BURDINAT and COMMISSIONER OF STATE REVENUE

[2012] WASAT 105

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   DEVELOPMENT & RESOURCES

ACT: TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION:   BURDINAT and COMMISSIONER OF STATE REVENUE [2012] WASAT 105

MEMBER:   MR P McNAB (SENIOR MEMBER)

HEARD:   3 APRIL 2012

DELIVERED          :   3 APRIL 2012

PUBLISHED           :  21 MAY 2012

FILE NO/S:   DR 21 of 2012

BETWEEN:   GUY ROBERT LOUIS BURDINAT

RHONDA DOROTHY BURDINAT
Applicants

AND

COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

Taxation - Land tax - Exemptions - Private residential property exempt if sole or principal place of residence - Property leased out by taxpayer for short term period - Retiree couple on extended holiday - Letting of residence by retiree couple for period of approximately three months - Letting mainly for security reasons - Letting under formal tenancy agreement but at below market rent with formal and informal access arrangements by taxpayer - Commissioner refused to recognise exemption in such circumstances - Extent to which leasing of property determined issue of taxpayer's continued residence - Commissioner's written policy recognising temporary absences by taxpayer - Relevance of other areas of statutory property law recognising short term as three months or less - Tribunal allowed review - Exemption established on taxpayer's particular facts and circumstances - Words and phrases: 'Sole or principal place of residence' - 'Short term'

Legislation:

Land Tax Assessment Act 2002 (WA), s 21, s 21(1)(b)
Residential Parks (Long­stay Tenants) Act 2006 (WA), s 5(1)
Residential Tenancies Act 1987 (WA), s 5(4)

Result:

Review allowed and exemption from tax established

Category:    B

Representation:

Counsel:

Applicants:     Self-represented

Respondent:     Ms R Panetta

Solicitors:

Applicants:     Self-represented

Respondent:     State Solicitor's Office

Case(s) referred to in decision(s):

Browne v Commissioner of State Revenue (2001) 27 SR (WA) 249

Owners of Pearl Beach Survey­Strata Plan 49019 and Heyns [2011] WASAT 66

Stewart and City of Albany [2009] WASAT 45

REASONS FOR DECISION OF THE TRIBUNAL: 

Summary of Tribunal's decision

1. The applicants, Mr and Ms Burdinat, owned certain residential property on Blackwall Reach Parade, Bicton.  They sought and were refused by the Commissioner of State Revenue an exemption from land tax in respect of their ownership of this property.

2. Such an exemption arose under the taxation laws of the State and applied where the land was their 'sole or principal place of residence' as at the relevant date, namely, 30 June 2011.

3. The Commissioner determined that, as the applicants had leased the property out as at the relevant date, the exemption could not, in the circumstances, have application to them.

4. The lease was for three months.  The couple were retirees and went on an extended holiday in the north of the State.  The Commissioner accepted that the leasing out was 'mainly for security purposes'.  The rent was below market value and the scope of the lease was subject to certain formal and informal access arrangements agreed between the applicants and the lessee.

5. Both previous cases and the Commissioner's written policy acknowledged that the temporary absence from one's residence did not mean that the exemption ceased to be available to the taxpayer.  The Tribunal drew attention to other areas of statutory property law regulating tenancy (and related matters) where a period of three months was generally regarded as 'short stay' or short term.

6. The Commissioner's policy also drew a distinction between shorter and longer absences from a residential property.  In the latter case, especially if the land were to be leased, the right to claim the exemption was, in the Commissioner's view, forfeited.

7. However, the Tribunal concluded that, in the particular facts and circumstances of the case, the applicants had not ceased to have a relevant connection with their residence and at the relevant date it was, notwithstanding the lease and their absence, still their sole or principal place of residence.

8. The Tribunal took the opportunity of inviting the Commissioner to amend his policy to have additional regard to the three months period, found elsewhere in broadly related areas of the law, as a possible indicator of factors relevant to the issue of whether a relevant connection to land had been severed.

9. The applicants were therefore successful and the review was allowed.  Their claim to an exemption from land tax would be recognised for this assessment period.

10. The Tribunal gave its reasons for decision shortly after the conclusion of the hearing.  What follows is taken from the transcript of those reasons and has been formally revised and edited for publication.

Introduction

1. This is a review of the Commissioner of State Revenue's (respondent or Commissioner) refusal to recognise or, in effect, grant an exemption from certain tax in respect of an alleged 'primary residence' owned by the applicants, Mr and Ms Burdinat.

