Downie v Chief Commissioner of State Revenue
[2003] NSWADT 233
•10/15/2003
CITATION: Downie v Chief Commissioner of State Revenue [2003] NSWADT 233 DIVISION: Revenue Division PARTIES: APPLICANT
Nicholas Downie
RESPONDENT
Chief Commissioner of State RevenueFILE NUMBER: 026048 HEARING DATES: 28/04/2003 SUBMISSIONS CLOSED: 05/13/2003 DATE OF DECISION:
10/15/2003BEFORE: Verick A - Judicial Member APPLICATION: Land tax exemption - principal place of residence MATTER FOR DECISION: Principal matter LEGISLATION CITED: Land Tax Management Act 1956
Taxation Administration Act 1996
Administrative Decisions Tribunal Act 1997CASES CITED: Re: Taxation Appeals No. WT92/12 and Fincher v Commissioner for ACT Revenue 1996 ATC 2030
Poullos & Poullos v Chief Commissioner of State Revenue [2003] NSWADT 32
Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68.REPRESENTATION: APPLICANT
S Lewis, solicitor
RESPONDENT
H Roberts, solicitorORDERS: The objection decision under review be affirmed.
Introduction
1 The Applicant seeks a review of the Respondent’s objection decision that he is not entitled to a land tax emption under s 10(1)(r) of the Land Tax Management Act 1956 (the “LTM Act”) for the tax years 2001 and 2002 in relation to a property owned by the Applicant and situated in Birchgrove in New South Wales (the Louisa Road property).
2 The Applicant claims that the Louisa Road property was his “principal place of residence” in the relevant years and accordingly exempt from land tax.
3 No documents were lodged by the Respondent under s 58 of the Administrative Decisions Act 1997 (the “ADT Act”). Several documents relating to this matter were however provided by the Respondent at the hearing. The Applicant lodged an affidavit and also gave oral evidence at the hearing. In addition, the parties lodged written submissions and made oral and submissions at the hearing.
Factual Background
4 The facts on which the Applicant relies are set out in his affidavit as follows:
5 In paragraphs 10 and 11 the Applicant, with the aid of an annexure, details the number of days he has spent at each location. By way of a summary, in 2000, he spent 42 days at the Louisa Road property whilst he spent 137 days at Launceston or Seaton Cove. In 2001 he spent 111 days at the Louisa Road property and 233 days at Launceston or Seaton Cove with 21 days overseas and elsewhere in Australia. In 2002, he spent 66 days at the Louisa Road property and 227 days at Launceston or Seaton Cove with 72 days overseas or elsewhere in Australia.
1. I am the registered proprietor of Lot 2, Deposited Plan 560866, being land known as 46A Louisa Road, Birchgrove, New South Wales (“the Louisa Road property”).
2. I am by profession an ophthalmic surgeon.
3. I am a partner in a practice which conducts a day surgery with consulting rooms at 262 Charles Street, Launceston, Tasmania. The practice is made up of two partners, two associates, two consultants, and one Registrar.
4. I purchased the Louisa Road property in 1973. At the time of purchase the property had erected upon it a small house. On purchasing the Louisa Road property my wife and I occupied it. The Louisa Road property is registered solely in my name. This is because at the time of purchasing the property I had just recently graduated from university and needed to borrow some of the purchase funds from my mother. My mother agreed to lend me this money on the condition that the property was placed in my name only, and I have never got around to transferring the property into joint names with my wife.
5. Between 1973 and 1979 I undertook small renovations on the house.
6. My wife and I occupied the Louisa Road property continuously until approximately 1980, at which time we moved to Launceston.
7 From 1980 to approximately mid 1998 the Louisa Road property was rented out. In approximately mid 1998 my wife and I reoccupied the Louisa Road property. On 6 July 1999, pursuant to a consent to a Development Application granted by Leichhardt Council I commenced demolition work on the house with the assistance of my son. This work was completed in February 1999.
8. The rebuilding of the Louisa Road property was completed in October 2000, following which it was immediately occupied by my wife and me.
9. In addition to the Louisa Road property I own with my wife a farm in Launceston of 300 acres. This farm is run on a commercial basis. The farm maintains approximately 900 sheep, 15 head of cattle as well as horse agistment. My wife and I also own a house at Seaton Cove which is approximately 200km east of Launceston.
