Commissioner of State Revenue v De Campo
[2007] WASCA 136
•27 JUNE 2007
COMMISSIONER OF STATE REVENUE -v- DE CAMPO [2007] WASCA 136
| (2007) 33 WAR 542 | |||
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASCA 136 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:115/2006 | 20 FEBRUARY 2007 | |
| Coram: | WHEELER JA BUSS JA MILLER AJA | 27/06/07 | |
| 28 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| A | |||
| PDF Version |
| Parties: | COMMISSIONER OF STATE REVENUE ROSANNA DE CAMPO |
Catchwords: | Taxation Land tax Exemption Whether three adjoining lots can be treated as a single private residential property Construction of s 21(1)(a) of the Land Tax Assessment Act 2002 (WA) Construction of cl 2(4) of the glossary to the Land Tax Assessment Act Whether the lots were established and used as one integrated area that constituted the place of residence Application of the "establishment" test and the "user" test involves questions of fact and degree which are to be determined objectively |
Legislation: | Interpretation Act 1984 (WA), s 5 Land Tax Act 2002 (WA) Land Tax Assessment Act 2002 (WA), s 3, s 5, s 7, s 17, s 21(1), Pt 3, glossary (cl 1, cl 2(1), cl 2(2), cl 2(3), cl 2(4)) State Administrative Tribunal Act 2004 (WA), s 17(1), s 27(1), s 29(1) Taxation Administration Act 2003 (WA), s 3, s 34, s 37(2), s 40(1), s 43A(1) |
Case References: | Collector of Customs v Agfa-Gevaert Ltd (1995) 186 CLR 389 Commissioner of Taxation v Miller (1946) 73 CLR 93 Handiside v Attorney-General [1969] NZLR 650 JM Bestall v Commissioner of State Revenue (2005) 28 SR (WA) 311 Levene v Inland Revenue Commissioners [1928] AC 217 R v Brown [1996] AC 543 R v Rintel (1991) 3 WAR 527 Re Chief Commissioner of State Revenue and Ferrington (2004) 57 ATR 170 XYZ v Commonwealth (2006) 80 ALJR 1036 Young and Commissioner of State Taxation [2005] WASAT 296 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : COMMISSIONER OF STATE REVENUE -v- DE CAMPO [2007] WASCA 136 CORAM : WHEELER JA
- BUSS JA
MILLER AJA
- Appellant
AND
ROSANNA DE CAMPO
Respondent
ON APPEAL FROM:
Jurisdiction : STATE ADMINISTRATIVE TRIBUNAL OF WESTERN AUSTRALIA
Coram : HON R VIOL (SUPPLEMENTARY DEPUTY PRESIDENT)
Citation : DE CAMPO and COMMISSIONER OF STATE REVENUE [2006] WASAT 230
File No : DR 15 of 2006, DR 112 of 2006
(Page 2)
Catchwords:
Taxation - Land tax - Exemption - Whether three adjoining lots can be treated as a single private residential property - Construction of s 21(1)(a) of the Land Tax Assessment Act 2002 (WA) - Construction of cl 2(4) of the glossary to the Land Tax Assessment Act - Whether the lots were established and used as one integrated area that constituted the place of residence - Application of the "establishment" test and the "user" test involves questions of fact and degree which are to be determined objectively
Legislation:
Interpretation Act 1984 (WA), s 5
Land Tax Act 2002 (WA)
Land Tax Assessment Act 2002 (WA), s 3, s 5, s 7, s 17, s 21(1), Pt 3, glossary (cl 1, cl 2(1), cl 2(2), cl 2(3), cl 2(4))
State Administrative Tribunal Act 2004 (WA), s 17(1), s 27(1), s 29(1)
Taxation Administration Act 2003 (WA), s 3, s 34, s 37(2), s 40(1), s 43A(1)
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Appellant : Mr N C Monahan
Respondent : Mr D H Solomon
Solicitors:
Appellant : State Solicitor
Respondent : Solomon Brothers
(Page 3)
Case(s) referred to in judgment(s):
Collector of Customs v Agfa-Gevaert Ltd (1995) 186 CLR 389
Commissioner of Taxation v Miller (1946) 73 CLR 93
Handiside v Attorney-General [1969] NZLR 650
JM Bestall v Commissioner of State Revenue (2005) 28 SR (WA) 311
Levene v Inland Revenue Commissioners [1928] AC 217
R v Brown [1996] AC 543
R v Rintel (1991) 3 WAR 527
Re Chief Commissioner of State Revenue and Ferrington (2004) 57 ATR 170
XYZ v Commonwealth (2006) 80 ALJR 1036
Young and Commissioner of State Taxation [2005] WASAT 296
(Page 4)
1 WHEELER JA: I have had the advantage of reading in draft the reasons for decision of Buss JA. I agree with those reasons and have nothing to add.
2 BUSS JA: The respondent ("Mrs De Campo") applied to the State Administrative Tribunal ("the Tribunal") for a review of decisions to disallow objections to land tax assessments on:
(a) Lot 695 on Plan 3395, with the street address 13 Wavell Road, Dalkeith ("Lot 13"), for the assessment years ending 30 June 2005 and 30 June 2006; and
(b) Lot 4 on Diagram 15558, with the street address 15 Wavell Road, Dalkeith ("Lot 15"), for the assessment year ending 30 June 2006.
3 Lot 696 on Plan 3395, with the street address 11 Wavell Road, Dalkeith ("Lot 11"), adjoins Lot 13. Lot 13 adjoins Lot 15. It is not in dispute that at all material times Lot 11 was the subject of a "residential property" land tax exemption.
4 On 16 August 2006, the Tribunal set aside the Commissioner's decisions to disallow Mrs De Campo's objections. The Tribunal ordered that the matters be remitted to the Commissioner for new assessments to be issued in accordance with the Tribunal's decision on the objections.
5 The Commissioner appeals to this Court. By s 43A(1) of the Taxation Administration Act 2003 (WA), an appeal from a decision of the Tribunal under that Act can be brought on a question of law, of fact, or mixed law and fact, without having first obtained leave to appeal.
