Cominos v Chief Commissioner of State Revenue

[2010] NSWADT 165

CITATION:	Cominos v Chief Commissioner of State Revenue [2010] NSWADT 165
DIVISION:	Revenue Division
PARTIES:	APPLICANT Chris Cominos (Bouris) RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	096026
HEARING DATES:	5 February 2010
SUBMISSIONS CLOSED:	23 February 2010
DATE OF DECISION:	1 July 2010
BEFORE:	Hirschhorn M - Judicial Member
CATCHWORDS:	Land tax – principal place of residence, parcel of residential land
LEGISLATION CITED:	Land Tax Management Act 1956 Taxation Administration Act 1996
CASES CITED:	Ryan v Commissioner of Land Tax (1982) 1 NSWLR 305 Chief Commissioner of State Revenue v McGrath & anor [2008] NSWSC 387 McGrath and anor v Chief Commissioner of State Revenue [2007] NSWADT 46 Chief Commissioner of State Revenue v Geoffrey Harry Coleman & Another [2007] NSWSC 625 Chief Commissioner of State Revenue v Sacco [2008] NSWADTAP 61 Kamper and anor v Chief Commissioner of State Revenue [2005] NSWADT 256 Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 Chief Commissioner of State Revenue v Timbs (2006) NSWADTAP 25 Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Amor [2004] NSWADTAP 19 Giunta v Chief Commissioner of State Revenue [2005] NSWADTAP 19 McDonald’s Australia Ltd v Chief Commissioner of State Revenue [2005] NSWSC 6 Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21
REPRESENTATION:	APPLICANT In person RESPONDENT A Gerard, solicitor
ORDERS:	1. The decision of the Respondent is affirmed.

REASONS FOR DECISION

Part A - Introduction

1 The Applicant, Ms Cominos (Bouris) has applied for review of a decision of the Respondent, the Chief Commissioner of State Revenue, requiring the payment of land tax in respect of a property owned by the Applicant in Como (that property is referred to hereafter as “No. 43A”) for the 2007 and 2008 land tax years.

Part B – Facts

2 The general background facts were not in dispute. The Applicant and Respondent helpfully exchanged correspondence in respect of a draft Statement of Agreed Facts and Issues provided to the Tribunal for the purpose of the hearing (in which agreement was reached in relation to some of the general background facts and some legal issues).

3 Prior to 2 December 1996, the Applicant owned one lot of land in Como (“Lot 124”).

4 On 2 December 1996, Lot 124 was subdivided into two separate lots, referred to hereafter as “No. 43” and “No. 43A”.

5 No. 43 and No. 43A each have a duplex building on them. The Applicant said that the building straddles the boundary. A self contained 3 bedroom flat is on each lot. There is no internal access between the two duplexes – the only access to them is external.

6 On 19 May 1997, the Applicant transferred No. 43A to her parents, Mr and Mrs Bouris.

7 From the 1998-2006 land tax years inclusive, the Respondent treated No. 43A as exempt from land tax on the basis that it was the principal place of residence of Mr and Mrs Bouris.

8 During the same period, the Applicant says she used and occupied No. 43 as her principal place of residence and for no other purpose.

9 On 7 May 2006, the Applicant’s father, Mr Bouris, passed away. Mrs Bouris had held No. 43A as a joint tenant with Mr Bouris and accordingly, following his death, Mrs Bouris was the sole owner of No. 43A.

10 On 10 December 2006, Mrs Bouris transferred No. 43A to her daughter, the Applicant.

11 Since the death of Mr Bouris and up to the date of the hearing:

(a) Mrs Bouris has continued to reside in the property at No. 43A;
(b) The Applicant says she has continued to reside at No. 43 with her 4 children (under 16 yrs) – two children having been born since 10 December 2006.

12 On 21 January 2008, the Respondent issued the Applicant with a notice of assessment to land tax for the 2007 and 2008 Land Tax years for, inter alia, the property at No. 43A. In respect of the same Land Tax years the Respondent treated the property at No. 43 as exempt from Land Tax as the Applicant’s principal place of residence.

