Chief Commissioner of State Revenue v Davies

[1999] NSWCA 336

CITATION:	Chief Commissioner of State Revenue v Davies [1999] NSWCA 336
FILE NUMBER(S):	CA 40443/98
HEARING DATE(S):	10 August 1999
JUDGMENT DATE:	17 September 1999
PARTIES :	Chief Commissioner of State Revenue (Appellant) v Richard Allen Davies & Dawn Roslyn Davies (Respondents)
JUDGMENT OF:	Priestley JA at 1; Beazley JA at 2; Davies AJA at 3

LOWER COURT JURISDICTION:	Land & Environment Court
LOWER COURT FILE NUMBER(S) :	30122/97
LOWER COURT JUDICIAL OFFICER:	Pearlman J

COUNSEL:	A: Dr H R Sorensen R: Mr B Sharpe
SOLICITORS:	A: I V Knight, Crown Solicitor R: R A Davies
CATCHWORDS:	Taxation; Land Tax; Unutilised value allowance - what is the basis of calculation?
ACTS CITED:	Land Tax Management Act 1956, ss7,9A,62L
DECISION:	See para 15

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40443/98
LEC 30122/97
PRIESTLEY JA
BEAZLEY JA
DAVIES AJA

FRIDAY, 17 SEPTEMBER 1999

CHIEF COMMISSIONER OF STATE REVENUE
v
Richard Allen DAVIES & ANOR
JUDGMENT

1    PRIESTLEY JA: I agree with Davies AJA.

2    BEAZLEY JA: I agree with Davies AJA.

3    DAVIES AJA: This is an application for extension of time and for leave to appeal from a ruling, given by Justice Pearlman, Chief Judge of the Land and Environment Court of New South Wales, on a question of law set aside for separate determination in proceedings brought by the opponents, Mr R A Davies and Mrs Davies against the applicant, the Chief Commissioner of State Revenue. On the application, Dr H R Sorensen of counsel appeared for the applicant, the Chief Commissioner of State Revenue, and Mr B Sharpe of counsel appeared for the opponents.

4    The primary issue to be determined in the Land and Environment Court was the sum to be placed upon the unutilised value allowance attributable to a property, Lot 8 Franklin Road Cherrybrook, of 1.5 hectares, which was owned and occupied by the opponents. The property comprised a house together with its garage, garden, lawn and driveway which occupied an area of 1,700 square metres, and the remainder of the property, being land and facilities used for recreational horse pursuits.

5 Division 3 of the Land Tax Management Act 1956 (“the Act”), which encompasses ss 62L to 62N, provides for an unutilised value allowance in respect of land which is used as the site of a single dwelling-house although zoned for a higher and better use. The opponents’ property was such land. The parties were agreed that the zoning of the land, Residential 2(a3), permitted subdivision with Council consent. The property was used or occupied solely as the site of a single dwelling-house. The parties were agreed that the portion of the land which was reasonably necessary to be occupied or used in conjunction with the single dwelling-house was 1,700 square metres. It is not in dispute that the opponents had an entitlement to an unutilised value allowance in respect of their property.

6 The significance of an unutilised value allowance is that it permits the postponement of payment of that part of the land tax as is attributable to the unutilised value of the land. The postponement provisions are set out in s 9A of the Act, of which it is sufficient to set out subss (1) and (2) which read:

(1) If there is an unutilised value allowance entered in the Register in respect of the land value of land, a person liable to pay land tax on the land in respect of that land value is entitled to a postponement of part of that land tax, as provided by this section.
(2) The entitlement to postponement is an entitlement to postpone payment of the amount by which the land tax assessed would have been reduced had the land value of the land been reduced by that unutilised value allowance.

The definition of an “unutilised value allowance” is specified in s 62L of the Act which provides:

(1) The unutilised value allowance for a land value is the amount calculated by deducting from the land value of the land the value that the land would have if it could be used only as the site of a single dwelling-house.

(2) However, no account is to be taken of any portion of the land which is in excess of that which is reasonably necessary to be occupied or used in conjunction with the single dwelling-house.

7 If one simply read the words of subs (1) of s 62L, one would conclude that the term “the land” refers to the whole of the property and one would infer that the calculation would assess the difference between the value on the basis of the property’s highest and best use as suitable for subdivision into residential allotments and its value calculated on the footing that it could be used only as the site of a single dwelling-house. There can, I think, be no question that the words “the land value of the land” in subs (1) refer to the value of the entire property. Section 7(2) of the Act provides that the land value of land, in relation to a land tax year, is the value entered in the Register as the land value of the land as at 1 July in the previous year. In subss 9A(1) and (2), the words “land”, “that land” and “the land” clearly refer to the property which has been the subject of the land tax valuation. The very purpose of the provisions is to postpone the payment of part of the land tax payable in respect of that land.