Agreed facts
6 The parties agreed, before the Tribunal, that as at midnight on 30 June 2004:
(a) Before 22 November 2002, Mrs De Campo made separate offers to purchase Lots 11 and 13, with the offer to purchase Lot 13 being conditional upon Mrs De Campo purchasing Lot 11.
(b) On 22 November 2002, Mrs De Campo became the registered proprietor of Lot 11, which had an existing near-new two-storey house.
(c) On 25 February 2003, Mrs De Campo became the registered proprietor of Lot 13, which had an existing brick and tile house.
(Page 5)
- (d) The house on Lot 13 was leased to a third party until August 2003. Upon the expiry of the lease, Mrs De Campo demolished the house on Lot 13 and cleared the entire block, apart from certain mature trees and shrubs.
(e) At all relevant times:
(i) there was an uninterrupted brick wall across the whole of the boundary separating Lots 11 and 13; and
(ii) Lots 11 and 13 were not commonly fenced as one common area.
(f) Before 30 June 2004, Mrs De Campo made an application to the City of Nedlands for approval to conduct various works on Lot 13.
7 Also, the parties agreed, before the Tribunal, that between 1 July 2004 and midnight on 30 June 2005:
(a) On 17 September 2004, Mrs De Campo became the registered proprietor of Lot 15, which had an existing house.
(b) As soon as feasible after 17 September 2004, Mrs De Campo demolished the house on Lot 15 and the dividing fence between Lots 13 and 15, and cleared much of the vegetation on Lot 15.
(c) At all relevant times:
(i) there was an uninterrupted brick wall across the whole of the boundary separating Lots 11 and 13; and
(ii) Lots 11, 13 and 15 were not commonly fenced as one common area.
(d) Before 30 June 2005, Mrs De Campo applied to the City of Nedlands to conduct various works on Lots 13 and 15, and a building licence was granted to permit her to construct on Lot 13 a two-car garage with a studio on top, and front gates across Lots 13 and 15.
The evidence of Mrs De Campo
8 Mrs De Campo gave evidence before the Tribunal. Her evidence in chief was recorded in detail in the Tribunal's reasons. Relevantly:
(a) At all material times, Mrs De Campo, her husband and their son resided in the two-storey house on Lot 11.
(Page 6)
- (b) The land on Lot 11 behind the two-storey house was taken up largely by a swimming pool, with only small areas of lawn for recreational purposes.
(c) Mrs De Campo intended to develop Lot 13 in two stages. First, she intended to remove the house on Lot 13 and use the land as a native bush garden/vegetable garden. Secondly, she intended to transform the gardens into a formal landscape garden which would complement the style of the two-storey house on Lot 11.
(d) Shortly after the house on Lot 13 was demolished, Mrs De Campo engaged a building designer and landscape architect to commence design work in relation to that property. The carrying out of the work was time consuming. Eight different design concepts were prepared. Mrs De Campo eventually settled on a particular concept. (The City of Nedlands is the local government with authority in relation to Mrs De Campo's properties, and its approval was required for the works she intended to carry out as part of the second stage of the development of Lot 13.)
(e) After the house on Lot 13 was demolished, Mrs De Campo's son played on that property "doing what a child of that age would normally do". Also, Mrs De Campo, her husband and their son had picnics on Lot 13.
(f) After the house on Lot 13 was demolished:
(i) Mrs De Campo installed large gates for the front driveway on Lot 11 and metal grilles between the open piers at the front of that lot;
(ii) Mrs De Campo commenced a vegetable garden on Lot 13, and planted some native plants on that lot which were later stolen; and
(iii) Mrs De Campo, her husband and their son had to walk from the front yard of Lot 11, and around the uninterrupted brick wall which was on the boundary between Lots 11 and 13, to gain access to Lot 13.
(g) Mrs De Campo, her husband and their son made use of Lot 13 on almost a daily basis in the course of residing in the two-storey house on Lot 11. A water supply to Lot 13 was provided by draping hoses across the wall between Lots 11 and 13.
(h) The vegetable garden which Mrs De Campo established on Lot 13 was cultivated sequentially in two different locations on that lot, and was then re-established on Lot 15.
(Page 7)
- (i) The initial site for the vegetable garden on Lot 13 became the location for the two-car garage and studio.
(j) When the house on Lot 13 was being demolished, a tree on that lot was damaged and, at significant expense, another mature tree was relocated to Lot 13.
(k) The two-car garage and studio which Mrs De Campo constructed on Lot 13 was designed to complement the style of the two-storey house on Lot 11. Those building works were substantially completed by March 2006.
(l) Mrs De Campo relocated some substantial trees between Lot 13 and Lot 15, including the relocation of a fig tree at a cost of $7000.
9 Mrs De Campo said in cross-examination that there was "no specific play area" on Lot 13 because she wanted her son to "run free" on the land. There was no sand patch prepared on that lot because the existing grass and sand was adequate. Her evidence was vague as to the precise number of native trees she had planted on Lot 13 (it appears that up to 20 native trees were planted), and also as to the specific characteristics of the vegetable garden.
10 The Tribunal made a finding in relation to Mrs De Campo's evidence, at [41], as follows:
"Although the applicant was inclined to exaggerate from time to time in the course of her evidence, the Tribunal is prepared to accept that there was a considerable amount of use by the family of Lots 13 and 15 once they became available to the family. There is no evidence to the contrary from the respondent."
The evidence of Jonathan Neil Raven
11 Jonathan Neil Raven is a Senior Inspector employed by the Commissioner. The Tribunal recorded relevant aspects of his evidence, at [49] - [50]:
"… [Mr Raven] said that on 7 September 2005 together with Mr Glen Foote, an inspector in the Compliance Division of the office, they inspected Lots 11, 13 and 15 from the curb side and took three digital photographs from the curb side - document No 17 in the respondent's bundle of documents. He said that there were a few dead trees devoid of leaves down the right
(Page 8)
- hand side of Lot 13 and the rest of Lot 13 was 'just shrub grass'. He saw no plants or trees which formed any native garden or other type of garden on either Lots 13 or 15 and saw no landscaping work or other work as depicted on the plans supplied by the applicant - the applicant had stated that there had been landscaping plans none of which had come to fruition. He gained the impression that Lots 13 and 15 had been amalgamated and were part of a property development. As a result of his inspection, he concluded that the applicant's claim that Lot 13 formed an integral part of a residence located on Lot 11 could not be established."