13 On 8 March 2008, the Applicant objected to the notice of assessment in respect of land tax relating to No. 43A. The objection was disallowed by the Respondent on 10 December 2008. An application for review was then filed by the Applicant on 6 February 2009.

Part C - Legislation

14 Land tax is levied and payable on the taxable value of all land in New South Wales, except land which is exempted from taxation under the Land Tax Management Act 1956 (“LTMA”) : section 7. For each calendar year, tax is charged on land as owned at midnight on 31 December the previous year: section 8.

15 For the purposes of 2007 and 2008 land tax years, there was an exemption for land under the principal place of residence exemption as provided for in Schedule 1A LTMA. The relevant legislative provisions (being section 10(1)(r) and relevant parts of Schedule 1A) were as follows:

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 Principal place of residence exemption
(Section 10 (1) (r))

Part 1 Preliminary

1 Definitions

(1) In this Schedule:
principal place of residence exemption —see clause 2.
residential land —see clause 3.
taxing date —means midnight on the thirty-first day of December.

(2) For the purposes of this Schedule, a reference to the owner of land includes, if there are joint owners, any one or more of those joint owners.

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 on 1 January 2004 or any succeeding year, if:

(a) the land has a land value in respect of the year of less than the premium tax threshold, and

(b) the land is:
(i) a parcel of residential land, or
(ii) a lot under the Strata Schemes (Freehold Development) Act 1973 ….

(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 .

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.
…

16 Section 3(1) LTMA defined principal place of residence in the following terms:

principal place of residence of a person means the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person.

Part D – Issue

17 The central issue before the Tribunal is whether No 43A is exempt from land tax in respect of the 2007 and 2008 land tax years pursuant to the principal place of residence exemption in section 10(1)(r) and Schedule 1A LTMA.

18 In determining this issue, two important sub-issues arise as follows: (1) Do No 43 and No 43A constitute a “parcel of residential land” for the purposes of Part 2, clause 2(1)(b)(i) of Schedule 1A LTMA? (2) If so, was that parcel of residential land used and occupied by the Applicant as the principal place of residence of the Applicant (as owner of that land) and for no other purpose, in respect of the relevant land tax years pursuant to the opening words of Part 2, clause 2(1) of Schedule 1A LTMA?

19 The Applicant also raised the issue as to whether the Applicant could rely on the concession in Part 3, clause 4 of Schedule 1A LTMA being a “Concession for land on which there is one other residential occupancy” (that is, her mother’s occupancy of No 43A).

20 A further issue before the Tribunal is whether the market rate of interest imposed in respect of the 2007 and 2008 land tax years was correctly imposed in accordance with s 21 of the Taxation Administration Act 1996 (“TAA”) and/or whether there should be any remission of that interest pursuant to the discretion in s 25 TAA.

Part E – Applicant’s case

21 The Applicant filed two sets of written submissions prior to the hearing and an additional set of written submissions following the hearing pursuant to leave given by the Tribunal.

22 The Applicant’s case was essentially as follows:

a.The Applicant accepted that the starting point for analysing whether No 43 and No 43A constituted “a parcel of residential land” is the decision in Ryan v Commissioner of Land Tax (1982) 1 NSWLR 305.
b. The Applicant submitted that the Respondent had admitted that the two lots in question were contiguous, adjoining, undivided in title (owned solely by the Applicant) and that the two lots were not physically separated (i.e. by a fence).
c. Clause 4 (of Part 3 in Schedule 1A) was introduced after Ryan’s case. Clause 4 applies in the present case. No 43 and No 43A is a building or buildings used and occupied for residential purposes and contain a residential occupancy other than that of the owner (Applicant), being the residential occupancy of her mother, Mrs Bouris.
d. The Applicant submitted that all four tests in Ryan’s case were met in the present case and No 43 and No 43A constituted a parcel of residential land.
1. No 43 and No 43A are contiguous;
2. They are undivided by physical separation;
3. They are undivided in use as at all material times they were both used solely for residential purposes and for no other purpose.
4. They are undivided in occupation.
5. They are undivided in title.
e. Within the meaning of relevant authorities such as Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 , the Applicant submitted that she was at all material times in occupation of No 43A, she retained the right to possession and maintained her rights of control over No 43A. The Applicant allowed her mother to reside at No 43A but the property was not leased.
f. The unity of use requirement in Ryan only requires that both No 43 and No. 43A are used solely for residential purposes and for no other purpose. It does not matter that the residential use is by a person other than the owner. The Applicant claimed that this was supported in Commissioner of Land Tax v Christie (1973) 2 NSWLR 526 and Chief Commissioner of State Revenue v Timbs (2006) NSWADTAP 25 at [57]-[58], [70] and Hyde Page v Chief Commissioner of State Revenue (2009) NSWADT 229 at [26] and following.
g. The Applicant also argued in the alternative that she used and occupied both No 43 and No 43A for residential purposes as her principal place of residence and for no other purpose – she allowed her mother to reside at No 43A but such residence remained at the Applicant’s discretion or control. No. 43A has never been rented out. The Applicant said that she has used and occupied No 43A because she retained the right to possession and maintained her rights of control over the land.

