Avitaia v Chief Commissioner of State Revenue (Rd)

[2008] NSWADTAP 57

Appeal Panel - Internal

CITATION:	Avitaia and ors v Chief Commissioner of State Revenue (RD) [2008] NSWADTAP 57
PARTIES:	APPELLANTS Elaine Therese Avitaia, Felice Avitaia, Colin Wayne Brown, Jennifer Mary Brown, Irwin Lloyd Kent, Moresaco Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	089027
HEARING DATES:	30 July 2008
SUBMISSIONS CLOSED:	30 July 2008
DATE OF DECISION:	2 September 2008
BEFORE:	O'Connor K - DCJ (President); Hirschhorn M - Judicial Member; Bennett C - Non-Judicial Member
CATCHWORDS:	Land Tax - Principal Place of Residence Exemption - Land Co-Owned by Company - Portions used as Principal Places of Residence - Land Tax Management Act 1956 - Schedule 1A - Construction
DECISION UNDER APPEAL:	Avitaia and ors v Chief Commissioner of State Revenue [2008] NSWADT 65
FILE NUMBER UNDER APPEAL:	076076
DATE OF DECISION UNDER APPEAL:	03/04/2008
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Conveyancing Act 1919 Land Tax Management Act 1956 Taxation Administration Act 1996 Valuation of Land Act 1916
CASES CITED:	Bagust v Rose [1964] NSWR 5 Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642 Chief Commissioner v Paspaley [2008] NSWCA 184 Forgeard v. Shanahan (1994) 35 NSWLR 206 McMillan v Chief Commissioner of Land Tax [1972] 1 NSWLR 545 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Pascoe v Swan (1859) 27 Beav 508; 54 ER 201 Ryan v Chief Commissioner of Land Tax [1982] 1 NSWLR 305 Tittman v Traill (1957) 74 WN (NSW) 284
REPRESENTATION:	APPELLANTS R Richards, solicitor, Robert Richards and Associates RESPONDENT M England, counsel / Crown Solicitor's Office
ORDERS:	Appeal dismissed

1 All land situated in New South Wales and owned by taxpayers is subject to land tax, other than land which is exempt: Land Tax Management Act 1956, s 7 (the Act). Land exempted from tax includes ‘land that is exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1A: s 10(1)(r )’.

2 The main issue in this appeal concerns the availability of this exemption when a principal place of residence is situated on a parcel of land that has as a registered co-owner a company. Schedule 1A provides, as relevant to this case:

‘ 11 Exemption does not apply to land owned by companies and trustees

(1) Land is not exempt from taxation under the principal place of residence exemption if:

(a) the land is owned, or jointly owned, by a company, …’.

3 This provision took effect for the land tax year commencing 1 January 2004. A like provision applied for the tax year 2003: s 10AA; and prior to that time, s 10(1D)(a), both provisions now repealed.

4 The Chief Commissioner (‘the Commissioner’) has consistently assessed as liable to pay land tax the owners of the allotment of land that is Lot 29 on DP 752017, Local Government Area: Warringah, Parish of Broken Bay, County of Cumberland known as 313 Mona Vale Road, Terrey Hills. The allotment is a large one (18,827 sq metres, i.e. approximately 1.8 hectares or 4.5 acres). The land has grass paddocks, sheds, stables and three areas within which are found buildings capable of being used as residences. It adjoins Mona Vale Road at one end, and Myoora Road at the other end.

5 The registered title to the land shows the following persons as tenants in common in the following proportions:

(i) Irwin Lloyd Kent – 51,912/236,550 share (i.e. a little under 22%)

(ii) Colin Wayne Brown and Jennifer May Brown as joint tenants in a 25955/236550 share (i.e. a little under 11%)

(iii) Elaine Therese Avitaia and Felice Avitaia as joint tenants in a 25955/236550 share (i.e. a little under 11%)

(iv) Moresaco Pty Ltd – 132728/236550 share (i.e. a little over 56%).

6 These persons lodged the application for review that has given rise to this appeal in which they are the appellants. (Moresaco Pty Ltd is a nominal party to the proceedings, and does not seek any relief from the proportion of the land tax attributable to its occupation.)

7 They disagree with the Commissioner’s assessments issued for the years 2000 to 2006. Their claim is that the assessment should be reduced to take account of the circumstances under which Mr Kent, Mr and Mrs Brown, and Mr and Mrs Avitaia occupy the land.