12 The Tribunal evaluated Mr Raven's evidence, at [51] - [52]:
"Mr Raven's evidence was of limited value to the respondent. Its strength is somewhat reduced by the limitations Mr Raven faced in not being able to make an 'on-site' inspection of the properties and then for any length of time. He was not really in a position to contradict the applicant's evidence and therefore the Tribunal accepts the applicant's evidence that the family used Lots 13 and 15 as the "backyard" of Lot 11 although the planned landscaping etc has not come to fruition as at this stage. There was a photograph submitted by the applicant which showed a street frontage of Lots 11 and 13 which shows the existing, and some intended extension, of landscaping of the front; fencing and paving is in fact completed.
Looking at the evidence as a whole the Tribunal is of the view that there is little evidence on the part of the respondent which had the effect of contradicting the evidence of the applicant and therefore her case to any great degree."
The statutory framework
13 I will set out and refer to the provisions of the Land Tax Assessment Act 2002 (WA) ("the Assessment Act") as currently enacted. Although the Assessment Act has been amended since midnight on 30 June 2004, the amendments are not material for the purposes of this appeal.
14 Section 5 of the Assessment Actprovides, relevantly, that land tax is payable for each "financial year" for all land in the State, except land that is exempt under s 17. The term "financial year" means the period of 12 months ending on 30 June: s 5 of the Interpretation Act 1984 (WA).
(Page 9)
15 By s 7(1) of the Assessment Act, land tax payable on land for an "assessment year" is payable by the person who is or was the owner of the land at midnight on 30 June in the previous year. The term "assessment year", in relation to land tax, means the financial year for which the land tax is, or is to be, assessed: cl 1 of the glossary to the Assessment Act.
16 Section 17 of the Assessment Act provides that land is exempt from land tax for an assessment year if:
(a) the Commissioner grants an exemption for the assessment year under s 20; or
(b) it is exempt for the assessment year under another provision of Pt 3.
Part 3 comprises s 17 to s 42.
17 Section 21(1) of the Assessment Act contains an exemption with respect to "private residential property" owned by individuals. It provides, relevantly:
"Private residential property (except property held in trust) is exempt for an assessment year if, at midnight on 30 June in the financial year before the assessment year, it is owned -
(a) by an individual who uses it as his or her primary residence;
…"
18 Clause 1 of the glossary to the Assessment Act contains certain definitions which are relevant in construing s 21(1). In the Act, unless the contrary intention appears:
"…
'lot'has the meaning given in clause 2 [of the glossary];
…
'parcel' means 2 or more lots of land that are treated as a single property under clause 2 [of the glossary];
'primary residence', in relation to an individual, means the individual's sole or principal place of residence;
(Page 10)
- 'private residence' means a building or part of a building that was occupied, or fit to be occupied and intended by the owner to be occupied, as a place of residence of one or more individuals, …
'private residential property' means -
(a) a lot of land on which there is a private residence;
(b) a parcel of land on which there is a private residence constructed so that part of the residence stands on each of the lots of land that constitute the parcel;
(c) an interest in a home unit; or
(d) for the purposes of sections 24, 24A, 27, 27A and 28 - a lot of land on which a private residence is being or has been constructed.
…"
19 Clause 2 of the glossary provides, relevantly:
"(1) A reference to a lot of land is a reference to a defined portion of land -
(a) that is depicted on a plan or diagram deposited with the Western Australian Land Information Authority established by the Land Information Authority Act 2006 section 5 and for which a separate Crown grant, certificate of Crown land title, qualified certificate of Crown land title, or certificate of title has been or can be issued, registered or depicted on a subdivisional plan or diagram, whether so exhibited or deposited or not; and
(b) that is approved by the Town Planning Board or the Western Australian Planning Commission, as the case requires, …
(2) A reference to a lot of land includes a reference to the whole of any land that is the subject of -
…
- (c) a certificate of title registered under the Transfer of Land Act 1893;
…
- (3) If 2 or more lots of land in the same ownership have common boundaries, the Commissioner may treat the lots as a single property for valuation and assessment if it is appropriate to do so.
(4) However, for the purpose of determining the use of a lot or parcel of private residential property, 2 or more lots of land are not to be treated as a single private residential property unless the Commissioner is satisfied that the lot or lots on which the private residence is constructed and each other lot are established, and used by the individuals who reside there, as one integrated area that constitutes the place of residence."
20 The Taxation Administration Act and the Land Tax Act 2002 (WA) are to be read with the Assessment Actas if they formed a single Act. See s 3 of the Assessment Act and s 3 of the Taxation Administration Act.
21 Section 34 of the Taxation Administration Act confers on a taxpayer the right to object to an assessment issued by the Commissioner. The Taxation Administration Act provides, relevantly:
(a) The onus of establishing that an assessment or decision to which an objection relates is invalid or incorrect lies on the taxpayer. See s 37(2).
(b) A person dissatisfied with the Commissioner's decision on an objection may apply to the Tribunal for a review of the decision: s 40(1).
22 In the present case, the proceedings before the Tribunal were within its review jurisdiction: s 17(1) of the State Administrative Tribunal Act 2004 (WA) ("the SAT Act"). By s 27(1) of the SAT Act, the review of a reviewable decision is to be by way of a hearing de novo. Section 29(1) of the SAT Act provides:
"The Tribunal has, when dealing with a matter in the exercise of its review jurisdiction, functions and discretions corresponding to those exercisable by the decision-maker in making the reviewable decision."