Part F – Respondent’s case

23 The Respondent also prepared written submissions for the purposes of the hearing and with leave, filed additional written submissions after the hearing.

24 The Respondent’s case was essentially as follows:

a. The relevant authority for determining whether adjoining but separate lots is a single parcel of residential land is Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305.
b. The lots, No 43 and No 43A, are not “undivided in use” and therefore do not satisfy one of the necessary tests in Ryan’s case.
The required unity of use is directed to the owner’s use of the separate lots. The two lots must be both be used by the owner for residential purposes as the principal place of residence of the owner. It is not sufficient for both lots to be used for residential purposes.
c. That the unity of use test in Ryan requires the two lots to be used by the Applicant for residential purposes is evident from the entire principal place of residence scheme in Schedule 1A LTMA.
d. It is clear that the Applicant uses No 43 as her place of residence and her mother, Mrs Bouris uses No 43A as her place of residence. As the Applicant does not use No 43A as part of her principal place of residence, her case must fail.
e. Clause 4 of Schedule 1 does not fall to be considered. It is not the occupation and use of No 43A by Mrs Bouris that disqualifies the Applicant from the principal place of residence exemption – rather it is the fact that the Applicant does not use No 43A as part of her principal place of residence along with No 43 that is the relevant issue.
f. Interest was correctly imposed at the market rate pursuant to s 21 TAA. The premium rate component was remitted under s 25 TAA by the Commissioner. There are no exceptional circumstances in the present case to justify any remission of the market rate component of interest in the present case.
g. The decision of the Tribunal and the Appeal Panel of the Tribunal in Chief Commissioner of State Revenue v Timbs [2005] NSWADT 173 / (2006) NSWADTAP 25, have no relevance to the present case because they concerned strata lots.
h. The four unities test in Ryan is clearly directed towards the owners of the land. In subsequent decisions of the Court and Tribunal applying Ryan, in respect of “unity of use” (“use” being a question of fact), have always turned on the extent and quality of use of the second lot by the owner and whether that use was sufficient to satisfy the unity of use test.
i. A capricious result would follow if the Tribunal were to accept the Applicant’s submission to the effect that all that is required for unity of use is that both blocks are used for residential purposes. The renting of No 43A to a third party by way of lease would still satisfy such a unity of use test – this cannot be the case. Further any contiguous blocks of land in NSW owned by the same owner and used for residential purposes by someone would satisfy the unity of use test. It was acknowledged that some of these might not satisfy the unity of occupation test but this is a separate test in Ryan.
j. No 43A does not meet the definition of “residential land” in the LTMA. It is clear that the terms of the definition in clause 3 of Schedule 1A that it imports a requirement that the relevant land be used and occupied by the owner of the land. No. 43A is not used in the present case by the owner (i.e. the Applicant) at all. Clause 4(1) of Schedule 1A allows one other residential occupancy other than that of the owner. The concession contemplates that there will be multiple occupancy of the land, not a single occupancy by a person other than the owner.

Part G – Discussion and Reasons for Decision

Parcel of residential land – Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305 (“Ryan’s case”)

25 The parties agreed that a central issue in this application for review was whether No 43 and No 43A constituted a “parcel of residential land” for the purposes of Part 2, clause 2(1)(b)(i) of Schedule 1A LTMA. There was no dispute that Ryan’s case is binding on this Tribunal and that the relevant tests set out by Hunt J in that case apply to determine whether No 43 and No 43A, being contiguous properties situated at Como, constitute a “parcel of residential land”.