8 In each of their cases they submit that as they each occupy a defined portion of the subject land as their principal place of residence, they should be relieved of the proportion of the overall land tax bill that matches those defined portions.

9 The defined portions can be ascertained by a Deed entered into between all of the persons mentioned in 1995. Their submission is that it constituted an equitable partition of the land. There are three defined portions expressed to be for the exclusive use and occupation of Mr Kent, the Browns and the Avitaias respectively. They are set aside and used, it is said, for their principal places of residence. They argue that these portions should be relieved of liability to land tax. They contend that the rule in cl 11 does not apply to preclude them being granted an exemption.

10 The Tribunal rejected these submissions. It found that it was possible for parties who are co-owners of land to engage in the voluntary partition of land, and thereby create separate equitable interests. It was not satisfied, on the evidence, that such a partition had been effected by the Deed.

11 Procedurally, we note that the Commissioner’s assessments for the years 2000 to 2004 did not give rise to timely objections, and consequently there have been no formal objection decisions. The Tribunal’s review jurisdiction is conferred by the Taxation Administration Act 1996 (TAA), s 96 empowering a taxpayer to apply for ‘review of a decision of the Commissioner that has been the subject of an objection under Division 1’.

12 In this case therefore, it would appear that the Tribunal, and consequently this appeal to the extent that it may be seen to put in issue the 2000-2004 assessments, is not competent, because:

(1) The objections made by the taxpayer to the 2000-2004 assessments were out of time under s.89 TAA. The Commissioner did not allow permission for additional time to lodge the objections under s.90 TAA and thus they were not valid objections for the purposes of s.86 TAA. See recently, as to timely objections being a precondition: Chief Commissioner v Paspaley [2008] NSWCA 184.

(2) The taxpayer does not seem to have made an objection against the decision of the Commissioner to refuse to allow additional time to lodge the objections.

(3) The taxpayer does not seem to have made an objection against the decision of the Commissioner to reassess the 2000-2004 years under s.9 TAA.

13 We note that this may be because the Commissioner did not issue notices of reassessment (which he should have done and may have prompted the taxpayer to lodge objections). Even if the Commissioner had issued such notices, it appears that permission would still have been required from the Commissioner to lodge objections which would have also been out of time (by operation of ss 86(2)(c) and 86(3) TAA).

14 There is no dispute that the 2005 and 2006 assessments did result in objections and objection decisions that found the Tribunal’s review jurisdiction. As there is no material difference in the circumstances applicable to the various years, the parties, as we understand the material and the approach of the Tribunal below, have proceeded on the basis that 2006 can be used as the ‘sample’ year, and the Commissioner will proceed to deal with all of the years from 2000 to 2006 in line with the decision as it relates to the 2006 year.

The Appeal

15 An appeal may be made as of right in respect of a ‘question of law’, and may, by leave of the Appeal Panel, be extended to the merits: Administrative Decisions Tribunal Act 1997 (the ADT Act), ss 112, 113.

16 The appellants have reiterated the same arguments that failed before the Tribunal in support of its appeal. The Commissioner, in reply, submits that the Tribunal was correct in its factual analysis, but in any event, even if an equitable partition had occurred, that was irrelevant to the applicability of the exclusion effected by cl 11. All that matters, it is submitted, is that there is a co-owner that is a company on the face of the title.

17 The first two grounds of appeal challenge the Tribunal’s conclusion that the Deed did not effect an equitable partition of the land. The third ground of appeal challenging the Tribunal’s conclusion that cl 11(1)(a) was applicable is, in essence, supplementary.

Some Further Background

18 As we understand its history, the land was owned as at 1995 by Mr Kent, of the one part, and Moresaco Pty Ltd (a company connected with Mr Wilfred Kelvin) of the other part, as tenants in common. The practical use of the land was divided around 60/40 as between Mr Kelvin and Mr Kent respectively. This information is found in a surveyor’s report done that year, and found on the Warringah Council file that formed part of the material before the Tribunal.

19 The survey report noted that various activities were conducted on the land. Mr Kelvin used it for an organisation known as Fund for Animals, described as a charity devoted to care for distressed animals. Mr Kent used the land for, what is described in the Tribunal’s reasons, as his hobby of horse breeding. He also administered a business from the site known as Aircop Air Conditioning Pty Ltd.