(Page 12)
The Tribunal's reasoning
23 The Tribunal referred to and distinguished earlier decisions of the Tribunal in JM Bestall v Commissioner of State Revenue (2005) 28 SR (WA) 311 and Young and Commissioner of State Taxation [2005] WASAT 296.
24 In Bestall, the salient facts were these. On 1 September 2000, the applicant purchased a property ("Lot 101"). Lot 101 had a width of about 25 metres and a depth of about 130 metres. When the applicant purchased Lot 101, the front or eastern third of the property had been improved by the construction of a two-storey dwelling house, ancillary improvements and a landscaped garden, but the rear or eastern two-thirds of the property was unimproved and comprised scrub. The rear two-thirds of Lot 101 was separated from the front one-third by a fence across the width of the property. At all material times, a property known as Lot 100 was located immediately to the south of Lot 101. Lot 100 had almost identical dimensions and orientation to Lot 101. The front or eastern third of Lot 100 had been improved by the erection of a two-storey dwelling house and ancillary improvements. The applicant and the owners of Lot 100 agreed that they would consolidate their properties, each of them would retain most of the front or eastern third of their former, respective property as a Torrens title lot, and they would develop the rear or western two-thirds of the consolidated property and a central driveway between the two existing dwelling houses as a survey strata title estate with 10 survey strata lots. The applicant and the owners of Lot 100 cleared the survey strata land, erected a fence around it, provided utility services to each strata lot, constructed the central driveway, installed some landscaping along the edges of the driveway, and constructed a pillar on each side of the driveway at the street frontage to the driveway which contained letterboxes for each of the strata lots. In March 2003, deposited plan 34392, which depicted the consolidation and re-subdivision of Lots 100 and 101, was registered by the Department of Land Administration. Deposited plan 34392 included, amongst other lots, Lot 11 which comprised most of the developed area of Lot 101. Also, on 13 March 2003, survey strata plan 43049 was registered in respect of the undeveloped area of Lot 100 and Lot 101. Certificates of title were issued to the applicant in respect of Lots 1 - 5 on that strata plan, which comprised most of the undeveloped portion of Lot 101. Lots 6 - 10 on strata plan 43049 comprised mainly the undeveloped part of Lot 100, and certificates of title in respect of those lots were issued to a third party who had purchased them from the owners of Lot 100.
(Page 13)
25 The issue in Bestall was whether the applicant was liable to pay land tax in respect of Lots 1 - 5. The applicant contended that, at all material times, Lots 1 - 5 had formed part of her "private residential property" within s 21 of the Assessment Actand cl 2(4) of the glossary to that Act. The Tribunal held, at 318 - 319 [28]:
"On the proper construction of cll 2(3) and 2(4) of the Glossary, in order for the discretion under cl 2(3) to treat the lots in question as a single, private residential property to be enlivened, the respondent or the Tribunal must be satisfied by the taxpayer of the following two preconditions:
(i) 'that the lot or lots on which the private residence is constructed and each other lot are established … as one integrated area that constitutes the place of residence'; and
(ii) 'that the lot or lots on which the private residence is constructed and each other lot are … used by the individuals who reside there, as one integrated area that constitutes the place of residence'."
- The Tribunal also held, at 319 [31], that each of the two pre-conditions involved questions of fact and degree, and that the questions were to be determined entirely objectively.
26 It was decided in Bestall that the applications for review should be dismissed and the decisions of the Commissioner affirmed. In particular:
(a) As to the financial year ending 30 June 2004, the Tribunal held, at 320 [33], that as at 1 July 2003, Lots 1 - 5 were neither established nor used by the applicant or her family as part of "one integrated area that constitutes the place of residence".
(b) As to the financial year ending 30 June 2005, the Tribunal held, at 321 [38], that it was not satisfied that, as at 1 July 2004, the lot on which the applicant's residence was constructed and Lots 1 - 5 were "established" as "one integrated area" that constituted the applicant's place of residence.
27 In Young, the applicant sought review of the Commissioner's disallowance of an objection to an assessment of liability for land tax. The assessment in question required the applicant to pay land tax for the financial year ending 30 June 2005 in relation to the property known as 16 Margaret Street, Cottesloe ("No 16"). The assessment asserted that an adjoining property at 18 Margaret Street, Cottesloe ("No 18"), also owned
(Page 14)
- by the applicant, was subject to a "100 per cent residential exemption" from land tax. The applicant objected to the assessment in relation to No 16 on the basis that No 16 and No 18 should be treated as a single private residential property. The relevant facts concerning the acquisition of No 16 and No 18, and the improvements on those properties, were described by the Tribunal, at [10] - [11]:
"On or about 27 May 1997, Mr Young purchased No 18 and, from at least January 2003 used it as his home, together with his wife and three children. Number 18 has an area of 491 square metres and has erected on it a one to two-storey free-standing dwelling house of 1960's construction. The house contains three bedrooms, kitchen, lounge/family room, bathroom and laundry.
On or about 30 June 1985, Mr Young's parents purchased No 16. When Mr Young's father passed away in 1996, Mr Young's mother became the sole proprietor of that property. On or about 25 June 2004, Mr Young's mother transferred ownership of No 16 to Mr Young. Number 16 is an identically sized and shaped lot to No 18. It has erected on it a one-storey free-standing dwelling house of 1930's construction. It contains a single bedroom, kitchen/living area, lounge room, bathroom and 'sleepout'."
(a) The Tribunal was not satisfied that No 16 and No 18 were "established" as "one integrated area" that constituted the applicant's place of residence; in particular, each lot was separated by a substantial dividing fence, the appearance and physical characteristics of the two lots were such that they appeared to be two separate houses on two separate, although adjoining, residential properties with two separate front and rear yards, and physical access from one lot to the other was only possible by walking from one front yard to the other front yard or by climbing the dividing fence.
(b) Although the applicant and his family used No 16 for storage and study facilities, that use was not "as one integrated area that constitutes the place of residence"; in particular, to the extent that No 16 was used, it was as a distinctly different property.