26 In Ryan, Hunt J had to consider whether two contiguous blocks of land used and occupied for residential purposes constituted a “parcel of residential land” for the purposes of s 10(1)(r)(ii) of Land Tax Management Act 1956 as it stood at the relevant time. His Honour held that “contiguous blocks of land can comprise a “parcel of residential land” within s 10(1)(r)(ii) only where they are undivided not only by physical separation but also use, occupation and title”.

27 The facts in Ryan were relevantly, as set out by Hunt J at page 306, as follows:

In 1964, Mr and Mrs Ryan jointly purchased a block of land known as No 1 Baden Road, Kurraba Point. At the same time, and in his own name only, Mr Ryan purchased the contiguous block of land known as No 3 Baden Road, although completion of this purchase was delayed until 1966. The vendor in each case was the same, and one purchase price was paid for the two blocks. In 1965, a large house was constructed upon the land at No 1 Baden Road which, together with a garage, pool house, swimming pool and associated facilities, virtually fills the whole of that land. There is no physical separation between the two blocks of land. Number 3 Baden Road is used and occupied by Mr and Mrs Ryan as a garden entertainment and recreation area; gardens have been laid and a barbecue built. The only other building constructed upon the land at No 3 Baden Road consists of stone steps which commence on the land at No 1 Baden Road next to the house and cross the boundary into No 3 Baden Road. Mr Ryan says, and I accept, that both blocks of land have been used and occupied together at all times as the one residential area.

28 In Ryan, Hunt J found against Mr Ryan because Mr Ryan failed to establish unity of title of both properties. Whilst Mr and Mrs Ryan jointly owned No 1 Baden Road, only Mr Ryan owned No 3 Baden Road and thus there was no unity of title in respect of the two properties. In Ryan, there was only one dwelling and, other than some stone steps on the adjoining block, there were no other buildings.

29 The tests formulated in Ryan’s case were accepted by two later Supreme Court cases in New South Wales: Chief Commissioner of State Revenue v McGrath & anor [2008] NSWSC 387 (Gzell J) (McGrath); and Chief Commissioner of State Revenue v Geoffrey Harry Coleman & Another [2007] NSWSC 625 (Handley AJ) (Coleman). It has been applied in numerous Tribunal decisions including those of the Appeal Panel of the Tribunal: Chief Commissioner of State Revenue v Sacco [2008] NSWADTAP 61 (Sacco) where the Panel observed that the test had “acquired something of a quasi-legislative status”.

30 Importantly, as noted in both McGrath (at paragraph [26] per Gzell J) and Coleman (at paragraph [21] per Handley AJ), the tests as formulated in Ryan’s case involve questions of fact.

31 In the present case, the parties are in dispute as to whether there was unity of “use” in relation to No 43 and No 43A at the relevant taxing dates. The Applicant maintained the unity was met because both properties were used for residential purposes (No 43 was used by the Applicant for residential purposes and No 43A was used by Mrs Bouris for residential purposes). The Applicant said that “undivided in use” has regard only to the purpose to which the land is put.

32 The Respondent countered that the two properties were not used by the owner (the Applicant) for residential purposes and accordingly there was no unity of use between No 43 and No 43A.

33 The question arising therefore in this case is whether the “unity of use” test requires the owner to use both properties for residential purposes or whether it is sufficient that the two properties are simply used by anyone for residential purposes (i.e. as distinct from say, commercial purposes or indeed, as the Applicant suggested at the hearing, no purpose (eg a vacant property).

34 Having regard firstly to Ryan’s case, the Tribunal notes that at 306, Hunt J clearly made a finding of fact in that case, based on the evidence of Mr Ryan, that “both blocks of land were “used and occupied together at all times as the one residential area”. No 1 Baden Road contained a house together with a garage, poolhouse, swimming pool and associated facilities. No 3 Baden Road was used and occupied by Mr and Mrs Ryan as a garden entertainment and recreation area.

