Cominos v Chief Commissioner of State Revenue

[2010] NSWADTAP 82

Appeal Panel - Internal

CITATION:	Cominos v Chief Commissioner of State Revenue [2010] NSWADTAP 82
PARTIES:	APPELLANT Chris Cominos RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	109045
HEARING DATES:	26 October 2010
SUBMISSIONS CLOSED:	26 October 2010
DATE OF DECISION:	8 December 2010
BEFORE:	O'Connor K - DCJ (President); Verick A - Judicial Member; Bennett C - Non-Judicial Member
CATCHWORDS:	LAND TAX - Principal place of residence exemption - Whether applies to separate residence on neighbouring lot in common ownership - ‘granny flat’ concession - parcel of residential land - Appeal dismissed
DECISION UNDER APPEAL:	Cominos v Chief Commissioner of State Revenue [2010] NSWADT 165
FILE NUMBER UNDER APPEAL:	096026
DATE OF DECISION UNDER APPEAL:	07/01/2010
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Land Tax Management (Amendment) Act 1987 Land Tax Management Act 1956
CASES CITED:	B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187 Cominos v Chief Commissioner of State Revenue [2010] NSWADT 165 Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305
REPRESENTATION:	APPELLANT In person RESPONDENT A Gerard, Crown Solicitor's Office
ORDERS:	Appeal dismissed

1 The appellant, Mrs Cominos (nee Bouris), is the owner of two separate lots across which is built a duplex residential building. There is a dividing wall, and each side presents as a self-contained 3-bedroom town house with separate entrances. There is no internal connection between the houses.

2 One lot, known in the proceedings as No 43, is occupied by her family. The other lot, known as No 43A, is occupied by her mother, Mrs Bouris.

3 Under the Land Tax Management Act 1956 (the Act) s 8, land tax is charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied. The lots were for many years owned separately, and each was occupied as a principal place of residence. The respondent, the Chief Commissioner of State Revenue, treated them as exempt from land tax on that basis.

4 The position changed after the death in May 2006 of Mrs Bouris's husband, and the appellant's father. On 10 December 2006 Mrs Bouris, as surviving joint owner, transferred No 43A to the appellant. She continued to occupy No 43A without charge, and, as in the past, gave support to her daughter and her family (there are four children).

5 On 21 January 2008, the Commissioner assessed the appellant with respect to land tax for the tax years 2007 and 2008 in respect of No 43A.

6 The appellant has failed in her objections to the assessment both before the Commissioner and, on review, the Revenue Division of the Tribunal: see Cominos v Chief Commissioner of State Revenue [2010] NSWADT 165.

7 She now appeals. An appeal may be made on a question of law, and, with the leave of the Appeal Panel, extended to the merits: Administrative Decisions Tribunal Act 1997, s 113.

8 The appeal is confined to a question of law, put in this way in the notice of appeal (the appellant is a barrister, and appeared without representation):

The misinterpretation of the words in Schedule 1A Principal place of residence exemption Land Tax Management Act 1956 generally and more particularly the misinterpretation of the words in Clause 4 Concession for land on which there is one other residential occupancy in Schedule 1A Principal place of residence exemption Land Tax Management Act 1956.

9 The questions, as can be seen, were not put in any precise terms. They are simply general assertions of unspecified misinterpretation(s).

10 The appellant's basic point is that her mother's situation ought to be treated no differently from an arrangement where a person lives in a separate residential unit (say, a 'granny flat') on a lot owned by a person who occupies the lot as a principal place of residence and lives in the main residence. She regards it as unfair that as a result of the mother's transfer of the property after the death of Mr Bouris her mother's home is exposed to land tax.

11 The provisions relevant to this assessment are ss 7 and 10 of the Act, and cll 2, 3 and 4 of Schedule 1A (as in force at the date of assessment):

7 Land tax on taxable value of land

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).