6 In paragraphs 12 to 21 he sets out further factual background as follows:
7 In his oral evidence the Applicant made some clarifications about his farm in Launceston and are more fully referred to in the Applicant’s submission as set out below. The Applicant also informed the Tribunal at the hearing that the Louisa Road property had since been sold.
12. In 2001 and 2002 two of my children being Jessamy and Rose also occupied the Louisa Road property.
13. In 2001 and 2002 the Louisa Road property was (and continues to be) fully furnished. I maintained my personal belongings there, including clothing, photographs toiletries, sporting gear, music and paintings and other objects I have collected over the years. In 2001 and 2002 a car was garaged at the Louisa Road property, which my family and I used. I also had an internet connection for my computer.
14. My electoral address has been the Louisa Road property since 18 December 2000.
15. In 2001 and 2002 telephone, gas and electricity was connected to the Louisa Road property.
16. In 2001 my wife attended the University of Sydney to study a Masters of International Public Health. During this time she also occupied the Louisa Road property. A copy of my wife’s degree is annexed hereto and marked “B”. During 2002 my wife stayed at the Louisa Road property on the dates when I was there, and also independently of me.
17. Throughout 2001 and 2002 I retained a gardener to attend to the gardens at the Louisa Road property and he visited the property on a monthly basis. In 2001 I employed a cleaner who visited the Louisa Road property weekly. The cleaner attended the Louisa Road property throughout 2002 approximately twice per month.
18. For reasons of convenience, I have arranged my affairs so that the billing address for credit cards, Council rates and some services are directed to the surgery address in Charles Street, Launceston, for payment by the practice’s bookkeeper. Energy Australia bills have since November 2001 been addressed to the Louisa Road property. Annexed hereto and marked “C” is a copy of my Energy Australia bill for November 2001 (there are two separate supplies to the Louisa Road property but it is occupied as a single dwelling).
19. I have strong family ties in Sydney as both my brother and mother live here.
20. I previously made an application to the Tribunal for review of the Chief Commissioner’s Decision (File No.0026010) that the Louisa Road property was not my principal place of residence in respect of the 1999 and 2000 tax years. In that application I was provided with a copy of the Chief Commissioner’s file. In those documents was a statement of reasons for purposes of Section 58 of the Administrative Decisions Tribunal Act, a copy of which is annexed hereto and marked “D”. In that statement of reasons the Chief Commissioner accepted that the Louisa Road property became my principal place of residence during the 2000 calendar year and granted exemption to the land as my principal place of residence for the 2001 and 2000 Land Tax years. This exemption was subsequently reversed.
21. Since I July 2000 the Louisa Road property has been used and occupied solely for residential purposes.
Relevant legislative provisions
8 By the combined effect of sections 7, 8, and 9 of the LTM Act, land tax is levied each year on land value of all land in New South Wales owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied other than land which is exempt from taxation under the LTM Act.
9 So far as is relevant in respect of this application, a property used by an owner as his or her principal place of residence is exempt under s 10(1)(r) of the LTM Act in the following terms:
10 “Principal place of residence” of a person is defined in s 3(1) of the LTM Act to mean “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”. Subsection 3(3) of the LTM Act further provides a definition of “use and occupation” as a principal place of residence in the following terms:
(1) Except where otherwise expressly provided in this Act, the following lands shall, subject to sections 10AA, 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act:
(r) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1998 or any succeeding year, land that has a land value in respect of the year of less than the premium tax threshold and that is used and occupied as the principal place of residence of the owner of the land (or, if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose (except as provided by subparagraph (iii), being:
(i) a strata lot, or
(ii) a parcel of residential land, or
(iii) a parcel of residential land on which there is also one of the residential occupancies referred to in subsection (1D) (b) (ii) (A)-(F),
unless the owner or all of the joint owners who so used and occupied the lot or parcel (as appropriate) is such an owner by reason only of being a trustee,
11 Under s 100(3) of the Taxation Administration Act 1996 (the TAA Act), the Applicant has the onus of proving the Applicant’s case in an application for review before this Tribunal.
(3) For the purposes of this Act, in respect of any year in respect of which taxation is leviable or payable, land or a flat is not used or occupied as the principal place of residence of a person unless:
(a) that land or flat and no other land or flat has, since before the first day of July that last preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for no other purpose, or
(b) in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person’s principal place of residence.”
