Carberry v Chief Commissioner of State Revenue

[2018] NSWCATAD 157

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Carberry v Chief Commissioner of State Revenue [2018] NSWCATAD 157
Hearing dates:	29 June 2018
Date of orders:	24 July 2018
Decision date:	24 July 2018
Jurisdiction:	Administrative and Equal Opportunity Division
Before:	C Ludlow, Senior Member
Decision:	The assessments for the land tax years 2014 to 2016 are affirmed.
Catchwords:	REVENUE – land tax – principal place of residence exemption – property not used and occupied by owner – meaning of income – conditions for exemption not met – land tax assessments affirmed.
Legislation Cited:	Income Tax Assessment Act 1936 (Cth) Income Tax Assessment Act 1997 (Cth) Land Tax Management Act 1956 (NSW) Taxation Administration Act 1996 (NSW)
Cases Cited:	Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8 Saboune v Chief Commissioner of State Revenue [2011] NSWADT 8 Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222
Texts Cited:	D C Pearce and R S Geddes, Statutory Interpretation in Australia, 8th edition, 2014 Lexis Nexis Butterworths Legislation.nsw.gov.au Macquarie Dictionary
Category:	Principal judgment
Parties:	Paul Anthony Carberry (Applicant) Chief Commissioner of State Revenue (Respondent)
Representation:	Counsel: Mr A Rider (Respondent)   Solicitors: Mr S Hargreaves (Authorised Agent) (Applicant) Crown Solicitor’s Office (Respondent)
File Number(s):	2017/00141443

REASONS FOR DECISION

Background

1. The applicant has sought a review of the respondent’s decision concerning disallowance of his objection to the respondent’s assessment of land tax on the applicant’s land (the Land) for the 2014, 2015 and 2016 tax years. This Tribunal is empowered to review the assessment of land tax and this decision is concerned with that review.

2. The agreed facts are as follows:

1. On 18 November 2013 the Applicant purchased the Land for $955,000.

2. In late November/December 2013, the Applicant commenced preliminary works (clearing) in preparation for converting the dwelling on the Land into two separate residences.

3. As at 31 December 2013, the Land was unoccupied, and the applicant was living at Unit 19, 21 Redman Rd, Dee Why (the Dee Why Unit).

4. In February 2014, due to an unexpected delay in settling a personal injury insurance claim, which was to be used to fund the proposed building works on the Land, the applicant suspended work on the Land.

5. From late February 2014 to 27 April 2017, the applicant leased the Land to tenants for a fortnightly rent of between $1,990 and $2,060, with annual rental received of $5975 (FY14), $51,740 (FY15), $52,295 (FY16) and $43,872.40 (FY 17).

6. As at 31 December 2014 and 2015, the Land was used and occupied by tenants and the applicant was living at the Dee Why Unit.

7. On 24 May 2016, a quote of $2,310 was obtained for a Council compliant survey of the Land.

8. On 5 July 2016 the applicant was invoiced $1,250 for design sketches for alterations and additions for a secondary dwelling on the Land. On the same date, the applicant was quoted $2850 for work related to preparing and lodging a development application to the Council in respect of the proposed works on the Land.

9. In or about late April/early May 2017, the applicant took occupation of and moved into the premises on the Land.

10. On or about 21 October 2017, the builder expected to complete building works on the Land.

11. On or about 25 October 2017, the applicant lodged a development application with Northern Beaches Council in respect of alteration and additions for a secondary dwelling on the Land for an estimated cost of $44,500.

12. From 17 November 2017, both 34 Jendi Avenue Bayview (which was advertised as a three bedroom home), and 2/34 Jendi Avenue Bayview (which was advertised as a brand new one bedroom home on the top floor of the dwelling of the Land) were available for rental of $875 and $550 per week, respectively.

Relevant Legislation

3. Section 7 of the Land Tax Management Act 1956 (“the LTM Act”) provides that 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 the LTM Act). Section 4 of the LTM Act provides that the LTM Act is to be read together with the Taxation Administration Act 1996 (“the TA Act”).

4. Section 96 of the TA Act provides:

“96 Review by Civil and Administrative Tribunal

(1) A taxpayer may apply to the Civil and Administrative Tribunal for an administrative review under the Administrative Decisions Review Act 1997 of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if:

(a) the taxpayer is dissatisfied with the Chief Commissioner’s determination of the taxpayer’s objection, or

(b) 90 days (not including any period of suspension under section 92) have passed since the taxpayer’s objection was served on the Chief Commissioner and the Chief Commissioner has not determined the objection.

