inclusive and the ordinary meaning of the words should be construed as extending to ancillary uses such as storage and staff meetings. He said it is highly artificial to look at which individual blocks of land the residential part of the complex is built on. The ancillary uses of the properties were for the purpose of supporting the nursing home - for example, a storage facility being a necessity.

21 In relation to the Victorian Court of Appeal decision in Applewood Residential Developments Pty Ltd v CMR of State Revenue [2006] VSCA 207 (‘Applewood’) referred to by the Respondent, Mr Higgins noted that the Court spoke of purposes necessary for the use and occupation of a retirement facility. He said the Applicant in the present matter contends that use of the properties for storage and meetings was necessary to support residential care. Mr Higgins noted that the cases relied on by the Respondent are concerned with land under development rather than, as in the present matter, land used for ancillary purposes.

The Respondent’s Submissions

22 Mr Rider, for the Respondent, referred to the exemption in s 10R(2) for land “used and occupied” as an aged care establishment. He submitted that the word ‘use’ should be interpreted having “regard to the purpose to which land is put”: Commissioner of Land Tax v Christie (1973) 2 NSWLR 526, at 533 (per Bowen JA). In the present case, the land in question was not used to provide residential care; it was not used as an aged care establishment.

23 With regard to the occupation of the land, Mr Rider submitted that to satisfy the s 10R exemption, the Applicant had to physically occupy the land as an aged care establishment “and for no other purpose” (s 10R(2)). The Applicant did not occupy the properties tenanted during the period of their tenancies. Moreover, there was no actual aged care establishment physically occupying the land during the relevant years. The land was either physically occupied by tenants, or for meetings and storage, or by the builders.

24 Mr Rider referred to the meaning of ‘aged care establishment’ in s 10R(1) of the LTM Act and the definition of ‘residential care’ in s 41-3 of the Aged Care Act 1997 (Cth). He submitted it is clear that an aged care establishment is one that is operational and providing care and accommodation to residents. This was not the case in respect of the land in issue. In any event, it was not the Applicant’s intention to use any existing building on the land to provide residential care. Rather, its intention was to demolish the existing buildings and build a new facility. Thus, s 10R could not apply.

25 With regard to Revenue Ruling No LT31, Mr Rider noted that the reference in paragraph 5 to “any part of the land” used for ancillary purposes. He submitted that this does not apply to ancillary purposes operating on different land to that on which the aged care establishment is located and where the principal function is not serving residents of the aged care establishment. In the Applicant’s case, the buildings used for storage and meetings were not on the land used for the aged care establishment: they were on different land.

26 Mr Rider referred to the decision in Lifestyle Retirement Project No 2 Pty Ltd v Chief Commissioner of State Revenue [2008] NSWADT 256 (‘the Lifestyle Retirement Project case’), at [45], where Hole JM, said:

45 The applicant relied on the submission that once the redevelopment of the site had commenced then the only use or occupation of the subject land could be as a retirement village. Section 10R(2)(b) of the Land Tax Management Act 1956 refers to the land being used and occupied as a retirement village. This section does not permit recognition of a future use, the section clearly refers to the land being used (and occupied) at the time of consideration of land tax liability. The land tax liability was as at 31 December 2004 and 31 December 2005 when the subject land was being used (and occupied) for the purposes of construction of the proposed retirement village. It was not being used and occupied as a retirement village.

27 Mr Rider also referred to the Victorian Court of Appeal decision in Applewood, in which provisions similar to those operating in NSW (on which the Victorian provisions were modelled) were considered, where, at [17], Chernov JA, with whom Nettle and Redlich JJA agreed, said that “the point is not simply whether it [the land] was held for the purpose of a retirement village. It is whether it was used and occupied as such.” At [26], he distinguished land used or held for the purposes of a retirement village from land that was used and occupied as a retirement village. It was only in the latter case that the exemption is engaged.

28 Mr Rider noted the Tribunal’s decision in the Nathan Scott case, where, at [23], Verick JM held that land in the early stages of development as an aged care establishment was not occupied as an aged care establishment and did not attract the exemption.

29 For the above reasons, the Respondent submits that the assessment should be affirmed and the application dismissed.

Consideration

30 The issue in this case is whether the Applicant can rely on an exemption from liability for payment of Land Tax for the relevant Land Tax years under s 10R(2) of the LTM Act in respect of the five properties referred to above. This turns on whether the land was “used and occupied” as an ‘aged care establishment’. As stated above, an ‘aged care establishment’ is one in which ‘residential care’ is provided, as defined in s 41-3 of the Aged Care Act 1997 (Cth).

31 Mr Rider submitted that the parcels of land in question were not ‘used’ to provide residential care during the relevant periods, and were not, therefore, ‘used’ as an aged care establishment. He referred to the Victorian Court of Appeal decision in Applewood in support of his contention that not only ‘use’ but also ‘occupation’ for the purpose of the aged care establishment are required for the exemption to apply. I note that the relevant Victorian legislation in that case is drafted in similar terms to the relevant provisions of the LTM Act. At [27], Chernov JA specifically referred to the Victorian provisions having been modelled on the provisions of the LTM Act. Undoubtedly, the decision in that case is a highly persuasive authority for present purposes. The Court of Appeal emphasised that the land must be used and occupied as (in that case) a retirement village at the relevant time for the exemption to apply.

32 Similar emphasis was given to the requirement for ‘use and occupation’ in the Tribunal decisions in the Nathan Scott and Lifestyle Retirement Project cases. Those cases concerned the redevelopment of the land in question for a proposed aged care establishment and retirement village respectively. In both cases, the Judicial Members interpreted s 10R(2) as requiring that the use and occupation must be established at the relevant Land Tax date. A future use and occupation does not satisfy the requirement.

33 In my view, the requirement for use and occupation was correctly interpreted in those cases. With regard to the Applicant’s submission that the land was being used for a purpose ancillary to the purpose of an aged care establishment (s 10R(4)), I agree with the Respondent’s submission that the reference in that subsection is to circumstances where there is more than one purpose to the use and occupation of the one piece of land. It does not extend to ancillary uses on other land as is the case here. This interpretation is in line with Revenue Ruling No LT31, which refers to “any part of the land which is used for purposes which are ancillary to use as a retirement village and/or nursing home”.

34 Thus, I am not satisfied that the Applicant’s five parcels of land, which are the subject of the Land Tax assessment under review, meet the requirements for an exemption under s 10R(2) of the LTM Act.

Decision

35 Pursuant to s 101(1) of the Taxation Administration Act 1996, I therefore confirm the Land Tax assessment made by the Respondent.