10 Land exempted from tax

(1) Except where otherwise expressly provided in this Act the following lands shall, subject to sections 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act: …

(r) land that is exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1A,

Schedule 1A

Part 2 Principal place of residence exemption

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 lot under the Strata Schemes (Freehold Development) Act 1973 or a lot under the Strata Schemes (Leasehold Development) Act 1986.

(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 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.

(4) The exemption conferred by this clause 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.

3 Residential land—meaning

(1) In this Schedule, residential land means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes, other than a building or buildings:

(a) comprised of lots within a strata plan or residential units, or

(b) containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner, or

(c) from any part of which income is derived.

(2) Land does not cease to be used and occupied as provided by subclause (1) by reason of there being on that land any building or improvement that is used or occupied for a purpose ancillary to the purposes for which the building is, or the buildings are, designed, constructed or adapted.

Note. Clause 4 allows one residential occupancy to be disregarded in applying the principal place of residence exemption. Clause 5 allows the use of land for purposes ancillary to a business conducted at a different place to be disregarded in certain circumstances.

Part 3 Concessions in application of principal place of residence exemption

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.

12 The appellant relies in particular on cl 4, the 'granny flat' concession.

13 Had her mother lived in a separate residence which qualified as 'an excluded occupancy' on the principal lot, the Commissioner concedes that on the evidence available the appellant would have received the benefit of this concession.

14 The appellant's key difficulty is that the lots, while owned by the same person (her), are on separate titles. The Tribunal considered whether the two lots could be treated as a 'parcel of residential land' (see cl 2(1)(a)), and thereby brought within the scope of the concession. The Tribunal held not, on the basis of the well-known test propounded by Hunt J in Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305 (Ryan's case).

15 The Tribunal found (at para [37]) that the two lots were not used together as the one residential area by the appellant; and therefore in its opinion there was no 'unity of use', so at least one of the four unities (undivided by physical separation; use; occupation; and title) required by Ryan's case was missing. It can be seen, on the facts, that unity of occupation and unity of title also present as issues. In reaching this conclusion, the Tribunal surveyed the relevant case-law applying Ryan's case, and drew attention to various distinctions in the circumstances of cases where the four unities had been held to exist, and the present case.

16 So far as the cl 4 concession is concerned, the Tribunal said at [57]:

57 Quite apart from the definitions of “residential land” in clause 3 Schedule 1A and “a parcel of residential land” in clause 2(1)(b)(i) Schedule 1A, there is of course an overriding requirement that the land be used and occupied by the owner as his/her principal place of residence and for no other purpose in order that land be exempt from taxation under s 10 (1)(r) LTMA. It seems to the Tribunal that whether the lots are viewed individually or collectively as a parcel, it was clear as a matter of fact in this case, that the Applicant did not use and possibly did not occupy No 43A as her principal place of residence at the relevant taxing dates. The Tribunal agrees that the concession in clause 4 assumes that there is multiple occupancy of a building – the owner and one other residential occupancy. Here, the building at No 43A only had one occupancy being that of Mrs Bouris.

17 One line of argument by the appellant relied on amendments to the Act that have occurred in the years since Ryan's case was decided. The submission is that those amendments altered the context within which the words 'parcel of residential land' appear, and rendered obsolete the approach adopted by Hunt J so far, at least, as multiple occupancies of the type under notice in this case are concerned.

18 The appellant's submissions note the narrower scope of the exemption in 1982 as compared to now. Section 10(1)(r )(ii) provided exemption for 'a parcel of residential land not exceeding 2100 square metres in area that is used and occupied as [the owner's] principal place of residence and for no other purpose', and s 10(1D) included in the meaning of 'residential land' 'land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building that is designed, constructed or adapted for residential purposes'.

19 Hunt J noted in his judgment legislative amendments prior to his decision that had affected the scope and operation of the principal place of residence exemption, and the case-law history that had led to the legislation specifically including within the meaning of land, a 'parcel of land'. That history informed Hunt J's view as to the tests to be applied to determine whether an owner held a 'parcel of land'.