35 At 307, Hunt J observed that it was clear that if the two blocks used as the one residential area were identified as together comprising one “parcel of residential land”, the Commissioner had conceded that Mr Ryan was entitled to his exemption pursuant s 10(1)(r)(ii). If however, each block was identified individually as a “parcel of residential land”, Mr Ryan conceded that, in relation to No 3 Baden Road, he did not on that block use and occupy a building designed and constructed for residential purposes, and thus was not entitled to an exemption in relation to that block.

36 Similarly in this case, the Tribunal notes that if No 43 and No 43A were to be identified individually as each being a parcel of residential land, then the Applicant would not use and occupy No 43A for residential purposes. The Applicant conceded, certainly as far as “use” was concerned, that she did not “use” this property at the relevant taxing date. No 43A was instead used by her mother as the mother’s residence. The Applicant, of course, as would be expected, visited her mother from time to time, but importantly the Applicant did not use the building at No 43A as any part of her own residence – she did not sleep there, eat there (other than when visiting) and did not otherwise reside there.

37 Further, it is also clear as a matter of fact from what the Applicant said at the hearing, that the two properties (No 43 and No 43A) were not used together as the one residential area by the Applicant (as was found in Ryan’s case). Instead, as a matter of fact, one property (No 43) was used by the Applicant at the relevant taxing date and the other lot (No 43A) was used by the Applicant’s mother at the relevant taxing date. The Applicant did not provide any evidence to support any other finding nor indeed did she submit that she used No 43A together with No 43 in any way at the relevant taxing date.

38 It has been held in numerous cases, that the tests in Ryan’s case are separate and cumulative and must be satisfied “precisely” (see Chief Commissioner of State Revenue v Coleman [2007] NSWSC 625 at [20]). Accordingly, a failure to meet the “unity of use” test at the relevant taxing date (being 31 December 2006 for the 2007 land tax year and 31 December 2007 for the 2008 land tax year) means that the two properties would not constitute a “parcel of residential land”

39 It is noted that the Appeal Panel of the Tribunal in Sacco (supra), in the context of a consideration of the “physical separation” test in Ryan’s case, said the following at [33] –[34] in relation to the tests generally:

In our view, the key element of Hunt J’s formulation is the word ‘undivided’. It flavours the meaning to be given to the remaining words. The overall concept is that of a ‘parcel of residential land’. A parcel is ‘a quantity of something wrapped or packaged together, a package or bundle’ ( Macquarie Dictionary , meaning 1). Another meaning is ‘a separable, separate, or distinct part or portion or section, as of land’ (meaning 4). The adjective of importance in meaning 4 is ‘distinct’.

Hunt J’s criteria are all seeking, as we see it, to promote the idea of seamless occupation and use. There must be commonality of title, commonality of use, commonality of occupation and physical commonality. The parcel, to pick up the adjective in meaning 4, must be ‘distinct’ from the land around it.

40 As set out above, there is not a seamless use of No 43 and No 43A in this case – the requisite “commonality” is missing. The use of the properties is by different persons. If, as the Applicant submitted, all the unity of use test required was that the land be used for residential purposes (i.e. by anyone), then most contiguous properties in suburban streets would be unified in “use” and meet that test.

41 It is noted that in Kamper and anor v Chief Commissioner of State Revenue [2005] NSWADT 256, the Tribunal was called upon to review land tax imposed in relation to a property situated at Taren Point for a number of land tax years from 2000-2002 inclusive (the “earlier relevant years”) and 2003-2004 inclusive (the “subsequent relevant years”). Relevantly for present purposes, the facts in relation to the earlier relevant years were set out by the learned Tribunal member at para [4] as follows:

2.1 In 1991 the Applicants purchased the property at 56A Woodlands Road Taren Point (“56A Woodlands Road”). Since that time the Applicant, his wife, and children have used this property exclusively as their principal place of residence and continue to do so.
2.2 In 1996 the Applicants purchased the property at 56 Woodlands Road Taren Point. The property remained vacant until 1997. In 1997 the Applicants rented the premises for a short period of time before requesting the tenants to vacate the premises.
2.3 The Applicants then allowed extended family, Magdalene Kamper’s sister and her family (“the Spanos family”) to live in the premises until approximately June 2002. The Applicants neither sought nor obtained rent from the Spanos family during this time. They assisted the Spanos family during a time when the Spanos family was impecunious to the extent that they also provided a motor vehicle for the Spanos family and paid their utilities accounts.