20 The land had on it some buildings used as residences.

21 Mrs Brown and Mrs Avitaia are daughters of Mr Kent. Mrs Brown had lived on the land for many years. Mrs Brown is an equal shareholder with her father in the business of Aircop Air Conditioning.

22 The Deed executed in September 1995 purports to grant each of the parties exclusive occupation of portions of the land. The Deed includes an annexure, a sketch plan, showing how the land is to be divided as between residential and non-residential uses.

23 The purpose of the Deed, it seems, was to enable Mr Kent to effect a division of half of his prior interest in the land in a way which enabled the Avitaia family and the Brown family to have a secure home. There is reference in the reasons of the Tribunal to mortgages being taken out by the Avitaias and the Browns in connection with the acquisition of these interests.

24 There is no objection by the Commissioner to the Tribunal’s ruling that the portions of land occupied by the Avitaia family and the Brown family are used exclusively as their principal places of residence. The Tribunal was not satisfied that Mr Kent had discharged his onus to satisfy it that the building which he claimed as his residence was in fact his principal place of residence.

25 In the instance of Mr Kent, the appellants seek leave to extend to the merits. It is asserted that ‘the evidence shows that Mr Kent used that part of the property … to which he had a right to exclusive possession as his principal place of residence’.

The Partition Grounds: Grounds 1 and 2

26 Butt, Land Law (4th ed. 2001), states at [1468]:

‘Partition terminates co-ownership. By partition, each co-owner becomes the sole owner of a specifically ascertained portion of the land: their interests in the land become ‘divided’.’

27 An English legal dictionary, Mozley & Whiteley’s Law Dictionary (10th ed. 1988, Hardy Ivamy (ed)) defines partition as follows:

‘A dividing of land held in joint tenancy, in coparcenary, or in common, between parties entitled to it; so that the estate in joint tenancy, coparcenary or common is destroyed, and each party has henceforth an undivided share. This may be done by agreement, by deed of partition, or compulsorily by an action in the Chancery Division. …’

28 In New South Wales court-ordered partition is governed by the provisions of the Conveyancing Act 1919, ss 66F-66I.

29 The Act acknowledges that land may be owned ‘at law’ and ‘in equity’. The meaning of ‘owner’ in the definition section, s 3, is an expansive one, reflecting that possibility:

‘ Owner includes:

(a) in relation to land, every person who jointly or severally, whether at law or in equity:

(i) is entitled to the land for any estate of freehold in possession, or

(ii) is entitled to receive, or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise.’

30 Section 25 also refers to equitable ownership. It provides:

‘ 25 Equitable owner

(1) The owner of any equitable estate or interest in land is liable in respect of land tax as if he or she were the legal owner of the estate or interest and land tax is to be assessed accordingly.

(2) For that purpose:

(a) the owner of the legal estate is taken to be the primary taxpayer and the owner of the equitable estate is taken to be the secondary taxpayer, and

(b) there is to be deducted from the land tax payable by the secondary taxpayer in respect of the land such amount (if any) as is necessary to prevent double taxation.

(3) This section does not apply in respect of land that is subject to a special trust.

(4) This section is subject to the other provisions of this Act, in particular sections 25A [classification of trust as a special trust] and 26 [vendor/purchaser, incomplete transfers].’

31 The Commissioner concedes that co-owners can arrange an equitable partition of land with the result that a natural person may obtain an equitable title in respect of defined land. But the Commissioner contends that cl 11(1)(a) remains applicable, and determinative, if a co-owner on the title is a company.

32 The Tribunal had affidavit evidence from Mr Kent, Mr Brown, Mrs Brown and Mrs Avitaia. It also had the Commissioner’s material, required to be filed under s 58 of the ADT Act. The Commissioner placed in evidence various documents: one, a driver’s licence showing Mr Kent’s address as Cooranbong; 2004 water invoices relating to the land as a whole addressed to Mr Kent, Mrs Brown, Mrs Avitaia and the company for ‘residential property’; 2005 and 2006 water invoices addressed to the same persons relating to the land as a whole for ‘commercial property’.

33 The Tribunal noted that the sketch plan annexed to the Deed marked various parts of the land to various parties. First it referred to the Moresaco land. It then went on to describe the other allocations as follows (para [24]):

‘(d) As to the balance of the land, which is bordered on the top and right hand sides by the Moresaco land, on the left side by Myoora Road, and on the bottom, presumably, by neighbouring land (“the sub-block”), it is bisected by a driveway. The various portions of the sub-block are marked out (presumably by fences, given the use of some of the land for horse purposes). The driveway ends at a portion allocated to Mr Kent. That portion extends the width of the sub-block, and is used by Mr Kent as a horse paddock.

