Fitzpatrick v Chief Commissioner of State Revenue
[2011] NSWADT 75
•12 April 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Fitzpatrick v Chief Commissioner of State Revenue [2011] NSWADT 75 Hearing dates: 6 April 2011 Decision date: 12 April 2011 Before: M Hole, Judicial Member Decision: 1. The decision of the Chief Commissioner of State Revenue is confirmed
Catchwords: Principal Place of Residence; Substitution of owner Legislation Cited: Land Tax Management Act 1956 Category: Principal judgment Parties: Rob Fitzpatrick (First applicant)
Rebecca Fitzpatrick (Second applicant)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel
M Carpenter (Respondent)
Solicitors:
R Fitzpatrick (Applicant in person)
State Crown Solicitor (Respondent)
File Number(s): 106059
reasons for decision
This is an application by the applicants for the review of a decision made by the respondent on 16 September 2010 to assess land that the applicants had purchased at Mosman for the land tax year 2008.
The following facts were not disputed by either party:
(a)the applicants purchased the property at Mosman ("the subject property") on 27 July 2007;
(b)during the period between 30 August 2007 and 28 February 2008 the applicants authorised another family to reside in the subject property and a residential tenancy agreement was entered into in respect of this period;
(c)the applicants applied to the local council for development approval in respect of the subject property to attend to alterations and additions to the existing dwelling house including the remodelling of the second storey, additional basement area and a double carport;
(d)between the period of 27 July 2007 and 31 December 2007 the applicants attended to some landscaping works on the subject property including the planting of 27 leighton green cypress and other activities in respect of the landscaping of the subject property;
(e)the local council approved the development subject to conditions on 25 February 2008;
(f)the work was undertaken pursuant to the development approval between the period 25 February 2008 to March 2009;
(g)a land tax notice of assessment was issued on 8 October 2008 disclosing an assessment of $0.00;
(h)the applicants occupied the subject property as and from March 2009 as their principal place of residence;
(i)a land tax questionnaire was forwarded to the applicants on 30 April 2010;
(j)the land tax questionnaire was completed and then signed on 9 May 2010 then forwarded to the respondent;
(k)a land tax assessment notice was issued on 27 May 2010; and
(l)this application was lodged on 17 August 2010.
Legislation
The relevant legislation is Land Tax Management Act 1956 ("LTMA"). Section 3 states:
"3 Definitions
...
Owner includes:
(a) in relation to land, every person who jointly or severally, whether at law or in equity:
(i) is entitled to the land for any estate of freehold in possession, or
(ii) is entitled to receive, or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise,
(b) (Repealed)
(c) in relation to any leasehold estate in land, whether legal or equitable (other than under any lease to which section 21C or 21D applies), a person, or a person who is a member of a class or description of persons, prescribed for the purposes of this paragraph, and
(d) a person who, by virtue of this Act, is deemed to be the owner."
LTMA Section 8 states:
" 8 Date of ownership for purposes of land tax
Land tax shall be charged on land as owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied.
In this section "year" means the period of twelve months commencing on the first day of January."
LTMA Section 10(1)(r) states:
"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,
..."
(Historical version applicable to the subject period).
LTMA Schedule 1A Part 2 (1) and (2) states:
"SCHEDULE 1A - Principal place of residence exemption
...
Part 2 - Principal place of residence exemption
2 Principal place of residence exemption
(1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is:
(a) a parcel of residential land, or
(b) a strata lot or, subject to this Schedule, land comprised of 2 or more strata lots.
(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.
..."
LTMA Schedule 1A Part 3(6)(1) to (4) incl and (8) states:
"Part 3 - Concessions in application of principal place of residence exemption
...
6 Concession for unoccupied land intended to be owner's principal place of residence
(1) An owner of unoccupied land is entitled to claim the land as his or her principal place of residence, if the owner intends to use and occupy the land solely as his or her principal place of residence. In such a case, the owner is taken, for the purpose of the principal place of residence exemption, to use and occupy the unoccupied land as his or her principal place of residence.
Note: It is an offence under section 55 of the Taxation Administration Act 1996 to make a statement to a tax officer, or give information to a tax officer, orally or in writing, knowing that it is false or misleading in a material particular.