(Page 15)
29 In the present case, the Tribunal distinguished Bestall and Young. Its reasoning, at [53] - [59], in relation to Mrs De Campo's application and those authorities, was as follows:
"One significant fact in favour of the applicant's position is the clear lack of room for recreational purposes other than the swimming pool in the back area of Lot 11 – this is consistent with the applicant's position that Lot 13 was purchased so that that could provide the recreational area unavailable in Lot 11. It further supports the applicant's position that Lot 15 was purchased to extend the available area in Lot 13 and therefore to Lot 11, for ongoing recreational and other uses by the family.
The respondent submitted that Bestalland Young could be relied on by it, not only from the point of view of the legal principles established but also the decision itself. It is clear however that both cases are distinguishable on the facts. For example, in Bestall the adjoining vacant land had been developed as strata lots by the applicant with separate services such as water, sewerage and postal addresses. Further, the applicant did not share a central driveway with the owners with some of the other lots. In relation to Young's case each of the two lots sought to be treated as one had upon them built a separate residence.
Turning to the first of the two preconditions identified in Bestall and applicable here, and remembering that any establishment on the lots must be 'firm and permanent' 'as one integrated area', in the present case, as soon as possible, the houses on Lots 13 and 15 were demolished and the wall between those lots was removed. The purchase of Lot 11 was conditional on Lot 13 being available for purchase - this was achieved and the applicant was able to hold, on a permanent basis, two lots side by side. Lot 15 was bought as soon as it became available. A common frontal fence was built and the dividing wall between Lots 13 and 15 was removed - these arrangements have a flavour of permanence. The garage and studio was built on Lot 13 for regular use by the family and a number of trees planted on Lots 13 and 15.
In the Tribunal's view, these various matters, and the evidence generally, satisfy the first of the two pre-conditions under cl 2(3) [sic] of the Glossary.
(Page 16)
- As to the second pre-condition, the facts as found (and the evidence generally) shows a continuous and varied use by the applicant and her family of the lots; such use involving recreation, the growing of vegetables and use of the garage on Lot 13. The regular supplying of water from Lot 11 to Lot 15 with the paying of the costs by Lot 11 confirm the permanence of this arrangement.
Once again, in the Tribunal's view, the second pre-condition has been satisfied by the applicant - Lots 11, 13 and 15, on the evidence suggest a 'whole' that can, as required by cl 2(3) [sic], be regarded as a single property that constitutes the applicant's place of residence.
The only factor which could be seen to detract from this conclusion is the continued existence of the wall between Lots 11 and 13, and the method of access adopted by the family into Lots 13 and 15. In the end the Tribunal considered that the applicant's explanation for this was reasonable in the circumstances and that security was the overriding factor in the decision not to demolish the wall or to build an entry gate into Lot 13."
30 At all material times, Mrs De Campo was the beneficial owner of Lots 11, 13 and 15.
The Commissioner's grounds of appeal
31 The Commissioner alleges, in his grounds of appeal, that the Tribunal erred in law, as follows:
"(a) by failing to properly distinguish between, and separately consider the evidence in relation to, the assessment year of 1 July 2004 - 30 June 2005 (Assessment Year 1) and the assessment year of 1 July 2005 - 30 June 2006 (Assessment Year 2);
(b) by taking into account, and giving weight in its determination, to the subjective intentions of [Mrs De Campo];
(c) by taking into account evidence of matters after 1 July 2004 (for Assessment Year 1) and 1 July 2005 (for Assessment Year 2);
(Page 17)
- (d) by taking into account irrelevant considerations; and
(e) in concluding that there was any, or any sufficient evidence, to allow a conclusion to be drawn that the 'establishment' test under clause 2(4) of the Glossary to [the Assessment Act] had been satisfied in relation to either of the Assessment Years."
The critical issue in this appeal
32 The critical issue, in this appeal, is whether the Tribunal erred in deciding that Lots 13 and 15 were exempt from land tax under s 21(1)(a) of the Assessment Act for the assessment year ending 30 June 2005, in the case of Lot 13, and for the assessment year ending 30 June 2006, in the case of Lots 13 and 15.
33 The determination of that issue depends on whether, at midnight on 30 June in the financial year before each assessment year, the relevant lots should have been treated as a "single private residential property", under cl 2(4) of the glossary to the Assessment Act, for the purposes of the exemption conferred by s 21(1)(a).
34 I will identify and examine the relevant provisions of the Assessment Act before considering each ground of appeal.
The term "private residential property"
35 The term "private residential property", as defined in cl 1 of the glossary to the Assessment Act, means, relevantly, "a lot of land on which there is a private residence".
36 A "lot" of land means, relevantly, the whole of any land that is the subject of a certificate of title registered under the Transfer of Land Act 1893 (WA). See cl 2(2)(c) of the glossary. (At all material times, each of Lots 11, 13 and 15 was a "lot" of land within cl 2(2)(c). Each of them may also have been a "lot" within cl 2(1) of the glossary.)
37 A "private residence" means, relevantly, a building that was occupied as a place of residence of one or more individuals. See cl 1 of the glossary. (At all material times, there was a "private residence" on Lot 11, namely, a building (the two-storey house) that was occupied as a place of residence of Mrs De Campo, her husband and their son. At all material times, there was not a "private residence", as defined in cl 1, on either Lot 13 or Lot 15.)
(Page 18)
Section 21(1)(a) of the Assessment Act
38 In cl 1 of the glossary to the Assessment Act, the term "primary residence", in relation to an individual, is defined to mean the individual's sole or principal place of residence. The Assessment Act does not define "sole or principal place of residence". The phrase bears its ordinary meaning.
39 In Levene v Inland Revenue Commissioners [1928] AC 217, Viscount Cave LC, in the course of construing a revenue statute, explained, at 222, the meaning of "reside":
"… the word 'reside' is a familiar English word and is defined in the Oxford English Dictionary as meaning 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'. No doubt this definition must for present purposes be taken subject to any modification which may result from the terms of the Income Tax Act and Schedules; but, subject to that observation, it may be accepted as an accurate indication of the meaning of the word 'reside'. In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure."