2. The decision under review turns upon the application of s 21 of the Land Tax Assessment Act 2002 (WA) (LTA Act). Section 21 is as follows (emphasis added):

   (1)Private residential property (except property held in trust) is exempt for an assessment year if, at midnight on 30 June in the financial year before the assessment year, it is owned -

   (a)by an individual who uses it as his or her primary residence; or

   (b)by a husband and wife, at least one of whom uses it as his or her primary residence; or

   (c)by persons who have lived in a de facto relationship with each other for at least 2 years, whether or not they still live on that basis, at least one of whom uses it as his or her primary residence.

   (2)However, if the property is also owned by another person or persons, it is exempt if each owner who does not use it for that purpose is an owner only because of a requirement by a financial institution for a guarantee of money advanced on the security of the property.

3. The critical issue in this review requires a judgment to be made on the status of certain of the applicants' private residential property as at midnight on 30 June 2011. More particularly, the question here is: was the applicants' residence in Bicton, as at the relevant date, their 'primary residence' within the meaning of s 21(1)(b) of the LTA Act?

4. The term 'primary residence' is defined in the glossary to the LTA Act in the following terms:

   primary residence, in relation to an individual, means the individual's sole or principal place of residence[.]

5. Here, the relevant individual is Mr Burdinat.  The issue here which the Tribunal has identified above ('sole or principal place of residence') falls to be considered in a particular factual matrix considered in more detail below.

Applicable principles

1. The law in relation to s 21 of the LTA Act is generally discussed in Browne v Commissioner of State Revenue (2001) 27 SR (WA) 249 (Browne), which is one of a number of authorities provided to the Tribunal by the respondent.  This was a decision of the former Land Valuation Tribunal of Western Australia.

2. The Tribunal has had particular regard to the following passages of Browne (at [251] ­ [252], emphasis added):

   12Pursuant to the Revenue Laws Amendment (Assessment) Act 1998 (WA) cll 9(a) and 9(b) of the Schedule were amended so as to provide that the words 'ordinary place of residence' were replaced with 'sole or principal place of residence'. It is clear from the Second Reading Speech of the Hon Colin Barnett, the Minister dealing with the matter, that the amendment was to clarify that only one residential exemption is available to each taxpayer throughout the year. The effect of the amendment is that a taxpayer who owns more than one property cannot rely on the sole or principal residential exemption in respect of more than one property.

   13The use of the phrase 'sole or principal' does not appear to vary from the notion of being the 'ordinary' place of residence save that it focuses the attention of the exemption on the primary or significant place of residence where an appellant has more than one residence.

   14The question for determination by the Tribunal is whether or not as at 30 June 2000 the subject property was the appellants' sole and principal place of residence so as to entitle them to an exemption to land tax.

   15In Koitaka Para Rubber Estates Ltd v Federal Commissioner of Taxation (1941) 64 CLR 241 at 249 Williams J considered the concept of residence in the following terms:

   'The place of residence of an individual is determined, not by the situation of some business or property which he is carrying on or owns, but by reference to where he eats and sleeps and has his settled or usual abode.  If he maintains a home or homes, he resides in a locality or localities where it or they are situate, but he may also reside where he habitually lives even if it is in hotels or on a yacht or some other place of abode.'

   16To be entitled to the exemption the appellants must demonstrate that the subject property was, at 30 June 2000, their settled or usual abode: see Koitaka Para Rubber Estates Ltd v Federal Commissioner of Taxation; Commissioners of Internal Revenue v Lysaght [1928] AC 234 at 244. The extent to which there has been a degree of continuity or regularity of residence is an important factor although it is a question of fact or degree at what point an accidental or temporary absence becomes so prolonged or of such a nature as to affect such continuity or regularity.  Importantly, the issue is not to be determined by some arithmetical analysis of the number of days a person spends at a particular place: see Levene v IRC [1928] AC 217 at 225.

   17In support of the disallowance of the exemption the respondent has referred the Tribunal to the decision of Rothenbury v Commissioner of State Taxation (1994) 11 SR (WA) 345. In that case the Tribunal dismissed an appeal where the appellants had moved to another part of the State to enable the male appellant to take up a permanent position with the Public Service. The furniture and belongings remained in the property and their daughter resided in the house paying a nominal rental. The owners rented another property in Karratha during the time that they remained there. The context of the ordinary place of residence was considered to import a notion of residence that was neither casual or [sic] uncertain.