(2) However, a taxpayer cannot apply to the Civil and Administrative Tribunal under this section for an administrative review in respect of a decision of a kind prescribed by the regulations as an exempt decision for the purposes of this section.

(3) A taxpayer who has applied to the Supreme Court under section 97 for a review of a decision cannot apply to the Civil and Administrative Tribunal under this section in respect of the same decision. However, the taxpayer may do so if the earlier application is withdrawn with the approval of the Supreme Court for the purpose of enabling the Civil and Administrative Tribunal to deal with the matter.

(4) The following provisions of the Administrative Decisions Review Act 1997 do not apply to an application made under this section (or any assessment or other decision to which it relates):

(a) Part 2 of Chapter 3,

(b) section 55 (3)–(6).

(5) For the purposes of section 58 (1) (a) of the Administrative Decisions Review Act 1997:

(a) the obligation of the Chief Commissioner under that paragraph to lodge a statement of reasons with the Tribunal in respect of an application is limited to providing the Tribunal with a statement of reasons only in respect of the matters arising from the grounds specified in the application, and

(b) if one of the grounds specified in the application relates to a matter raised in an objection determined by the Chief Commissioner—the Chief Commissioner may rely on reasons previously given to the taxpayer by the Chief Commissioner under section 93 for the determination of the objection in explanation of that part of the assessment or decision to which the objection related.

Note.

Section 58 of the Administrative Decisions Review Act 1997 requires an administrator whose decision is the subject of an application for an administrative review to the Tribunal to lodge with the Tribunal certain relevant documents relating to the decision, including statements of reasons.

(6) The Minister is not to recommend the making of a regulation containing provisions for the purposes of subsection (2) unless the Minister certifies that the Minister administering the Civil and Administrative Tribunal Act 2013 has agreed to the provisions.

5. Section 100 of the TA Act provides:

“100 Provisions relating to applications for review

(1) An application for review following a failure of the Chief Commissioner to determine an objection cannot be made unless the applicant has given written notice of the proposed application to the Chief Commissioner not less than 14 days before it is made.

(2) The applicant’s and respondent’s cases on an application for review are not limited to the grounds of the objection.

(3) The applicant has the onus of proving the applicant’s case in an application for review.

(4) If the applicant or respondent appeals against a decision of the Civil and Administrative Tribunal in an application for review to an Appeal Panel of the Tribunal, the applicant in the application for review continues to bear the onus of proving the applicant’s case in the appeal if the Appeal Panel grants leave for the appeal to extend to a review of the merits of the decision.”

6. Clause 2 of Schedule 1A to the LTM Act provides:

“2 Principal place of residence exemption

(1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is:

(a) a parcel of residential land, or

(b) a strata lot or, subject to this Schedule, land comprised of 2 or more strata lots.

(2) Land is not used and occupied as the principal place of residence of a person unless:

(a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or

(b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person’s principal place of residence.

(3) If the owner of land is entitled to the exemption conferred by this Schedule, 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.

(4) The exemption conferred by this Schedule is referred to as the principal place of residence exemption.

(5) The principal place of residence exemption is subject to the restrictions set out in Part 4.”

7. Clause 4 of Schedule 1A provides:

“4 Concession for land on which there is one other residential occupancy

(1) For the purposes of the principal place of residence exemption, if a building or buildings used or occupied for residential purposes contains or contain a residential occupancy other than that of the owner, the use of the building or buildings for the purpose of that residential occupancy may be disregarded if:

(a) the residential occupancy is an excluded residential occupancy, and

(b) the building contains or buildings contain (out of a total of all rooms in the building or buildings) not more than one of those excluded residential occupancies (not including the occupancy of the owner).

(2) For the purposes of this clause, each of the following residential occupancies is an excluded residential occupancy:

(a) one room,

(b) one suite of rooms (not being a flat) each room of which all occupants of the suite are entitled to occupy,

(c) one flat,

(d) one suite of rooms (not being a flat) each room of which all occupants of the suite are entitled to occupy, and one room,

(e) one flat and one room,

(f) 2 rooms, each of which is separately occupied.

