CHURCH and COMMISSIONER OF STATE REVENUE

[2011] WASAT 26

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   DEVELOPMENT & RESOURCES

ACT: LAND TAX ASSESSMENT ACT 2002 (WA)

TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION:   CHURCH and COMMISSIONER OF STATE REVENUE [2011] WASAT 26

MEMBER:   JUDGE T SHARP (DEPUTY PRESIDENT)

HEARD:   1 FEBRUARY 2011

DELIVERED          :   11 FEBRUARY 2011

FILE NO/S:   DR 214 of 2010

BETWEEN:   GEOFFREY DONALD CHURCH

LESLEY ANN DUNNELL
Applicants

AND

COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

Taxation - Land tax - Continued exemption after death of resident - Proper construction of definition of 'owner' under glossary to Land Tax Assessment Act 2002 (WA)

Legislation:

Land Tax Assessment Act 2002 (WA), s 5, s 17, s 18, s 20, s 23, Pt 3
Taxation Administration Act 2003 (WA), s 40(1)
Transfer of Land Act 1893 (WA), s 63

Result:

The application is dismissed

Category:    B

Representation:

Counsel:

Applicants:     Self-represented

Respondent:     Ms R Panetta

Solicitors:

Applicants:     N/A

Respondent:     State Solicitor's Office

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

Attenborough v Solomon [1913] AC 76

Austin v Beddoe (1893) 41 WR 619

Commissioner of Stamp Duties (Q) v Livingston (1964) 112 CLR 12

CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98

Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490

REASONS FOR DECISION OF THE TRIBUNAL: 

Summary of Tribunal's decision

1. Under her will, the late Mrs Eva Leila Church left a half share of her residence in Mt Pleasant to her daughter, Lesley Ann Dunnell absolutely.  She left the other half of the property to her son, Geoffrey Donald Church, to be held in trust for the benefit of Mr Church, his wife and his children.  The property was transferred on 25 June 2009 to Mr Church and Ms Dunnell in accordance with the terms of the will.  The applicants then applied to the Commissioner of State Revenue for an exemption of the property from assessment of land tax on the basis that at midnight on 30 June 2009 the late Mrs Church's executors were still the owners of the property.  The Commissioner disagreed and refused to grant that exemption.  The applicants applied to the Tribunal for a review of the Commissioner's decision.

2. The Tribunal upheld the Commissioner's decision and dismissed the application. The Tribunal found that the late Mrs Church's executors were not the owners of the property at midnight on 30 June 2009 and that therefore the exemption under s 23 of the Land Tax Assessment Act 2002 (WA) did not apply.

Facts

1. The applicants are Geoffrey Donald Church (Mr Church) and Lesley Ann Dunnell (Ms Dunnell) who are brother and sister.  Mr Church and Ms Dunnell are the children of the late Mrs Eva Leila Church (Mrs Church) who died on 18 February 2009.

2. The respondent is the Commissioner of State Revenue (Commissioner).

3. At the time of her death, Mrs Church was the registered proprietor of the property known as 93 The Esplanade, Mt Pleasant, in the State of Western Australia being Lot 47 on Plan 3779 and being the whole of the land comprised in Certificate of Title Volume 858 Folio 67 (Land).  This was her private residence.

4. On 8 January 2007, Mrs Church executed a document entitled 'The Last Will of me EVA LEILA CHURCH' (Will).

5. Clause 5 of the Will outlined how the residue of the estate (including the Land) was to be dealt with.  Relevantly, cl 5 of the Will stated:

   5     Gifts of Balance of Residue

   I DIRECT my Executor to divide the balance of the reside of my estate into two equal parts and to deal with those parts as follows:

   5.1  As to one such part I DIRECT my Executor to give that part to my daughter LESLEY ANN DUNNELL absolutely and without any kind of trust or obligation PROVIDED THAT if LESLEY does not survive me and leaves a child or children who survive me and attain the age of 21 years, then that child is to take, or those children are to take in equal shares, the share of my estate which LESLEY would have taken had she survived me.

   5.2  As to the second such part, I DIRECT my Executor:

   (1)to set up a trust fund to be known as the Eva Leila Church Testamentary Trust (hereinafter called the Fund) of which my Testamentary Trustee shall be trustee and which is to consist of:

   (a)that part;

   (b)any income or capital added to the Fund from time to time.

   (2)to provide for the Fund to be invested as authorised by law or in accordance with the investment provisions in my Will.

   (3)to provide for the Fund to be held on trust until the Distribution Date on the terms and conditions described in the remaining paragraphs of this sub­clause 5.2.

   (4)to provide that until the Distribution Date my Testamentary Trustee shall pay all or part of the income and all or part of the capital of the fund for the maintenance, education, advancement or other benefit of any one or more of the following:

   (a)my son GEOFFREY DONALD CHURCH;

   (b)my son's wife JUDITH ANNE CHURCH;

   (c)…

   5.3  In sub­clause 5.2 the following terms shall have the following meanings:

   …

   Distribution Date means the earlier of:

   (i)the date being eighty (80) years after the date of my death; or

   (ii)the date which my Testamentary Trustee decides in its absolute discretion shall be the termination date of the Fund.