- That passage was cited with approval by Latham CJ in Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99. The expression "principal place of residence", in a revenue statute, has been considered in numerous authorities. Some of them are collected and discussed in Re Chief Commissioner of State Revenue and Ferrington (2004) 57 ATR 170 at 178 - 184 [30] - [44].
40 The term "primary residence" (which, as I have mentioned, is defined in cl 1 of the glossary, in relation to an individual, to mean the individual's sole or principal place of residence) appears, relevantly, in s 21(1)(a) of the Assessment Act in the context of "private residential property" which is owned "by an individual who uses it as his or her primary residence". Plainly, "primary residence" must be construed as part of the whole of s 21(1)(a), and with proper regard to the evident object or purpose of the exemption. As Lord Hoffmann noted in R v Brown [1996] AC 543 at 561:
"The fallacy in the Crown's argument is, I think, one common among lawyers, namely to treat the words of an English
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- sentence as building blocks whose meaning cannot be affected by the rest of the sentence … This is not the way language works. The unit of communication by means of language is the sentence and not the parts of which it is composed. The significance of individual words is affected by other words and the syntax of the whole."
- Also see Collector of Customs v Agfa-Gevaert Ltd (1995) 186 CLR 389 at 396 - 397; XYZ v Commonwealth (2006) 80 ALJR 1036 at 1060 [102].
41 The ordinary meaning of the verb "uses" is utilises or employs for or with some aim or purpose. See R v Rintel (1991) 3 WAR 527 per Malcolm CJ at 529. Although "uses" has a broad connotation, its meaning is, of course, controlled by the context. In s 21(1)(a), the thing which an individual "uses" is "private residential property", and the use in question is as the individual's "primary residence". It is apparent that s 21(1)(a) is concerned with actual use at midnight on 30 June in the financial year before the relevant assessment year. The nature and extent of the use of the private residential property which is required to constitute use as an individual's primary residence involves questions of fact and degree. Compare Handiside v Attorney-General [1969] NZLR 650 at 651 - 652.
42 It is not in dispute, in this appeal, that at all material times Lot 11 was Mrs De Campo's "primary residence" within s 21(1)(a). The dispute between the parties is confined to the status of Lots 13 and 15.
Clause 2(3) and (4) of the glossary
43 It is unnecessary, in this appeal, to determine the proper construction of cl 2(3) of the glossary to the Assessment Act. In particular, it is unnecessary:
(a) to enumerate the factors which are relevant in deciding whether "it is appropriate" to treat two or more lots as a "single private residential property";
(b) to determine whether the "appropriateness" which enlivens the Commissioner's power must exist as a matter of objective fact or whether the Commissioner's power is exercisable if he or she forms an opinion that "it is appropriate to do so"; or
(c) to determine whether, if "it is appropriate" to treat the lots as a "single private residential property", the Commissioner must
- exercise the power or whether the Commissioner retains a residual discretion in relation to its exercise.
- It is accepted, for the purposes of this appeal, that if the Tribunal was correct in deciding that cl 2(4) applied in relation to the relevant lots in the assessment years in question, then those lots should be treated as a "private residential property" for the purposes of the exemption in s 21(1)(a) of the Assessment Act.
44 Clause 2(4) prohibits two or more lots from being treated as a "single private residential property" unless the Commissioner is satisfied that the lot or lots on which the "private residence" is constructed, and each other lot in question, are:
(a) established; and
(b) used by the individuals who reside there,
as one integrated area that constitutes the place of residence.
45 Clause 2(4) comprises two tests, namely, an "establishment" test and a "user" test. Each test relates to all of the relevant lots, which must be one integrated area, and that integrated area must constitute the relevant individuals' place of residence.
46 Subject to cl 2(3) and (4), the exemption in s 21(1)(a) is restricted, relevantly, to property which comprises:
(a) a single lot of land on which is constructed a building that is occupied, or fit to be occupied and intended by the owner to be occupied, as a place of residence; or
(b) two or more lots of land on which there is a building of the nature referred to in subpar (a) above, with part of the building standing on each of the lots in question.
The apparent intention of the Parliament was to ensure that an individual should not be entitled to an exemption from land tax in respect of a lot or lots which adjoin the lot on which the building constituting his or her primary residence is constructed unless, in substance and reality, it is reasonable to regard the adjoining lot or lots as an integral part of the individual's primary residence.
47 In my opinion, two or more lots will be "one integrated area that constitutes the place of residence", within cl 2(4), if it is reasonable to characterise the lots, taken together, as the sole or principal place of residence of the individuals who reside in the building which stands on one or more of the lots. It will not be reasonable to make that
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- characterisation unless the lots in question are a cohesive whole and for the residential purposes of the individuals who reside in the relevant building. The physical characteristics of the lots (including the improvements and vegetation, if any, on each lot) and the nature and extent of any inter-relationship between the lots (including the improvements and vegetation, if any, on each lot) must be considered.
48 The "establishment" test in cl 2(4) connotes stability and permanence. The lots will not have been "established" as one integrated area that constitutes the place of residence if the integration of the lots is merely transient, temporary or contingent. In my opinion, whether, at midnight on 30 June in the financial year before the relevant assessment year, the lots are "established" as one integrated area that constitutes the place of residence is to be determined by evaluating the objective circumstances of any integration between the lots which exists in fact. Those circumstances must be weighed for the purpose of deciding whether the integration of the lots, and their constitution as the sole or principal place of residence of the individuals who reside in the relevant building, has the requisite degree of stability and permanence at midnight on 30 June.