(e) As one progresses up the driveway from Myoora Road, there is land forming the sub-block on either side and at the end of the driveway. The various parts of the sub-block are allocated as follows:

(i) Mr Kent has two grass paddocks on the left and two areas on the right of the driveway, forming a workshop and a horse riding arena.

(ii) the next two portions opposite each other on the left and the right of the driveway are allocated to the Browns. They have a horse paddock on the left of the driveway and a residence on the right.

(iii) Past the Browns’ portion there is a horse paddock on the left and a residence on the right, allocated to the Avitaias and occupied by Mrs Avitaia and her family.

(iv) The driveway ends here; Mr Kent’s horse paddock extends the whole width of the sub-block, and to the right of that, adjacent to the Moresaco block, there are stables and sheds used by the Avitaias.’

34 The Tribunal referred to Clause 2 of the Deed under which each of the parties were given exclusive possession, use and enjoyment of the allocated parts to which was annexed the sketch of the property. The parties agreed not to disturb each other’s exclusive use. The Deed required all rates and taxes or other charges assessed upon the subject property to be paid promptly when due ‘in the proportions in which they hold an interest in the subject property’.

35 The Tribunal then examined the appellants’ evidence as to their use and occupation of the land.

36 Later in its reasons (at [41] and following) the Tribunal referred to the recitals to the Deed, and set out the terms of Clause 2, Clause 3, Clause 9 and Clause 10.

37 The Tribunal commenced its assessment of the contentions by referring to the usual incidents of co-ownership. It said at [43]:

‘43 … The essential right of co-ownership, whether it be tenancy in common or joint tenancy, is to give the co-owners the right of possession and enjoyment of the whole of the land. This right is common to all kinds of co-ownership - see Blackstone’s Commentaries on the Laws of England , 2nd edition, Oxford, 1766, Volume 2, pages 180-2. Each co-owner may, for example, lease his or her interest in the land, but that subsidiary interest may not interfere with the rights of co-owners (ie, a co-owner’s right to possession trump those of a lessee of the interest of another co-owner).

44 Co-owners generally do not have to pay occupation rent for occupation of property unless they so occupy the property by excluding their co-owner - see Forgeard v. Shanahan (1994) 35 NSWLR 206, Pascoe v Swan (1859) 27 Beav 508; 54 ER 201.’

38 These propositions have not been disputed. The Tribunal then turned to the circumstances before it:

‘45 Is it possible, as Mr Richards submits, for co-owners to agree to arrange their affairs so that exclusive possession is given of particular areas, thus effecting an equitable partition? The answer, in my view, is yes. In the years before Strata Title legislation was enacted, horizontal subdivision was attempted to be effected by either long leases of jointly owned property (for example, an apartment building) or by recourse to company law and the institution of company title. This was specifically to deal with the difficulties of co-owners having the right to possession of the whole of the land, despite being tenants in common. The holding of shares in the company, which owned the building, was coupled with a lease from the company to the shareholder giving the right of exclusive possession of a particular area; that right of exclusive possession gave the right to exclude the company by its officers from entering the property. See Tittman v Traill (1957) 74 WN (NSW) 284 at 287; Bagust v Rose [1964] NSWR 5 at 8. The analogy is not a perfect one - since the shareholder is not a co-owner and cannot, for example, exercise the rights of an owner such as ejectment - but certainly the owner of the property giving exclusive possession to tenants of particular parts of the premises does give individual rights in those tenants to the particular part of the property.

46 It seems to me that in applying that principle to the Deed in question there are two real difficulties with Mr Richards’ submissions. Firstly, the Deed does not, in explicit terms, do anything except allocate portions of the land to be enjoyed in exclusive possession by each of the co-owners. It does not purport to subdivide nor to amend the general rights of co-ownership; in fact, it recognises those rights by the provisions, which deal with payment of “rates and taxes or other charges”; these are to be paid by the parties “in the proportions in which they hold an interest in the subject property as tenants in common. In the event that any party defaults in the payment of any such assessment then any other party shall be at liberty to make such payment and may thereafter recover such amount paid from the defaulting party”. Such a provision seems to recognise the joint and several liability of co-owners for charges on the land rather than to effect an equitable partition.