Applicant’s Submissions
12 The Applicant relies upon the following evidence in support of his contention that the Louisa Road property was his principal place of residence for the relevant years:
13 In relation to the above factors, the Applicant makes the following additional submissions:
(i) Renovations were completed in October 2000 following which he and his wife re-occupied the property (Downie affidavit paragraph 8);
(ii) In October 2000 Dr Downie moved furniture and other personal items from Launceston to Louisa Road property (Downie oral evidence);
(iii) Two of his children also occupied the Louisa Road property (Downie affidavit paragraph 12);
(iv) The Louisa Road property was fully furnished (Downie affidavit paragraph 13);
(v) Dr Downie maintains personal belongings in the Louisa Road property including clothing, photographs, toiletries, sporting gear, music, paintings and other objects he had collected over the years (Downie affidavit paragraph 13);
(vi) A car was garaged at the property which he used (Downie affidavit paragraph 13);
(vii) The internet was connected (Downie affidavit paragraph 13);
(viii) Dr Downie’s electoral address has been Louisa Road property since December 2000 (Downie affidavit paragraph 14);
(ix) Telephone, gas and electricity were connected;
(x) A gardener attended on a monthly basis. In 2001 a cleaner attended weekly and in 2002, monthly;
(xi) Dr Downie’s wife, also a doctor, practices part time in both Launceston and Sydney (Downie oral evidence);
(xii) Dr Downie divides his time between New South Wales, Tasmania, interstate and overseas. A schedule of the time so spent is annexed to Dr Downie’s affidavit;
(xiii) The Launceston property is run as a commercial farm (Downie affidavit paragraph 9 and oral evidence). The main building on the property (one of three on the property) is of a “lesser quality” than the Louisa Road property (Downie oral evidence).
14 The legal basis of the Applicant’s case for the exemption, is that the phrase “principal place of residence” be given its ordinary meaning and that, in the absence of any ruling by the Respondent or case law on the application of s 3(3)(b) of the LTM Act, reliance should be placed on judicial consideration given to the phrase in the context of Commonwealth income tax legislation. In particular, the Applicant relies on the decisions of the Administrative Appeals Tribunal in Re: Taxation Appeals No. WT92/12 and Fincher v Commissioner for ACT Revenue 1996 ATC 2030.
3. That some of the above factors may apply also to the Launceston property does not mean that the Tribunal should give no weight or that they are in some way “neutralised” as asserted by the respondent (Respondent’s supplementary submission paragraph 4).
4. In reply to the respondent’s submission at paragraph 9, Dr Downie’s electoral address is one factor the Tribunal should take into account in the context of all the other factors upon which Dr Downie relies.
5. The above factors are to be given weight in the circumstances of this application (see Tax Determination TD 51 – factors to be taken into account in determining whether a dwelling is a taxpayer’s sole or principal residence).
6. The Tribunal need only be satisfied that it is more likely than not that the Louisa Road property was Dr Downie’s principal place of residence in the relevant years (see Taxation Appeals No WT at page 8).
15 The Applicant submits that “as the renovations to the Louisa Road property were not completed until October 2002 at which time Dr Downie and his wife re-occupied the property”, “that the discretion provided for in Section 3(3)(b) of the Act should be exercised in favour of Dr Downie”. In respect of the 2002 year the Applicant submits that he “satisfies the requirements set out in Section 3(3)(a) of the Act in that:
Respondent’s Submissions
(a) He has continuously used and occupied the Louisa Road property since October 2000;
(b) The Louisa Road property is used for residential purposes and for no other purpose, and
(c) Since October 2000 Dr Downie has used the Louisa Road property as his principal place of residence.
16 The Respondent submits that s 3(3)(a) of the LTM Act cannot apply to the Applicant’s case for the following reasons:
17 In these circumstances the Respondent submits that:
It is clear in this case that the applicant has used and occupied more than one piece of land for residential purposes. So much can be assumed from paragraph 20 of the applicant’s written submissions. Where there are two such residences, one must ask then for the Commissioner to consider the application of s. 3(3)(b) of the LTM Act : see Poullos & Poullos v Chief Commissioner of State Revenue [2003] NSWADT 32.
18 The Respondent submits that onus placed on the Applicant to establish which of the two residences is his principal place of residence is as follows:
The only question is whether s. 3(3)(b) should be applied, on the basis that the applicant satisfies the Tribunal that the Louisa Rd property was the principal place of residence at the relevant dates. The authorities cited by the applicant in paragraphs 13 and 14 of his written submissions are therefore with respect, of limited relevance to the question to be answered in this appeal. Those decisions, including Kilcare Investments Ltd v Commissioner of Land Tax 1981 ATC 4379, Fuisher v Commissioner for ACT Revenue 1996 ATC 2030 and Levene v Inland Revenue Commissioners [1928] AC 217 deal with the use of premises for residential purposes. It is not in dispute in these proceedings that Dr Downie used the Louisa Road property for residential purposes.