42 In that case, the learned Tribunal member at paragraphs [7]- [10] found that:

7….From November 1997 until May or June 2002 the Second Property was used and occupied by Emanuel and Katina Spanos and their family; (they are referred to in clause 2.3 of the Applicants submissions as “the Spanos family”). Mrs.Spanos and Mrs. Kamper are sisters.

8 Mr Xenos noted that the Applicants did not ask the Spanos family for rent in respect of their use occupation the Second Property, and that moreover the Applicants paid for utilities such as electricity and the like. (Mr. Xenos did not make any specific reference to the motor vehicle referred to in clause 2.3 of the Applicant's submissions but that may have been an oversight, and in any event nothing turns on it.) Mr Xenos drew attention in this context to the decision of this Tribunal in Timbs v Chief Commissioner of State Revenue [2005] NSWADT 173 (currently on appeal). He noted that in Timbs and where the applicant owned and occupied two flats in the same building there was evidence that the applicant (Mr Timbs) allowed relatives to occupy one of the flats at times and from time to time. Mr. Xenos sought to contend that the facts in this case are analogous to those in Timbs. However any such analogy would not be apposite because the Spanos family occupied and used the Second Property for an extended and continuous period (of nearly 5 years) in circumstances where, if Mr. And Mrs Spanos had been the owners of the Second Property, it would have been their principal place of residence (“PPR”) Mr. Xenos later in the hearing conceded that for this reason and in relation to the earlier relevant years, the case for the Applicants was weak. This is so having regard to the tests in Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305 ; in particular it was plain that in respect of the earlier relevant years and in relation to the Properties, use and occupation was divided. I do not comment further on Timbs both because it dealt with strata flats and also because it is on appeal.

9 If only for the sake of completeness I note that although the Spanos family appear to have been the recipients of generous treatment (in respect of the Second Property) the reference in clause 2.3 of the Applicants submissions to “extended family” cannot have the effect that any member of the Spanos family was in any relevant statutory sense a dependent of the Applicants, and indeed there was no contention by Mr. Xenos to this effect.

10 On the basis that Ryan is, as a judgment of a superior court of this State binding on this Tribunal it is clear that during the earlier relevant years there was as between the Properties a division of use and occupation and so that the Applicants cannot succeed in respect of the earlier relevant years.

43 The facts in the above case (notwithstanding there were separate freestanding buildings on each block rather than a duplex building straddling the boundary) are quite similar to the present case. The Kampers used and occupied No 56A (the Main Property) at the relevant taxing dates. The Spanos Family used and occupied No 56 (the Second Property) at the relevant taxing dates and had done so continuously for about a 5 year period. Although the Kamper and Spanos families were each clearly using a building for “residential purposes”, there was found to be a clear division in “use” and “occupation” between the properties for the purposes of determining whether the Ryan tests were met. This is, in the Tribunal’s view of the relevant cases, because the Ryan test clearly requires that the two contiguous properties in question be used together by the relevant owner(s) as a single residential area. The use of both properties by the owner is what is important in order to satisfy the unity of “use” test for a parcel of residential land.

44 The Tribunal notes that in many other cases applying the unity of use test, there has been evidence as to the “use” of both of the contiguous lots by the relevant owner including:

a. Coleman

, (supra, [2007] NSWSC 625; refer decision of the Tribunal below at [2005] NSWADT 236 at [33] regarding division of “use and “occupation” albeit not in one of the relevant land tax years, also at [41] regarding the use of the Gunyah property for “recreational purposes” and “construction purposes”.

b. McGrath(

supra [2008] NSWSC 387 at [7]-[11]; refer also decision of the Tribunal below at [2007] NSWADT 46 at [45]-[46]

45 The Applicant placed a great deal of reliance in submissions on a well-known passage from Commissioner of Land Tax v Christie [1973] 2 NSWLR 526 (Christie) regarding “use”:

“Use” has regard to the purpose to which land is put. Under s 9(3)(e) it must be shown to have been devoted to the purpose of constituting the site of a dwelling house….”