8    The assessment of the unutilised value allowance which was before the Land and Environment Court in fact proceeded upon such a reading. The assessment commenced with the land value of the property as an englobo site (highest and best use) of $850,000. There is no dispute about that figure. The assessment then valued the subject land as a 1.5 ha home site on the footing that the whole site was utilised as a home site by the land holder. The land value of the property as a site of a single dwelling-house was considered to be $500,000. Therefore, an unutilised value allowance of $350,000 was adopted.

9 That approach failed to give any weight to the provisions of subs (2) of s 62L. The subsection is worded somewhat elliptically. In my opinion, its plain purpose is to require the value which the land would have if it could be used only as the site of a single dwelling-house to be calculated by reference only to that portion of the land which is reasonably necessary to be occupied or used in connection with the single dwelling-house. In the present case, that was the dwelling-house in its environs comprising 1,700 square metres.

10 The explanation for the wording of s 62L(2) is, no doubt, that the value of the land for its highest and best use will have already been undertaken and a valuation issued. The new valuation required to be done under s 62L will be the valuation of the land on the footing that it could be used only as the site of a single dwelling-house. It is to that valuation that s 62L(2) directs its attention and it requires that no account be taken of any portion of the land that is in excess of that which is reasonably necessary to be occupied or used in conjunction with the single dwelling-house.

11 Dr Sorensen, counsel for the Commissioner, submitted that s 62L(2) should be read as a provision which applied also to every valuation of the land to which s 62L(1) refers. He submitted that s 62L(2) requires that the only land to be taken into account is the home site and that this should be valued first at its highest and best use being suitable for subdivision and then on the basis that it could be used only as a site for a single dwelling-house. It may be noted that that interpretation would not support the assessment which was before her Honour.

12 The interpretation put forward by Dr Sorensen neither fits the words of s 62L nor the objective of the section. In the first place, the words “the land value of the land” in subs (1) refer to the land value specified in s 7(2), not to a valuation of a part of the land. In the second place, there is no reason for thinking that s 62L contemplates that there will be two valuations of the land comprising the dwelling-house and its environs. Rather, there is to be one such valuation, which is to be made on the basis that the land to which subs (2) refers could be used only as the site of a single dwelling-house.

13    The actual questions for determination and the answers given by Pearlman J were as follows:

“Question 1:
What is ‘the land’ for the purposes of s 62L?
Answer:
In relation to the reference in s 62L(1) to ‘the value that the land would have if it could be used only as the site of a single dwelling-house’, the expression ‘the land’ means that part of lot 8 which is reasonably necessary to be occupied or used in conjunction with the single dwelling-house. In relation to the reference in s 62L(1) to ‘the land value of the land’, the expression ‘the land’ means the whole of lot 8.


Question 2:
In determining the unutilised value allowance for the purposes of s 62L, whether the value of the site of the dwelling-house should be valued as the whole of the land or as the area of 1700 square metres?
Answer:
The reference in s 62L(1) to ‘the value that the land would have if it could be used only as the site of a single dwelling-house’ means the area of 1700 square metres and not the whole of lot 8.”

14    I agree generally with the reasons for decision of Pearlman J and with the intent of the answers given. However, for clarity, I would substitute answers as follows:

“Question 1:
What is ‘the land’ for the purposes of s 62L?
Answer:
In s 62L(1), the terms ‘the land value of the land’ and ‘the land’ refer to the whole of lot 8. However, s 62L(2) requires that, in ascertaining the value that the land would have if it could be used only as the site of a single dwelling-house, no account is to be taken of any portion of the land which is in excess of that which is reasonably necessary to be occupied or used in conjunction with the single dwelling-house.


Question 2:
In determining the unutilised value allowance for the purposes of s 62L, whether the value of the site of the dwelling-house should be valued as the whole of the land or as the area of 1700 square metres?
Answer:
The area of 1,700 square metres and not the whole of lot 8.”

15 As the matter raises the interpretation of s 62L of the Land Tax Management Act and as that interpretation has been in dispute, I would grant the application for leave to appeal, I would extend time and would direct the applicant to file a Notice of Appeal promptly. For the reasons I have given, I would set aside the answers given to the questions set aside for determination and would substitute the answers expressed in paragraph 14. The appeal should be otherwise dismissed. I would order that the Chief Commissioner of State Revenue pay the costs of the appeal.

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