20 The main change post-Ryan, and the origin of the present cl 4 concession, is the liberalisation of the principal place of residence exemption made by the 'granny flat' or 'multiple occupancy' amendments of 1987 (see Land Tax Management (Amendment) Act 1987). It does not, in our view, make any difference.

21 Where an owner occupies a parcel of land as their primary place of residence, the owner can take the benefit of the concession given by cl 4 in respect of a multiple occupancy such as a granny flat, which might well be found on a different lot to the home lot of the owner. But this is not a case of that type. Here the appellant lives with her family in a separate residence to her mother and each residence is on a separate lot.

22 As the Commissioner has submitted, the explanatory note to the amending bill saw the concession now reflected in cl 4 as one for an owner who occupied as his or her principal place of residence the same land (or parcel of land) within which the granny flat was located. The note said:

The object of this Bill … to expand the scope of the exemption from land tax in cases of multiple occupancy of land. The bill provides that land used as the principal place of residence of the owner of the land will not cease to be exempt because there is a 'granny flat' on the land as well as the owner's home …

Land which satisfies all relevant criteria for exemption will be exempted from tax under the proposed amendments even though there is residential occupancy on the land as well as the owner's home.

23 We agree with the Commissioner that the concession given by cl 4 does not extend to cases where the 'granny flat' is located on land (or a parcel of land) not occupied and used as one residential area by the owner.

24 There is nothing, we think, in the amendment history post-Ryan that affects the validity of the approach adopted in Ryan to the meaning of 'parcel of residential land'. The concept of a 'parcel of land' is a familiar one in revenue law and in land valuation law. (We note that the Ryan tests have more recently been enacted into the law to determine these issues.)

25 The appellant also submitted that the concept of an 'excluded residential occupancy' introduced by the 1987 amendments, and seen now in cl 4, affects the meaning of 'parcel of residential land'. We had difficulty following the argument on this point.

26 In our view, the taxing scheme is as follows:

- The general position is that land is taxable, and land includes a parcel of land. A parcel will comprise more than one lot, and be treated as a 'parcel' where the four unities are found as a matter of fact.

- A principal place of residence is exempt from land tax.

- The principal place of residence may be located on a 'parcel of residential land', introducing therefore as a prior or 'threshold' element – the need for the land to be 'residential' before the four unities test is applied.

- The determinant as to whether the land is 'residential' is based on whether the owner of the land occupies the whole of the land as one residential area. This element overlaps with an element relevant to determination of the existence of a parcel of land, where more than one lot is involved. The question is one of fact.

- The owner is not denied an exemption by having on the land a separate residence occupied by another person, provided that the separate residence fills the description given in the concession at cl 4 (for example, one suite of rooms, one flat).

27 In the last part of her submissions, the appellant sought to mount a factual case as to her circumstances. She said for example that it was in her discretion, as owner, to decide who occupied the neighbouring residence, and the terms of that occupation. She noted that her mother was not a tenant in any usual sense. She stated further that she, the appellant, had at all material times been 'in occupation' of that property as she has 'retained the right to possession and she maintained her rights of control over the land'. She says that the arrangement she has with her mother is 'analogous to allowing guests to stay in your home'.

28 The Tribunal made various findings of fact on these matters. This was a question of law appeal only. A question of law appeal, of its nature, involves a set of agreed or accepted facts. The respondent dealt with the appeal, properly, on the basis that the factual findings were not in issue. It is not open, therefore, now to revisit the findings. An appeal on a question of law is limited to the identification of an erroneous answer in respect of a question of law and not to a review of the merits; see further, B & L Linings Pty Ltd & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187, esp per Allsop P at [38], [55], [75], [77], [78], [120] and [121], with whom Giles and Basten JJA agreed, and per Basten JA at [150].

Order

Appeal dismissed.