(3) Accordingly, land does not cease to be residential land because there is on the land one, but not more than one, such excluded residential occupancy, even if income is derived from the residential occupancy.

(4) If land is comprised of 2 or more lots or strata lots, the excluded residential occupancy must be located on a lot or strata lot that is also used and occupied by the owner of the land for residential purposes.

8. Clauses 6 and 8 of Schedule 1A provide:

“6 Concession for unoccupied land intended to be owner’s 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.

Note.

It is an offence under section 55 of the Taxation Administration Act 1996 to make a statement to a tax officer, or give information to a tax officer, orally or in writing, knowing that it is false or misleading in a material particular.

(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.

(3) This clause applies in respect of the assessment of a person’s ownership of land only in the period of:

(a) 4 tax years immediately following the year in which the person became owner of the land, or

(b) if, after the person became owner and before the building or other works physically commence, the land is used and occupied for residential purposes by another person—4 tax years immediately following the tax year in which the other person ceases to use and occupy the land for those purposes.

(4) Without limiting subclause (3) (a):

(a) this clause does not apply in respect of the assessment of a person’s ownership of land in a period referred to in subclause (3) (b) unless the Chief Commissioner is satisfied that, by the end of the first of the 4 tax years concerned:

(i) the building or other works will be, or have been, physically commenced, or

(ii) significant steps will be, or have been, taken to enable those works to physically commence, and

(b) if the building or other works are not physically commenced by the end of that tax year (or the Chief Commissioner is not satisfied that, by the end of that tax year, significant steps have been taken to enable those works to physically commence):

(i) the principal place of residence exemption applying by operation of this clause to the land is taken not to have applied to the land in respect of that tax year (unless subclause (3) (a) applied to the assessment in that tax year), and

(ii) land tax liability is to be assessed or reassessed accordingly.

(5) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person’s ownership of the land and to continue to so use and occupy the land for at least 6 months.

(6) The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the land in respect of any tax year to which, but for the revocation, it would have applied. Land tax liability is to be assessed or reassessed accordingly.

(6A) For the purposes of section 9 (3) (c) of the Taxation Administration Act 1996, any reassessment under this clause is authorised to be made more than 5 years after the initial assessment.

(7) This clause does not apply in respect of land owned by a person if:

(a) the person or any member of the person’s family (within the meaning of clause 12) is entitled to have his or her actual use and occupation of other land taken into account under section 9C or 9D or under this Schedule, or

(b) the person owns land outside New South Wales that is the principal place of residence of the person or a member of the person’s family (within the meaning of clause 12), or

(c) the land, or the land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it.

(8) For the purposes of this clause:

unoccupied land means land that is not being used or occupied for any purpose.”

“8 Concession for absences from former residence

(1) A person is taken, for the purpose of the principal place of residence exemption, to continue to use and occupy land formerly used and occupied by the person as a principal place of residence (a former residence), after the person ceases to so use and occupy the former residence, if the Chief Commissioner is satisfied that:

(a) the person used and occupied the former residence as a principal place of residence for a continuous period of at least 6 months, and

(b) the person does not own any other land used and occupied by the person as a principal place of residence.

(2) The maximum period for which a person may be taken, under this clause, to continue to use and occupy a former residence as a principal place of residence is 6 years starting at the end of the last period (of at least 6 months) during which the former residence was used and occupied by the person as a principal place of residence (not including any period for which the person may be taken, under clause 7 or this clause, to have used and occupied the former residence as a principal place of residence).

(3) If the principal place of residence exemption applies to the former residence of a person by operation of this clause, the exemption ceases to have effect if the person is the owner of the former residence at the end of the 6-year period referred to in subclause (2) and fails:

(a) to resume actual use and occupation of the residence as a principal place of residence by the end of that period, and

(b) to continue that use and occupation for at least 6 months.

(3A) The principal place of residence exemption also ceases to have effect if the land ceases to be capable of being used and occupied as a residence and remains incapable of being so used and occupied for a period exceeding 4 years.

(4) Any period during which a person is in full time care is not to be counted toward the maximum period referred to in subclause (2). Accordingly, a person who is in full time care may continue to be taken to use and occupy his or her former residence as his or her principal place of residence during any period in which he or she is in full time care.