49 The "user" test in cl 2(4) relates to the actual use of the lots, by the individuals who reside in the relevant building, as one integrated area that constitutes the place of residence. In other words, the "user" test is concerned with actual use, as distinct from potential or intended use. See the Explanatory Memorandum relating to the Bill that upon enactment became the Assessment Act, which states, relevantly, at page 47:
"Subclause (4) provides that for determining the use of a lot or parcel of private residential property, 2 or more lots are not to be treated as a single private residential property unless the Commissioner is satisfied that the lots are established and actually used by the owners as one integrated area that constitutes a place of residence." (Emphasis in text)
- In my opinion, in determining whether, at midnight on 30 June in the financial year before the relevant assessment year, the lots are "used" by the individuals who reside in the relevant building as one integrated area that constitutes the place of residence:
(a) the objective circumstances of any integration between the lots which exists in fact; and
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- (b) the objective circumstances of the individuals' actual use of the lots,
are relevant. The nature and extent of the actual use of the lots which will be necessary before it may be concluded that, at midnight on 30 June, they are "used" by the relevant individuals as one integrated area that constitutes the place of residence will depend, to a significant extent, on:
(i) the physical characteristics of the lots (including the improvements and vegetation, if any, on each lot); and
(ii) the time (before midnight on 30 June) when those characteristics came into existence.
50 The Explanatory Memorandum gives examples, at pages 47 - 48, concerning the operation of cl 2(3) and (4):
"The operation of subclauses (3) and (4) can be illustrated as follows.
Where a person owns two adjoining lots, one of which is vacant and the other includes the person's residence, the vacant lot is assessed for land tax purposes. However, where both lots are clearly used as part of the residence, they are treated as one parcel and an exemption is granted.
Residential usage of the vacant lot may comprise a common boundary fence, a tennis court or swimming pool, or some other structure that evidences that the lot is being used as an integral part of the residence of the owner. Where the vacant lot is not actually used by the owner as an integral part of the residence at 30 June (eg he or she may intend to develop a tennis court or add a swimming pool in the future), the lot will be subject to tax."
- Those illustrations are merely examples. As I have mentioned, the word "established" connotes stability and permanence as distinct from transience, temporariness or contingency. It is possible, in a particular case, that two or more lots may have been "established" as one integrated area that constitutes a place of residence without structural or other improvements having been made on the lot or lots on which the relevant building is not constructed.
51 The application of the "establishment" test and the "user" test, in a particular case, will involve questions of fact and degree. Each case will turn on its own facts.
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Ground (a)
52 The Commissioner submitted to this Court that the Tribunal erred by failing properly to distinguish between, and separately consider, the evidence in relation to each of the assessment years ending 30 June 2005 and 30 June 2006. Counsel for the Commissioner referred, in support of that submission, to the Tribunal's reasons, at [60] - [61]:
"In the light of the above findings, the Tribunal determines that the respondent was in error in disallowing the objections to the assessment of land tax for the years 20 [sic] June 2005 and 30 June 2006 on Lots 13 and 15.
In particular, therefore, the Tribunal finds:
a) Lots 11, 13 and 15 are established and used by the applicant and her family as one integrated area and therefore should be treated as a single residential property under the [Assessment] Act.
b) It is appropriate to treat Lots 11, 13 and 15 as a single property for evaluation [sic] and assessment under the [Assessment] Act.
c) Lots 11, 13 and 15 are used by the applicant as her 'primary residence' for the purpose of exemption under s 21 of the [Assessment] Act."
53 In my opinion, there is no substance in the Commissioner's complaint. The Tribunal expressed, at [60] - [61], its conclusions in relation to the Commissioner's disallowance of Mrs De Campo's objections. Earlier in its reasons, the Tribunal recounted the facts which had been agreed between the parties, summarised the evidence given by Mrs De Campo and Mr Raven, expressed an opinion as to Mrs De Campo's credit, and made some findings of fact based on the evidence given by the witnesses. The Tribunal distinguished, at [24], between the agreed facts as at midnight on 30 June 2004 and the agreed facts relating to the period between 1 July 2004 and 30 June 2005. It identified, at [11] - [12], the issues for its determination, including whether the Commissioner was correct in disallowing Mrs De Campo's objections to the assessment of land tax on either or both of Lots 13 and 15. I am satisfied, on an examination of the Tribunal's reasons as a whole, that it was alert to the necessity for, and did in fact, distinguish between
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- and separately consider the evidence relating to each of the relevant assessment years.
Ground (b)
54 The Commissioner submitted that the Tribunal erred by taking into account, and giving weight in its determination, to the subjective intentions of Mrs De Campo. Counsel for the Commissioner relied, in support of that submission, on the Tribunal's reasons, at [53] and [55]:
"One significant fact in favour of the applicant's position is the clear lack of room for recreational purposes other than the swimming pool in the back area of Lot 11 - this is consistent with the applicant's position that Lot 13 was purchased so that that could provide the recreational area unavailable in Lot 11. It further supports the applicant's position that Lot 15 was purchased to extend the available area in Lot 13 and therefore to Lot 11, for ongoing recreational and other uses by the family.
…
Turning to the first of the two preconditions identified in Bestalland applicable here, and remembering that any establishment on the lots must be 'firm and permanent' 'as one integrated area', in the present case, as soon as possible, the houses on Lots 13 and 15 were demolished and the wall between those lots was removed. The purchase of Lot 11 was conditional on Lot 13 being available for purchase - this was achieved and the applicant was able to hold, on a permanent basis, two lots side by side. Lot 15 was bought as soon as it became available. A common frontal fence was built and the dividing wall between Lots 13 and 15 was removed - these arrangements have a flavour of permanence. The garage and studio was built on Lot 13 for regular use by the family and a number of trees planted on Lots 13 and 15."
55 In my opinion, the Tribunal did not err as alleged. The Tribunal stated, at [15], that it would adopt and follow the approach in Bestall, namely, that the taxpayer's intention was not a relevant consideration in determining the "use" to which the land was put. Further, the Tribunal referred, at [17], to a passage from the reasons for decision in Bestall in which it was asserted, in effect, that whether the "establishment" test and the "user" test were satisfied must be "determined entirely objectively". Although the Tribunal said, at [25], that the "background" referred to in
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- Mrs De Campo's evidence was "important", it added, in the same sentence, that "the intention of the applicant is not a relevant consideration in the final determination".
56 In my opinion, the Tribunal stated, at [53] and [55], in substance, that the objective circumstances were "consistent" with Mrs De Campo's subjective intentions, but it did not give any weight to those intentions in making its determination.