   18In Stone v Commissioner of State Taxation (unreported, appeals 56 of 1989­90 and 69 of 1989­90, 15 February 1991) an appellant was absent from his property for a period of two years during which time he and his wife travelled Australia in a campervan.  During their absence the appellants' furniture remained at the property which continued to be their postal address.  The property was occupied by the appellants' nephew who was paid a nominal amount (to cover the cost of rates and taxes) but was not entitled to the land for an estate.  The Tribunal found that the nephew was merely an occupant in a caretaker capacity and the appellants had no other permanent residence during their period of absence.  The Tribunal found that, in the circumstances, the property remained its appellants' ordinary place of residence and he was entitled to the exemption.

   19In Unkovich v Commissioner of State Taxation (1994) 11 SR (WA) 107 an appellant, who moved from a Bayswater property to Kununurra for a period of 14 months to take up a position of employment, rented his property to his sister for $120 per week. That arrangement was considered to constitute an informal tenancy rather than occupation merely as caretaker.

   20In Rothenbury's case the Tribunal saw the distinguishing circumstances between Stone and Unkovich to be whether the appellants set up another home or ordinary residence during the period of absence from the property in question and, secondly, the nature of any occupancy of the property in question during that period of absence.  The Tribunal considered the determining element in the consideration of the proper factual issue being whether the property in question continues to be used solely or principally as the place of ordinary residence during a period of absence.

   21In essence the issue is whether or not it can be said that the subject property is where the appellants eat and sleep and have their settled or usual abode and whether the property enjoyed that status on 30 June 2000.

3. In Browne, the subject property had been leased to various tenants (but, it appears, pursuant to the one formal tenancy arrangement) for a significant period of time.  There was, in fact, according to the Tribunal, a 'prolonged absence' from the property by the appellants in that case: see Browne at [253]. They were unsuccessful in their appeal.

The facts and circumstances

1. The facts in this matter are common ground, and they are set out principally in the respondent's statement of issues, facts and contentions at paras 1 ­ 17.  They are as follows (with references to relevant documents omitted):

   1.The Applicant and Rhonda Burdinat are retirees.

   2.As at 30 June 2011 (and since 3 August 1987), the Applicant and Rhonda Burdinat were the registered proprietors of property located at 48 Blackwall Reach Parade, Bicton ('Bicton property').

   3.The Applicant and Rhonda Burdinat had resided in the Bicton property since July 1987.

   4.From early June 2011 to early September 2011, the Applicant and Rhonda Burdinat left the Bicton property to travel to Broome, Western Australia, for a holiday.

   5.During that period, the Bicton property was leased to another person, Julian Gunby, on a fully furnished basis, mainly for security reasons.

   6.The term of the lease was from 5 June 2011 to 4 September 2011 [that is, a three months period].

   7.The rent payable under the lease was $1,200 per fortnight.

   8.The tenant's security bond was $2,400.

   9.During that period, the Applicant and Rhonda Burdinate [sic] resided in a caravan in Broome, Western Australia.

   10.The Respondent has presumed that the relevant caravan was located at Broome Vacation Village Unit 14, L1 Port Drive, Cable Beach, being the one for which the Applicant and Rhonda Burdinat are registered proprietors.

   11.The Applicant and Rhonda Burdinat always intended to, and did, return to the Bicton property after their holiday.

   12.On 19 October 2011, the Applicant and Rhonda Burdinat were issued with a land tax assessment for the 2011/2012 assessment year in respect of four items of taxable land, being:

   (a)Broome Vacation Village Unit 14, L1 Port Drive, Cable Beach;

   (b)378 South Street, O'Connor;

   (c)48 Blackwall Reach Parade, Bicton;

   (d)Unit 4, 25 Walters Drive, Osborne Park.

   13.The tax assessed was $6,496.

   14.On 2 November 2011, the Applicant and Rhonda Burdinat were issued with a reassessment of land tax for the 2011/2012 assessment year in respect of three items of taxable land, being:

   (a)378 South Street, O'Connor;

   (b)48 Blackwall Reach Parade, Bicton;

   (c)Unit 4, 25 Walters Drive, Osborne Park

   and allowing for the grant of a residential exemption for the property situated at Broome Vacation Village, Unit 14, L1 Port Drive, Cable Beach.

   15.The tax reassessed was $6,407.50.

   16.On 2 November 2011, the Applicant and Rhonda Burdinat objected to the reassessment,

   17.On 30 November 2011, the objection was disallowed.