(5) For the purposes of this clause, a person is in full time care during any period in which the person:

(a) resides at a hospital or mental hospital as a patient of the hospital, or

(b) resides at an aged care establishment (within the meaning of section 10R) while being provided with residential care, or respite care, or

(c) resides with another person (a carer) who is eligible for a carer payment under the Social Security Act 1991 of the Commonwealth because the carer provides care to the person.

(6) This clause applies in respect of the assessment of a person’s ownership of land in a tax year only if the Chief Commissioner is satisfied that no income has been derived from the use or occupation of the former residence in the preceding tax year, except as permitted by subclause (7).

(7) Income may be derived from the use or occupation of the former residence in a tax year if:

(a) the income is derived from a lease, licence or other arrangement under which a person has a right to occupy the former residence and the period for which any such right of occupation is conferred does not exceed a continuous period of 6 months, or a total period of 182 days, in the tax year, or

(b) the income is derived from any arrangement under which a person occupies the former residence, but the income is no more than is reasonably required to cover council, water and energy rates and charges and maintenance costs of the owner in respect of the residence.

(7A) For the purposes of subclause (7), each overnight stay counts as one day.

(8) This clause is subject to clause 12 (which limits members of a family to one principal place of residence exemption).

(9) In this clause:

hospital means an institution at which relief is given to sick or injured people through the provision of care or treatment.

mental hospital means an institution conducted principally for the treatment of mentally ill persons, and includes a hospital within the meaning of the Mental Health Act 1990.”

The issues for determination

9. The applicant disputes the respondent’s assessment, on the basis that his property should be treated as his principal place of residence and the exemption for a principal place of residence in cll 2 and 6 of Schedule 1A should have been applied. He submits that despite the fact that he leased the property and received rent from that lease, he did not derive any “income” from the use and occupation of the land, within the meaning of cl 6(2)(b) of Schedule 1A. The basis for this submission is that he when the expenses are taken into account, he did not receive any profit over and above those expenses.

9. The applicant also submits that in making the determination, the respondent should have applied the LTM Act as it was in 2013, not later in the four year period.

10. The respondent submits that the applicant has not established all the facts on which he relies. In particular:

1. He has not demonstrated that he intended solely to use the land as his principal place of residence as required by cl 6(1) of Schedule 1A.

2. He has not established that he did not derive any income from the property as required by cl 6(2)(b).

3. The land was not unoccupied as required by cl 6(1) and cl 6(2)(a).

4. Land tax is assessed as at midnight on 31 December of the tax year – in this case in 2013, 2014, 2015 and 2016. Clause 6 was in the same form at those times.

Whether the applicant intended to solely use the Land as his principal place of residence

12. The respondent submitted that the applicant had not shown that it was his intention to solely use the Land as his principal place of residence. Reference was made to the fact that on 5 July 2016 the applicant was invoiced $1,250 for design sketches for alterations and additions for a secondary dwelling, and that in late 2017 he lodged a development application for a secondary dwelling. From 17 November 2017, two premises were advertised for rental on the Land. On the authority of Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8, the applicant would be excluded from the exemption by cl. 6(7).

13. The applicant said that if he wished to use the Land as a residence for his family, this should be included in the word “solely”. He also submitted that under cl 4(2)(e) of Schedule 1A, additional occupancy could be disregarded.

14. It is true that cl 4 permits the use of the building or buildings for the purpose of a second residential occupancy to be disregarded, but only if the residential occupancy is “an excluded residential occupancy” (which is limited to additional rooms or suites), and the building or buildings contain not more than one of those excluded residential occupancies (not including the occupancy of the owner). They must also be on the same strata lot. The applicant is required to establish both these matters by way of evidence, if cl 4 is to apply. He has not done so. Accordingly I am not satisfied that he intended to use the Land solely as his principal place of residence.

Whether the applicant derived any income

15. Clause 6 of Schedule 1A does not apply to unoccupied land unless, where 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.

16. It was not disputed that the applicant had received rent from tenants occupying the premises on the Land between late February 2014 to 27 April 2017.

17. The ordinary meaning of “income” is “1. The returns from one’s work, property, business, etc.; revenue, receipts.2. Something that comes in.” (Macquarie Dictionary).

18. The applicant submits that “income” in the relevant provisions of the LTM Act should be understood to mean “profit” or “income less expenses incurred” or “taxable income”. He adduced evidence showing he incurred expenses in order to generate the rental revenue.