46 In relation to the meaning of “undivided in use” in Ryan’s case however, the Tribunal is of the view that the decided cases applying the test have looked beyond the mere purpose to which the land is put and at whether the contiguous blocks of land in question are used together by the relevant owner(s) as a residential area in order to determine whether or not they constitute a “parcel”.

47 The Applicant also made some supplementary submissions concerning Chief Commissioner of State Revenue v Timbs (2006) NSWADTAP 25 (Timbs). The Respondent noted in submissions (and the Tribunal agrees) that the relevant passages cited were from a dissenting decision of one of the members of that Appeal Panel.

48 Further, and importantly, that case dealt with strata lots and the question of whether the reference to “a lot” in clause 2(1)(b) of Schedule 1A LTMA permitted the principal place of residence exemption to apply to two or more strata lots. On this basis, the decision in that case is not of assistance in the present case which clearly deals with ordinary Torrens title lots (i.e. No 43 and No 43A).

49 In relation to the three remaining tests in Ryan’s case, although it is not strictly necessary to decide or indeed provide comment on these in view of the conclusion reached above, the Tribunal notes the following:

a. The “unity of title” test would be satisfied as the Applicant was the owner of No 43 and No 43A as at the relevant taxing dates in respect of the 2007 and 2008 land tax years;

b. The parties were in dispute as to whether or not there was “unity of occupation” as at the relevant taxing dates in respect of the 2007 and 2008 land tax years. In particular, the Respondent submitted in supplementary submissions that control, if established on the evidence, was only one element of the test of “occupation”. The Respondent noted that in this case there was no evidence in relation to these matters other than the submissions of the Applicant. The Tribunal agrees with this – there was no evidence in this case from Mrs Bouris, for example, as to the relevant living arrangements. The Tribunal also notes that there are obvious factual differences between the case of Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 where Mr Flaracos was found to have [at [18]] “joint physical presence” on the relevant land with tenants. From what the Applicant said at the hearing, her own physical presence on the land at No 43A was only from time to time as a visitor to her mother’s home. The Applicant did not live at No 43A for any period of time or importantly as at the relevant taxing dates.

c. In relation to the “physical separation” test, the Tribunal notes that there was also a general lack of evidence in relation to this matter. It appeared from submissions that there was a common wall between the duplexes but no internal access between them. It also appeared from submissions that was no external fence between the two blocks of land. Again this is an issue that would require further evidence in order for the Tribunal to make relevant findings of fact for the purposes of the Ryan test. The Tribunal notes that the Appeal Panel in Sacco (supra) concluded that at [39] that “undivided” must, at least, bear the connotation “significantly”or “substantially” undivided. A large unbroken common wall on the boundary, where there is no internal access between the duplexes, may well amount to a significant or substantial physical separation of the lots. The Tribunal has not decided this matter in relation to the lack of evidence before it.

Residential land

50 The definition of residential land in clause 3 of Schedule 1A requires the relevant land to be used and occupied for residential purposes and for no other purpose. This is essentially defined, in turn by the same clause, as the use and occupation of a building or buildings designed, constructed or adopted for residential purposes, other than a building or buildings containing occupancies other than that of the owner.

51 As Judicial Member Verick stated in McGrath and anor v Chief Commissioner of State Revenue [2007] NSWADT 46 at first instance (not overturned on appeal) the exemption for land used and occupied as a principal place of residence under clause 3 is only available for land used by the owner as one occupancy. However clause 4(1) of Schedule 1A provides a concession to owners where there is one other residential occupancy on the land, other than that of the owner of the land, provided it is an excluded residential occupancy under subclause 2.

52 The Respondent submitted in supplementary written submissions that No 43A did not meet the definition of “residential land”. Further to the extent that No 43A was not “residential land” then it could not for this reason alone, form a “parcel of residential land” with No 43 (citing McGrath v Chief Commissioner of State Revenue [2007] NSWADT 46 at [28], [38], [57] and [58].