   Testamentary Trustee means:

   (i)GEOFFREY provided he survives me;

   (ii)If GEOFFREY refuses to act or is unable to act or to continue to act as Testamentary Trustee then such other person or persons as the Appointor may from time to time appoint as Testamentary Trustee;

6. On 3 June 2009, a grant of probate was issued by the Supreme Court of Western Australia to the applicants as the executors of the Will.  The grant of probate was in common form.

7. On 10 June 2009, the applicants as executed two documents in respect of the Land, the first being an Application By Personal Representative (Application), being an application by the applicants to be registered as the proprietors of the interest of Mrs Church in the Land as executors of Mrs Church, and the second being a transfer of the Land by the applicants as executors of Mrs Church in favour of themselves as tenants in common in equal shares (Transfer of Land).  The Application and the Transfer of Land were both registered on 25 June 2009.  Mr Church's one half share of the Land is held by him as trustee of the trust created pursuant to cl 5.2 of the Will (Trust).

8. On 27 August 2009, the applicants completed and lodged with the Office of State Revenue an application form entitled Application For Continued Residential Exemption After Death Of Resident.  This form states that the registered proprietor of the Land is Mrs Church and constitutes a claim by the applicants for exemption of the Land from assessment of land tax for the year to 30 June 2010.

9. On 6 January 2010, a land tax Notice of Assessment was issued to the applicants specifying an amount payable of $18,178.

10. On 5 March 2010, the applicants lodged an objection to the assessment and on 17 May 2010 the Commissioner disallowed that objection.

Statutory framework

1. Unless otherwise stated, all references to particular sections are references to sections of the Land Tax Assessment Act 2002 (WA) (Land Tax Assessment Act).

2. Section 5 provides that land tax is payable for each financial year for all land in the State except land exempt under s 17.

3. Section 17 states that land is exempt from land tax if the Commissioner grants an exemption for the assessment year under s 20 or if the land is exempt under another provision of Pt 3 of the Land Tax Assessment Act.

4. The Commissioner has not granted an exemption under s 20 in relation to the Land.

5. Section 23 is in Pt 3 of the Land Tax Assessment Act. It contains the 'continued exemption after death of resident' provisions and it specifies three conditions which must be met in order for the exemption to apply.

6. Section 23(1) provides as follows:

   Continued exemption after death of resident

   (1)Private residential property owned by the executor or administrator of an individual’s estate is exempt, but only for the assessment year following the financial year in which the individual died, if ­ 

   (a)the individual’s ownership and use of the property as his or her primary residence gave rise to an exemption under section 21 for the financial year in which he or she died, or would have given rise to such an exemption if he or she had owned the property and had been using it for that purpose on 30 June before his or her death;

   (b)the executor or administrator is the owner of the property at midnight on 30 June in the financial year in which the individual died; and

   (c)the individual’s estate does not derive any rent or other income from the property between the date of the individual’s death and the end of the assessment year.

7. Section 18 provides as follows:

   Partial exemptions or concessions

   If ­ 

   (a)an exemption or concession under another provision of this Act would apply to land if it were used or occupied solely for an exempt purpose or purposes, or owned, used or occupied solely by a person or persons in a particular class or classes, or both, as mentioned in the respective provision; and

   (b)the land is used or occupied partly for the exempt purpose or purposes and partly for another purpose or purposes, or is owned, used or occupied partly by persons in the particular class or classes, and partly by another person or persons,

   then the exemption or concession applies to the proportion of the land that is used or occupied for the exempt purpose or purposes, or is owned, used or occupied by the persons in the particular class or classes, or both, as the case requires.

Application

1. The applicants have applied to the Tribunal under s 40(1) of the Taxation Administration Act 2003 (WA) for a review of the decision of the Commissioner.

2. The applicants contend that the Land, or alternatively the one half share of the Land registered in the name of Mr Church, is exempt from land tax under s 23 of the Land Tax Assessment Act for the year ending 30 June 2010.

3. The basis of the applicants' contention is that either:

   1. Mrs Church's estate had not been fully administered as at 30 June 2009 and therefore, notwithstanding the execution and registration of the Transfer of Land, the owners for the purposes of the Land Tax Assessment Act of the whole of the Land as at midnight on 30 June 2009 were still Mrs Church's executors (First Argument); or

   2.    in respect of the one half share of the Land which was transferred to Mr Church as the trustee of the Trust by virtue of the execution and registration of the Transfer of Land, if the Trust were to somehow fail, the Land would revert to Mrs Church's estate.  If that were to happen, then applicants would own the land as Mrs Church's executors and so the executors must therefore own the Land now (Second Argument).