19. He also referred to the Income Tax Assessment Act 1936 (Cth) and Income Tax Assessment Act 1997 (Cth) being “recognised revenue laws” under the TA Act. Section 80A of the TA Act allows the authorisation of Commissioners of other recognised jurisdictions to exercise functions under that Act for the purpose of a recognised revenue law. I do not accept the applicant’s submission that this means that “income” in the LTM Act should be read as meaning “taxable income”, as s 80A is directed at a different and narrow issue.

20. The respondent submitted that while there is no definition of “income” in the LTM Act, it should have its ordinary meaning and not be interpreted to mean profit, or income less any deductions.

21. The LTM Act does not define “income” and a word of general use such as this should be given its ordinary meaning unless the contrary intention is demonstrated in the Act (D C Pearce and R S Geddes, Statutory Interpretation in Australia, 8th edition, 2014 Lexis Nexis Butterworths, at 4.8 and the cases cited in that section).

22. The applicant also relied on clause 8(7)(b), which allows rental income to be disregarded in certain circumstances if it is no more than is reasonably required to cover council, water and energy rates and charges and maintenance costs of the owner in respect of the residence.

23. Clause 8 provides that a person may be taken, for the purpose of the principal place of residence exemption, to continue to use and occupy land formerly used and occupied by the person as a principal place of residence (a former residence), after the person ceases to so use and occupy the former residence. One of the requirements for this clause to operate is that the Chief Commissioner is satisfied that the person used and occupied the former residence as a principal place of residence for a continuous period of at least 6 months. As submitted by the respondent, the applicant has not established that he used and occupied the Land as a principal place of residence for six months and then ceased to use it as a residence, and the agreed facts indicate otherwise. Therefore this clause does not apply.

24. In addition, cl 8(7)(b) suggests that the ordinary meaning of “income” is to be applied in this context. The reference to income which “is no more than is reasonably required to cover council, water and energy rates and charges and maintenance costs of the owner in respect of the residence” indicates that “income” in Schedule 1A is used to refer to the sum derived before expenses are deducted.

25. I was not referred to any cases which had determined the meaning to be applied to “income” as used in the LTM Act, apart from the case of Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222 in which the Tribunal treated rental income as being the sum derived before expenses were deducted.

26. I find that “income” in Schedule 1A should be given its ordinary meaning and the entire rent received constitutes the income in this case.

Whether the property was unoccupied

27. Clause 6(8) states that “unoccupied land” means “land that is not being used or occupied for any purpose.”

28. It was agreed that the Land was leased to tenants between late February 2014 and 27 April 2017. The applicant submitted that he had commenced works but they had to be discontinued because of an insurance claim remaining unsettled. It was eventually settled in September 2015. At that time the expiry date of the lease was 18 February 2016. The applicant submitted that he did not intend to renew the lease but his tenant was diagnosed with cancer and wished to remain in the premises due to her illness. He agreed to the tenant’s request to remain in the premises for a further year, on the condition that work could continue. In the event, the tenant did not vacate the premises until 27 April 2017.

29. Where a property is leased and generates rental income, it cannot be regarded as unoccupied under the Act (Saboune v Chief Commissioner of State Revenue [2011] NSWADT 8). The applicant submitted that at all times he acted on his best understanding of the legislation and in good faith. This is not disputed, and it appears the respondent has acknowledged there was delay in assessing the applicant’s property and for that reason has waived interest. However, on the strict terms of the Schedule, he has not established that the Land was unoccupied and cannot rely on cl 6 in that regard.

Whether the wrong version of the Act was applied by the respondent

30. The applicant submitted that the respondent should have applied the LTM Act which was in force as at 31 December 2013 and that a later version was applied because of delays in handling his application. Further, he submitted that changes were later made to cl 6, in particular cl 6(3)(b) and cl 6(4) which relevantly affected the meaning of the clause as it applied to his situation.

31. The respondent submitted that cl 6, the relevant clause, was the same at all relevant times when the tax was assessed, namely 31 December in 2013, 2014 and 2015. A review of cl 6 of Schedule 1A as it appears in the historical versions of the LTM Act on the NSW Parliamentary Counsel’s website confirms this. Accordingly this submission cannot succeed.

Conclusion

32. For the reasons stated above the applicant has not established that he is entitled to the exemption under cl 6 or that the assessments should be amended or set aside.

Order

1. The assessments for the land tax years 2014 to 2016 are affirmed.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 24 July 2018