47 The Deed, in terms, has as its purpose purchase of shares in the land by the Avitaias and the Browns, and “recording the terms and conditions pursuant to which they hold their respective interests in the subject property, and the rights and liabilities, created as a result of the mortgage of the property”. It does not purport to subdivide the property although it does refer to exclusive possession of particular parts. It does not, and possibly could not, affect the rights of third parties such as the Commissioner.

48 Secondly, the Deed does not affect the status of Moresaco Pty Ltd as a co-owner to the extent which would be required to oust clause 11(1)(a) of Schedule 1A. That section excludes from the exemption “land … if … (a) the land is owned, or jointly owned, by a company, unless the land is owned or jointly owned by a trustee company …”. It seems to me that the rights of exclusive possession given to each co-owner are in reduction of, rather than in extinguishment of, their rights as co-owner.

49 As a result, it seems to me that Moresaco remains a “co-owner” of the property, as it both appears on the Certificate of Title and has ownership rights, such as a right to approach the Court for an order for partition or sale under section 66G of the Conveyancing Act 1919 (although such an application may be problematic given the terms of the Deed referring to the regime for sale should all parties not agree). As a result, clause 11(1)(a) of Schedule 1A applies and the land is not able to be subject to the exemption.’

39 The appellants’ submission is that the Tribunal took an unduly pedantic approach to the interpretation of the Deed. The appellants referred to Norton, A Treatise on Deeds, (2nd ed. 1928) at p 52 where old authority is supported for the proposition ‘To interpret a deed, the expressed intention of the parties must be discovered’. Expanding on the point, the author says:

‘In other words, the question to be answered always is, ‘What is the meaning of what the parties have said?’ not ‘What did the parties mean to say’.’

40 This approach to interpretation of a deed is not disputed by the Commissioner.

41 In our view, the principle as stated in this text tends not to assist the appellants’ case. It seems to focus entirely on the text. The modern approach to the interpretation of commercial contracts (and by extension, deeds of the present type) is not as strict. The meaning of such documents is to be determined ‘objectively’, having regard to ‘what a reasonable person in the position of the [affected party] would have understood them to mean’: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]. ‘That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to [the affected parties], and the purpose and object of the transaction’: at [22].

42 We have reviewed the material before the Tribunal, to see if that assisted in informing the Tribunal as to what the text might mean. The appellants’ evidence was given entirely by affidavit. Each of the principal affidavits is brief.

43 None of them, including in particular that of Mr Kent, sought to give any account of any relevant discussions that might explain the understandings which the parties had as to the purpose and effect of the Deed. Each of the deponents simply described the Deed as a means by which they obtained exclusive use and occupation of certain portions of the land. There is no evidence from Moresaco or Mr Kelvin (the Tribunal notes that Mr Kelvin has suffered a stroke, and the appellants advised that he is unable to communicate).

44 In our view, it was open to the Tribunal to conclude, as it did, that the relationship between the parties was primarily constructed as one based on the possession of separate share-holdings, rather than alienation of various portions of the property to separate equitable ownership.

45 One of the appellants’ objections is to the Tribunal’s statements at the end of para [47]:

‘It does not purport to subdivide the property although it does refer to exclusive possession of particular parts. It does not, and possibly could not, affect the rights of third parties such as the Chief Commissioner.’

46 We agree that the matter is to be determined by reference to the expressed intentions of the parties, and that the impact on third parties including the Commissioner does not form part of that exercise.

47 The appellants note that the Tribunal omitted to refer to Clause 6 of the Deed. Clause 6 established a procedure for Moresaco ‘to sell its interest in the property’. It specified a procedure for giving of a notice to the other parties, and giving them a first option to make an offer for the ‘interest’. It continued:

‘In the event that Moresaco purports to sell its interest to a third party at less than the price offered to the other parties the other parties shall be entitled to refuse to sign any transfer of the Moresaco interest and Moresaco shall be obligated to sell its interest … to the other parties’ (etc).

48 A reciprocal obligation in similar terms was cast on the other parties.

49 It is the case that the Tribunal did not place any great weight on this clause (there is a passing reference to it in parenthesis in para [49] of its reasons). The Commissioner’s submission is that this clause supports rather than detracts from the Tribunal’s conclusion that the rights of exclusive possession given to each co-owner are in reduction of, rather than in extinguishment of, their rights as co-owners. We agree with the Commissioner’s submission.