57 Ground (b) fails.
Ground (c)
58 The Commissioner submitted that the Tribunal erred by taking into account evidence of events which occurred after 1 July 2004 in relation to the assessment year ending 30 June 2005, and after 1 July 2005 in relation to the assessment year ending 30 June 2006. In particular, counsel for the Commissioner referred to the following evidence:
(a) a studio and garage was built on Lot 13 and used by Mrs De Campo, her husband and their son: the Tribunal's reasons at [55] and [57]; and
(b) a front fence was constructed across Lots 11, 13 and 15: the Tribunal's reasons at [55],
in circumstances where a building licence for the relevant works was issued in May 2005, but they were not substantially completed until March 2006: see the Tribunal's reasons at [43].
59 In my opinion, the issue of a building licence before 30 June 2005 for the purpose of constructing the studio and garage and the front fence, and the carrying out of the works after 30 June 2005, were relevant to whether the "establishment" test was satisfied at the material time, even though the works were not carried out until later. In particular, those matters were relevant to, but not conclusive of, whether any integration in fact, which the Tribunal found to exist at the material time, was stable and permanent, as distinct from transient, temporary or contingent.
60 Ground (c) fails.
Ground (d)
61 The Commissioner submitted that the Tribunal erred by taking into account irrelevant considerations, as follows:
(a) the demolition of the houses on Lots 13 and 15; and
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- (b) Mrs De Campo's holding of the adjoining lots, Lots 11 and 13, on a permanent basis, and her acquisition of Lot 15 as soon as it became available for purchase.
Counsel for the Commissioner argued that those facts did not involve "acts of establishment", but were merely "antecedent steps to establishment".
62 In my opinion, the demolition of the houses on Lots 13 and 15, the holding of Lots 11 and 13 on a permanent basis, and the acquisition of Lot 15 as soon as it became available for purchase, were relevant to, but not conclusive of, whether any integration in fact, which the Tribunal found to exist at the material time, was stable and permanent, as distinct from transient, temporary or contingent.
63 Ground (d) fails.
Ground (e)
64 The Commissioner submitted that the Tribunal erred in concluding that there was any, or any sufficient, evidence to permit a conclusion that the "establishment" test had been made out in relation to either of the assessment years in question, when:
(a) there were no physical structures on Lots 13 and 15 which had been completed as at midnight on 30 June 2004 or 30 June 2005: the Tribunal's reasons at [43];
(b) there was no evidence of any other relevant "alteration" to the land of the adjoining lots (that is, Lots 13 and 15) at a relevant time which was sufficient to constitute their "establishment" for any residential use; and
(c) Mrs De Campo carried the burden of proof in relation to such matters.
65 In my opinion, there was sufficient evidence before the Tribunal to enable it to conclude that the "establishment" test was satisfied in respect of:
(a) Lot 13, in conjunction with Lot 11, for the assessment year ending 30 June 2005; and
(b) Lots 13 and 15, in conjunction with Lot 11, for the assessment year ending 30 June 2006.
66 As to the assessment year ending 30 June 2005, there was evidence to the following effect:
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- (a) Mrs De Campo was the beneficial owner of Lots 11 and 13.
(b) There was a two-storey house on Lot 11. The land behind the house was taken up largely by a swimming pool, with only small areas of lawn for recreational purposes.
(c) At all material times, Mrs De Campo, her husband and their son resided in the two-storey house on Lot 11.
(d) In or about August 2003, Mrs De Campo demolished the house which was on Lot 13 and cleared the entire block, except for certain mature trees and shrubs.
(e) Shortly after the house on Lot 13 was demolished, Mrs De Campo engaged a building designer and landscape architect to commence design work in relation to that property, and numerous design concepts were prepared.
(f) After the house on Lot 13 was demolished, Mrs De Campo established a vegetable garden on Lot 13 and planted some native plants on the lot.
(g) Before 30 June 2004, Mrs De Campo made application to the City of Nedlands (the local government with jurisdiction over Lots 11 and 13) for approval to conduct various works on Lot 13.
67 As to the assessment year ending 30 June 2006, there was evidence to the following effect:
(a) The evidence I have recounted at [66] above.
(b) On 17 September 2004, Mrs De Campo became the beneficial owner of Lot 15.
(c) Before 30 June 2005, Mrs De Campo demolished the house on Lot 15 and the dividing fence between Lots 13 and 15, and cleared much of the vegetation on Lot 15.
(d) Before 30 June 2005, Mrs De Campo applied to the City of Nedlands to conduct various works on Lots 13 and 15, and a building licence was granted to permit her to construct on Lot 13 the two-car garage and studio, and front gates across Lots 13 and 15.
(e) Mrs De Campo relocated some substantial trees between Lot 13 and Lot 15, including the relocation of a fig tree at a cost of $7,000.
68 It is true that there was other evidence which indicated that the "establishment" test was not satisfied. In particular:
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- (a) At all material times, there was an uninterrupted brick wall across the whole of the boundary separating Lots 11 and 13 (which is relevant to both assessment years).
(b) Lots 11 and 13 were not commonly fenced as one common area (which is relevant to the assessment year ending 30 June 2005).
(c) Lots 11, 13 and 15 were not commonly fenced as one common area (which is relevant to the assessment year ending 30 June 2006).
(d) No building works were carried out on Lot 13 before 30 June 2005 (which is relevant to both assessment years).
(e) No building works were carried out on Lot 15 before 30 June 2005 (which is relevant to the assessment year ending 30 June 2006).
69 However, whether or not the "establishment" test (or, for that matter, the "user" test) was made out involved questions of fact and degree. I am satisfied that the Tribunal properly evaluated the evidence (including the agreed facts) and that its conclusions were reasonably open to it. The Commissioner has not demonstrated that the Tribunal made a material error of law or fact.
70 Ground (e) fails.
Conclusion
71 The Commissioner has not made out any of the grounds of appeal. The appeal should therefore be dismissed.
72 MILLER AJA: I agree with Buss JA.
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