19 In relation to the facts of this matter, the Respondent makes the following submissions:
The question of which of two residences is the principal place of residence is one of fact and degree and the applicant must satisfy the Tribunal that the property at Louisa Rd is his principal place of residence. In Re Taxation Appeals No WT92/12, the AAT stated:
“The evidence does not show to an extent that satisfies the Tribunal which of the various properties, and in particular, whether the property in contention, was the applicant’s principal residence. Even though the Tribunal accepts the evidence of the applicant that she lived at the property in contention for significant periods, the Tribunal is unable to conclude that that property was, more likely than not, her principal residence. This is not a matter where the Tribunal has to satisfy itself which one, other than the property in contention, fits the description, in order to exclude the latter property. If in the end the matter is left indeterminate, the applicant must fail.”
20 By way of a summary of the factors against the Applicant, the Respondent in his written submissions relies on the following factors:
19. Dr Downie has changed his Electoral Roll address as of 18 December 2000. However no significance can be placed on his vis-à-vis determining whether the Louisa Rd property was his principal place of residence at the relevant times. Under s. 99 of the Commonwealth Electoral Act 1918 (Cth) to have one’s name placed on the Roll of a Subdivision a person, who is qualified for enrolment, needs only to have lived in that Subdivision for a period of one month last past and still be living in the Subdivision. Thus enrolment on the Electoral Roll cannot be regarded as having any weight concerning whether the Louisa Rd property was the principal place of residence.
20. The applicant refers to the fact that the Louisa Rd property is furnished, contains personal belongings and has services connected. The Tribunal would be entitled to assume that the residence in Tasmania is also furnished, has personal belongings there and has the telephone gas and electricity connected and that the house and garden (if there is a garden, allowing that it is a farm) is maintained, since Dr Downie’s wife resides there with him for much of the time. Thus most of the factors establish only that the Louisa Rd property is used and occupied as a residential property.
21. The applicant refers in paragraph 20 of his Affidavit to the fact that he has spent “only” 49.58% of the year in Launceston in 2001 and 43.83% in 2002. When one considers the statistics from the perspective of “is Louisa Rd the applicant’s principal place of residence?” one observes that 30% of the applicant’s time in 2001 was spent at Louisa Rd. Almost 50% of his time was spent in Launceston, the place where his medical practice, in which he is a partner, is located. Whilst in Sydney he did not practice, although he may have attended meetings. The balance of the year was spent attending meetings and about 7 weeks in total (whether by way of weeks or weekend) was spent with his wife at their house in Seaton Cove, also in Tasmania that is approximately 200 kilometres east of Launceston – paragraph 9 of the Affidavit.
22. In 2002 even less time was spent at Louisa Road, approximately 18%. The inference one might draw from the evidence is that this is due to his wife having completed the degree she was undertaking at Sydney University during 2001. At paragraph 16 of his Affidavit the applicant refers to his wife attending the University of Sydney in 2001 to study for a higher degree. His wife’s presence in Sydney provided a reason for the applicant to spend as much time as possible visiting Sydney in 2001.
23. Although the respondent does not suggest that the issue be determined by reference to ‘number of nights’ alone, it does submit that on their face, the figures are not supportive of the suggestion that Louisa Rd is the applicant’s principal place of residence. When one adds to this the fact that the applicant’s medical practice is located in Tasmania, the inference is, in the respondent’s submission, inescapable.
Reasons for Decision
1. The applicant has a residence in Launceston: para 9 applicant’s affidavit. It has four bedrooms, a kitchen, dining room and study and is in good condition. It was the home in which the applicant’s five children grew up: applicant’s oral testimony.
2. The applicant spent considerably more time at his Launceston home than the Louisa Rd property in both of the tax years in question: Sched. A to the affidavit of applicant.
3. The applicant is a partner in a medical practice in Launceston. The practice was one in which he voluntarily joined. He does not have a practice in Sydney: para 3 of the applicant’s affidavit.
4. The applicant’s wife practices in Launceston as a general practitioner on a part-time basis: oral testimony.
5. The evidence which establishes that the residence in Louisa Rd is furnished, has services connected, is maintained and receives mail and bills is neutral because all of the above also applies to the Launceston residence.