50 Where there is no express statement in a deed that its object is to effect a partition of land, and where there is no other evidence as to intention, caution must be shown in concluding this to be the case. An instrument affecting interests in land may have a long life, affecting assignees and successors. This is a significant consideration favouring an approach to construction which limits itself substantially to ascertaining its meaning by having regard to the text of the instrument. See, for example, Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642 at 655 per Priestley JA.

51 It may well be that people will, as between each other, enter into arrangements for separate, unhindered occupation of separate plots of land within a tract commonly owned, without intending to put an end to the interest and entitlements each other has in respect of the land as a whole. It may be that it is in the commercial interests of all concerned to continue to hold the land as an undivided parcel. It may be worth far more than the land divided up. Sometimes, of course, the reverse will be true.

52 In our view, the Tribunal adopted an approach to construction of the Deed consistent with the authorities. The text, informed by what it could draw from evidence as to the circumstances giving rise to it, led the Tribunal to, what we see as, the inevitable conclusion that the Deed did not have the effect of dividing the allotment into separate equitable estates.

Finding in respect of Mr Kent: Leave Application

53 The Tribunal’s finding in respect of Mr Kent’s circumstances is brief:

‘52 I am not satisfied that Mr Kent uses the property as his principal place of residence. The recording of a different address as his residential address for the purposes of his dealings with the RTA is significant. In addition, it seems to me that his use of a building on the land as the headquarters of his business, comprising at least two rooms (including the toilet) is sufficient to take the occupation outside the “and for no other purpose” provisions. Even if I were wrong on the question of law, I do not consider that Mr Kent’s application should succeed.’

54 As the Appeal Panel is satisfied that the Tribunal committed no error in its approach to the question of whether a partition had taken place, no purpose would be served by revisiting this finding. Leave to extend the appeal to the merits in respect of this matter is refused.

Other Matters: Ground 3 and Ownership in Equity

55 Clause 11(1)(a), as previously noted, precludes the application of the principal place of residence exemption to ‘land … owned, or jointly owned, by a company’, and the meaning of ‘joint owners’ under s 3 is an extended one – ‘Joint owners means persons who own land jointly or in common’.

56 The third ground of appeal concerns the way cl 11(1)(a) is to operate if equitable partition is found. Given our conclusion that the Tribunal did not err in concluding that the Deed did not effect an equitable partition of the land, it follows that none of the appellants were entitled to the principal place of residence exemption by reason of the co-ownership of the legal estate in the land by Moresaco Pty Ltd.

57 Nonetheless we will make some brief comments on the arguments.

58 Had equitable partition occurred, the appellants’ submission was that the owners in equity are entitled in respect of their portions of land to be granted the exemption. This is said to be consistent with s 25(1), quoted earlier. It is also said to be consistent with cl 2(3) of Sch 1A which provides:

‘(3) If the owner of land is entitled to the exemption conferred by this clause, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner’s entitlement to the exemption.’

59 The Commissioner contended that it is ‘legal ownership, not equitable ownership, that forms the basis for valuations of land’. These valuations underpin the land tax assessment system. The basic provision of the Act is s 7 which provides:

‘Land tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers (other than land which is exempt from taxation under this Act).’

60 The valuation of land takes place under the Valuation of Land Act 1916. The primary provision is s 6A which provides at sub-section (1):

‘ 6A Land value

(1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.’

61 The Commissioner’s argument is that the valuation made by the Valuer General is made in respect of the allotment as shown on the certificate of title. The Commissioner submits that ‘there is no mechanism within the [Act] for assessment of land for a notional – but not legal – subdivision of property. Such a parcel of land is treated as one parcel for both valuation and land tax assessment purposes.’

62 As to the Act’s definition of ownership of land so as to include equitable ownership, the submission is that this extended meaning (per s 25) is, in effect, a one-way provision designed to protect the revenue. It is directed to ensuring that arrangements that might otherwise escape the ambit of the Act are captured, not to widen the principal place of residence exemption.

63 The courts have referred to the close inter-relationship of the valuation system and the land tax system: see, for example, Ryan v Chief Commissioner of Land Tax [1982] 1 NSWLR 305, McMillan v Chief Commissioner of Land Tax [1972] 1 NSWLR 545. It is difficult to see how the Commissioner could operate this system other than on the face of the Register and having regard to valuations made on the face of the Register. In our view, the Commissioner’s arguments have merit.

Order

Appeal dismissed.