The parties' submissions

1. The Commissioner accepts that the land is 'private residential property' for the purposes of s 23 and it also concedes that the conditions specified in para (a) and para (c) of s 23(1) are satisfied. However, the Commissioner contends that the condition specified in para (b) of s 23(1) was not satisfied because the owners of the Land as at midnight on 30 June 2009 were Mr Church as trustee of the Trust and Ms Dunnell as an individual. Accordingly, in the Commissioner's submission, neither the whole nor any part of the Land is owned by Mrs Church's executors and therefore, land tax is payable in respect of the whole of the Land.

2. The applicants in their further submissions to the Tribunal have conceded that the First Argument will not succeed.

3. It follows that the applicants also concede that land tax is payable in respect of the one half share of the Land which is owned by Ms Dunnell.

4. However, in respect of the one half share of the Land registered in the name of Mr Church, the applicants argue that this part of the Land remains as an asset of the estate until all the assets held in the Trust are distributed to the beneficiaries of the Trust. Their reasoning is that should the trustee not be able to distribute the capital or the income of the Trust to the beneficiaries, then the capital and income will revert to the estate to be dealt with in accordance with the terms of the Will. Accordingly, the applicants contend that the one half share of the Land registered in the name of Mr Church as trustee of the Trust was owned by Mrs Church's executors as at midnight on 30 June 2009. It therefore follows, in the applicants' submission, that the exemption in s 23(1) of the Land Tax Assessment Act applies to that half of the Land.

The Tribunal's response

1. The question before the Tribunal is simply this ­ were Mrs Church's executors the owners of the Land or any part of it at midnight on 30 June 2009?

2. The Tribunal agrees that the applicant's First Argument cannot succeed.  The Tribunal concurs with the respondent's submission that there is a generally accepted principle of law that states that until a residuary estate has been ascertained, neither a residuary nor a specific or general legatee has any proprietary interest in the assets of the estate (see, for example, Commissioner of Stamp Duties (Q) v Livingston (1964) 112 CLR 12 at [18]. However, once the executors have transferred some or all of the deceased's estate to a beneficiary under a Will, even in circumstances where the estate has not at that time been fully administered, then that property belongs to that beneficiary (see, for example, Austin v Beddoe (1893) 41 WR 619 at 620 and 621).

3. Turning to the applicant's Second Argument, the word 'owner' in relation to land is defined in the Land Tax Assessment Act to mean;

   … a person who is entitled to the land for any estate of freehold in possession.

4. This definition has not been judicially considered in the context of the Land Tax Assessment Act. However, in Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 (Glenn) a similar definition was considered and there at 498 it was construed to mean an estate of which some person has a present right of beneficial enjoyment. When a testator provides in a will that 'the beneficial enjoyment of property by a particular object of his bounty cannot begin until the expiration of a determinate or indeterminate period' then the person entitled to the estate in possession of that property is the trustee of the will.

5. This definition found support in CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 at [26].

6. The applicants appear to accept this position, but maintain that because of the possibility that the Trust could fail in some way, the executors must still be owners of Mr Church's one half share of the Land, at least, for the purposes of the Land Tax Assessment Act. However, the Tribunal disagrees, for two reasons. First, the position of executors who have conveyed property in accordance with the terms of the Will has long been settled. It is set out in Attenborough v Solomon [1913] AC 76 at [85]:

   The executors had long ago lost their vested right of property as executors and become, so far as the title to it was concerned trustees under the will.  Executors they remained, but they were executors who had become divested, by their assent to the dispositions of the will, of the property which was theirs virtute officii; and their right in rem, their title of property, had been transformed into a right in personam, ­ a right to get the property back … [I]t is a right to bring an action, not a right of property …

7. The second reason is that, once the Application and the Transfer of Land were registered under the Transfer of Land Act 1893 (WA) (TLA Act) on 25 June 2005, the result was that as at 30 June 2009 the Certificate of Title for the Land showed the registered proprietors to be Mr Church and Ms Dunnell. Although the capacity in which Mr Church and Ms Dunnell are the proprietors of the Land is not shown on the face of the Certificate of Title, it is clear that Ms Dunnell holds her half of the Land as an individual and that Mr Church holds his half of the Land as trustee of the Trust. Under s 63 of the TLA Act, the Certificate of Title is 'conclusive evidence that the person named in such certificate as the proprietor … is seised' in that land. Had the applicants intended to become registered proprietors as Mrs Church's executors, the registration of the Application alone would have achieved this purpose and it is clear that the purpose of the registration of the Transfer of Land was to give effect to the terms of the Will.

Conclusion

1. For the reasons set out above, the Tribunal finds that Mrs Church's executors were not the owners of the Land or any part of it as at midnight on 30 June 2009. Accordingly, the condition specified in para (b) of s 23(1) was not satisfied and therefore the Land is not exempt under s 23.

Orders

1.    The Commissioner of State Revenue's assessment dated 6 January 2010 is affirmed.

2.    The application for review is otherwise dismissed.

I certify that this and the preceding [34] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

JUDGE T SHARP, DEPUTY PRESIDENT