6. The applicant has a Tasmanian driver’s license listing a Launceston address.
7. Eldest daughter and her husband were resident at the Louisa Rd property: applicant’s oral testimony. Thus a separate family occupies the Louisa Rd property. The applicant and his wife visited that family. By contrast, no one lived in the Launceston property apart from the applicant and his wife.
8. The applicant owns a holiday house in easy reach of Launceston house: para. 24 of our submissions.
9. Change of electoral address is of no weight: para. 19 of the respondent’s submissions.
21 The central issue in this matter is whether the Applicant’s Louis Road property was used and occupied by him in the relevant years as his principal place of residence and was thereby exempt from land tax under paragraph 10(1)(r) of the LTM Act. Paragraph 10(1)(r) merely provides for an exemption where land “is used and occupied as the principal residence of the owner of the land”. This exemption has to be read with the provisions of s 3(1) and s 3(3)(a) and (b) of the LTM Act.
22 Section 3(1) defines the term “principal place of residence” of a person as “the one place of residence that is among the one or more places of residences of the person within and outside Australia, the principal place of residence”.
23 Section 3(3)(a) provides that “land or a flat is not used or occupied as the principal place of residence of a person unless that land or flat and no other land or flat has since before the first day of July that last preceded the commencement of that year, has been continuously used and occupied by that person for residential purposes and for no other purpose”. This test can only be satisfied in cases where a person has one residential property that has been continuously used and occupied by that person for only residential purposes. The ‘use” and “occupation” requirements have recently been considered by the New South Wales Supreme Court (Gzell J) in Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68.
24 In cases where a person is not able to satisfy the requirements placed by s 3(3)(a), the exemption is available only if “the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person’s principal place of residence” ( s 3(3)(b)).
25 There is no dispute that the Applicant also has a residence on his farm in Launceston. Accordingly, I agree with the Respondent that the provisions of s 3 (3) (a) of the LTM Act are not satisfied by the Applicant. In those circumstances, the question whether the Louisa Road property is his principal place of residence has to be determined by the Respondent under the obligation placed on the Respondent by the operation of the power given to the Respondent by virtue of s 3 (3) (b). The Chief Commissioner has to exercise this power taking into account the provisions relating to the exemption found in the LTM Act and in particular the term principal place of residence” as defined in s 3(3)(1) of the LTM Act.
26 I agree with the Respondent that the question of which of the two residences is the principal place of residence is one of fact and degree with the onus on the Applicant to satisfy the Tribunal that the Louisa Road property rather than the property situated in Launceston was his principal place of residence in the relevant years.
27 The Applicant has been in Launceston since 1980 with a well-established medical practice In Launceston. He has investment properties and a holiday cottage in Tasmania. According to his own calculations, he spends more time in Tasmania than the mainland. The Louisa Road property had been rented for a number of years until 1998 when the Applicant commenced to build a new residence on the property, which was completed in October 2000. The question that the Tribunal needs to consider is whether the property was his principal place of residence for the 2001 and 2002 tax years. The property has since been sold.
28 The evidence and the Applicant’s submissions establish that in the relevant years the Louisa Road property was a residence and occupied on certain days in the relevant years by the Applicant and other members of his family. But unfortunately, the evidence and his submissions have not conclusively established that it was his principal place of residence in those years. At the hearing I was concerned that the evidence and factual background was largely in respect of the Louisa Road property and little was said about the Launceston property where the Applicant had resided for a considerable period and continues to reside to attend to his medical practice and his farm. The Applicant sought to give further evidence as a result of my concern. But the evidence was only limited and rather selective about the residence in Launceston. It was said that the Launceston property was run as a commercial farm and the main building (one of three on the property) is “lesser quality” than the Louisa Road property. I can understand the latter observation in relation to a brand new residence on the Louisa Road property. But I do not think that by itself would affect the status of the long-standing and continued use and occupation as a residence of the Launceston property.
29 In addition to my observations made above, I would also adopt the Respondent’s factual reasoning as set out in paragraphs 19 and 20 above to support my conclusion that the Applicant has failed to discharge the onus placed on him to establish that the Louisa Road property was his principal place of residence. When all the evidence and factors are taken into account it is difficult to conclude that in the relevant years the Louisa Road property was his principal place of residence. On the contrary, the facts and all the factors point to the Launceston property as being his principal place of residence in the relevant years.
30 Accordingly, I would affirm the objection decision made by the Respondent in this matter.
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