2. Here, as was canvassed during the hearing, there was a relatively short term lease at below market rent, 'mainly for security reasons' (see the respondent's statement of issues, facts and contentions, at para 5) and with various formal and informal access arrangements agreed as between the lessee and the applicants.  The Tribunal accepts, however, that the residence always formally remained in the tenants' exclusive possession.

Discussion of the case

1. The authorities (see, in particular, Browne at [252]) and the Commissioner's own written policy (see below) both recognise that temporary absence does not necessarily disentitle a taxpayer from an exemption. Indeed, like other areas of the general law, the Commissioner's 2003 Policy LT 15.0 ­ Land Tax ­ Exemption when Owner Absent from Primary Residence (Policy) adopts, unsurprisingly, a dichotomy between short term and long term absences.  The relevant paragraphs of the Policy are as follows (emphasis added):

   1.Where an owner is absent for a short time from their primary residence at midnight on 30 June due to circumstances such as hospitalisation or holidays, and there is no change to the character of the usage of the primary residence and the property retains its character, the owner's primary residence exemption will apply for that assessment year.

   2.Where the absence is of a longer duration, a property will be considered as the owner's usual primary residence, providing his or her personal effects remain in the property and it is not rented out during the owner's absence.

   Paragraph 1 of the Policy makes reference to absence 'for a short time', and para 2 of the Policy talks about a 'longer duration' and incidentally refers to leasing out, something which is not canvassed in para 1.

2. Other areas of the law related to accommodation also reflect a similar dichotomy, usually of three months (90 days) representing the 'short term': see, for example, Owners of Pearl Beach Survey­Strata Plan 49019 and Heyns [2011] WASAT 66 at [46], discussing a by­law referencing short­stay tourist accommodation at 90 days; and Stewart and City of Albany [2009] WASAT 45 at [39]: '… three months [stay] in twelve, these sites are considered short stay …'.

3. Particular statutory examples which also have dichotomies using 90 days as a critical date in respect of the application of certain rules affecting tenancy arrangements are:

   •the Residential Tenancies Act 1987 (WA), see s 5(4); and

   •the Residential Parks (Long­stay Tenants) Act 2006 (WA), see s 5(1).

4. Speaking generally, the law ­ in these areas, at least ­ has chosen this period of 90 days for greater or different regulation or control with respect to the use of certain property.  There is, of course, no particular 'magic' in this specific period, considered by itself; nor is it a necessarily determinative factor that the legislature in these areas has selected 90 days, but in the Tribunal's view, such choices by the legislature and other bodies (presumably on the same logic) are not irrelevant to the judgment that must be made as to whether an otherwise 'temporary' absence destroys the right to claim an important exemption from tax.

5. It cannot, in the Tribunal's view, be said, in the particular facts and circumstances of this case, that the temporary letting of premises by a retiree couple 'mainly for security reasons', while that retiree is on holiday for a period well recognised as relatively 'short term' in broadly analogous areas of the law elsewhere, thereby destroys the character of the property as the applicants' 'sole or principal place of residence' as at the relevant date.

6. Nothing the Tribunal has said in these reasons means that anybody who lets their premises for, say, less than 90 days, is thereby somehow automatically entitled to an exemption.  Every case will depend upon its particular circumstances, and then there will be questions of fact and degree.

Invitation to reconsider the Policy

1. In light of the matters discussed above, the Tribunal invites the Commissioner to reconsider the Policy and to examine whether there should not be at least some additional recognition, given it is so well established in other areas of the law, between before and after a period of, say, 90 days absence.  For example, absences in certain circumstances (such as the taking of holidays) of less than 90 days could prima facie indicate temporary or short term departures, and those absences after 90 days could prima facie indicate circumstances which remove an applicant from the exemption.

1. The design of such policies dealing with these types of discretionary matters, which is no easy task, is, of course, a matter for the primary decision­maker and administrator, and not for the Tribunal.  Nevertheless, because of the Tribunal's decision in this review, the Tribunal commends this course to the Commissioner.

Conclusion

1. The Tribunal is satisfied in this case, for the reasons that have been given above, that the exemption properly ought to apply, and that will be the decision of the Tribunal.

Orders

1. The Tribunal makes the following orders:

   1.For the reasons given, the application for review is allowed.

   2.The decision under review is set aside and in lieu thereof there will be a decision to the effect that the applicants have established an exemption under s 21(1)(b) of the Land Tax Assessment Act 2002 (WA) in respect of 48 Blackwall Reach Parade, Bicton.

I certify that this and the preceding [30] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

MR P McNAB, SENIOR MEMBER