53 In the latter case, it is noted that as a factual matter, one of the contiguous blocks was not being used at all at the relevant taxing dates. This then raised a question as to whether it could be said the block was “used and occupied for residential purpose and for no other purpose” for the purposes of clause 3 of Schedule 1A. In that case, the learned Tribunal Member found that in the absence of residential use of that block, it could not form with the contiguous block, “a parcel of residential land”.

54 The Respondent submitted that clause 3(1) provides that for land to be “residential land” it must be used and occupied for residential purposes and no other purpose by the owner of the land. This is evident from the fact that clause 3(1)(b) provides that land containing occupancies, other than that of the owner, is not residential land. Further, the concession in clause 4 operates where there is one residential occupancy, other than that of the owner, (if that residential occupancy satisfies the requirements of an “excluded residential occupancy”).

55 The Respondent’s submission in relation to the relevant properties in this case was as follows:

a. No 43A is not residential land because there is no use of a building designed, constructed or adapted for residential purposes by the owner (i.e. the Applicant).

b. The concession in clause 4(1) only operates where there is one residential occupancy, other than that of the owner. The concession assumes that there is a residential occupancy of the owner and then one other residential occupancy of someone else.

c. Accordingly, as No 43A is not residential land, then it cannot together with No 43 form a “parcel of residential land” (i.e. the same way as in the McGrath case, the “disuse” of one of the properties meant that it could not form together with the other property that was being used, a “parcel of residential land”.)

d. The Explanatory Note to the legislative amendments that first introduced the commonly called “granny flat” provisions (s 10(1D), now clause 4 (1) Schedule 1A) confirmed –“The object of this Bill is to amend the Land Tax Management Act 1956 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….”. In the present case, as the Applicant (owner) did not have a home at No 43A – there was no “multiple occupancy” of No 43A.

56 The Tribunal considers that there is merit in the abovementioned submission, particularly in view of the factual circumstances whereby the Applicant did not use or physically occupy No. 43A at the relevant taxing dates or indeed at all (other than visits to her mother’s house from time to time as might be expected).

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.

58 Section 3 TAA defines a “tax default” in the following terms:

tax default means a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of tax that the taxpayer is liable to pay.

59 Sections 21 and 22 TAA set out the obligation of a taxpayer to pay interest in respect of a tax default.

60 Section 25 TAA provides for the circumstances in which the Respondent (or the Tribunal standing in the shoes of the Respondent on review) may remit interest.

61 The relevant principles governing the imposition and remission of interest were considered in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Amor [2004] NSWADTAP 19 ("Incise Technologies") at [60]-[63] as follows:

60 In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank's Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation.

62 In Giunta v Chief Commissioner of State Revenue [2005] NSWADTAP 19, the Appeal Panel stated that the observation of the Appeal Panel in the abovementioned case should, as Gzell J noted when considering the indications given by the Commissioner in a Revenue Ruling “not be used as a fetter upon the discretion which is couched in general terms and must be exercised according to its language and depending on the facts of each case”: McDonald’s Australia Ltd v Chief Commissioner of State Revenue [2005] NSWSC 6 at [100].

63 In Trust Co. of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21, Verick JM said (at [25] & [27]):

25 The market rate component would reflect the use by the party in question of the relevant amount of money on one hand, and the lack of use of the relevant funds by the state on the other. But the fixed premium rate component is a rate imposed by way of a penalty for the "tax default" in question. A premium rate of interest is imposed where a "tax default" is a result of some culpable conduct on the part of the taxpayer. The Chief Commissioner can also impose a penalty tax under s 26 of the TA Act in cases where more serious tax defaults occur due to deliberate conduct of taxpayers.
27 In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the "tax default" is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes).

64 There are no exceptional circumstances or indeed any other particular circumstances in this case which would justify the remission of interest at the market rate and the Tribunal has concluded that the Respondent’s refusal to remit market rate interest was correct.

65 The Tribunal notes that at the hearing the Applicant did not make submissions in relation to any further remission of market rate and at the hearing, she did appear to contend that she was willing to pay it. In addition, there was no evidence that the Respondent was in any way at fault in this case.

66 For the foregoing reasons, the Tribunal makes the following order:

1. The decision of the Respondent is affirmed.