(2) This clause does not apply unless:
(a) the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence, and
(b) if those building or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since that commencement, and
(c) the intended use and occupation of the land is not unlawful.
(3) This clause applies in respect of the assessment of a person's ownership of land only in the period of:
(a) 2 tax years immediately following the year in which the person became owner of the land, or
(b) if the land is used and occupied for residential purposes by a person other than the owner at any time after the person became owner, 2 tax years immediately following the tax year in which the building or other works necessary to facilitate the owner's intended use and occupation of the land are physically commenced on the land.
(4) The Chief Commissioner may extend the period in which this clause applies if the owner of the unoccupied land demonstrates that:
(a) there is a delay in the completion or, in a case referred to in subclause (3)(b), the commencement of the building or other works necessary to facilitate the owner's intended use and occupation of the land, and
(b) the delay is due primarily to reasons beyond the control of the owner.
...
(8) For the purposes of this clause:
"unoccupied land" means land that is not being used or occupied for any purpose.
..."
Evidence
The applicants relied on the written submissions made by the applicants which included copies of material that had been forwarded to the respondent by the applicants. This included a copy of the development application consent and letters provided by certain contractors in respect of the work undertaken as a result of or in anticipation of the development consent.
Applicants' submissions
The applicants submitted that the subject property is the principal place of residence of the applicants. They sold their former principal place of residence on 18 January 2007 and then they rented accommodation in the local area until they purchased the subject property and then until they moved into the subject property in March 2009.
The applicants submitted that they had attended to landscaping the subject property as and from August 2007 and that therefore the construction had commenced on the subject property at that time.
The subject property is next door to a heritage listed substation and in order that the concept design for the alterations and additions to the subject property to proceed the landscaping was necessary and it was crucial to the development.
The applicants had come to an agreement with friends so that those friends could occupy the subject property for a period which was from 30 August 2007 to 28 February 2008 on the basis that those friends would pay rent. This was documented in a residential tenancy agreement. The applicants submitted that the friends 'stood in the shoes' of the applicants and should be considered to be the owners for the purposes of assessing land tax.
The applicants submitted that the applicants believed that they were exempt from land tax in view of the initial land tax letter received by them dated 8 October 2008 disclosing the amount payable as $0.00.
The applicants submitted that when the land tax questionnaire dated 30 April 2010 was received it had been completed in a hurry and Mr Fitzpatrick had mistakenly disclosed the date of purchase of the subject property as 7/2008 in two places whereas it should have shown the date of purchase as 7/2007.
The applicants relied on Schedule 1A to LTMA and the Revenue Ruling No LT82 - The Principal Place of Residence Exemption. The applicants drew attention to the comment in that Ruling under the heading " PPR exemption - Schedule 1A,Clause 2 " where the ruling notes that:
"The owner must use and occupy the land to qualify for the exemption. ... the exemption will be allowed if the Chief Commissioner of State Revenue is satisfied that the land is then used and occupied as the principal place of residence of the owner."
"Concession for unoccupied land intended to be the principal place of residence - Schedule 1A, Clause 6
Unoccupied land may be exempt under the principal place of residence exemption if the owner intends to use and occupy the land at the completion of proposed building works. If the criteria of intended use are met, the owner will be taken, for the purposes of the exemption, to use and occupy the land.
Unoccupied land includes vacant land or land on which an existing building is to be renovated, or demolished and rebuilt.
The exemption applies for two tax years:
following the year in which the land was purchased, or
following the date when building works are physically commenced on the land, in any case where a person, other than the owner, has occupied the land after its acquisition by the owner.
Note. Building works will be taken to have physically commenced once demolition has commenced, excavation of footings dug or such other preparatory work undertaken. The preparation and lodgement of plans and development applications will not be recognised as the commencement of physical activities.
The land must be unoccupied during the period of the exemption and the exemption will not apply if any portion of the land is tenanted and from which the owner is deriving any income."
The applicants relied on the reference to "or such other preparatory work undertaken" as referred to in the part of Revenue Ruling No LT 82 quoted at paragraph 15.
The applicants submitted that the planting of trees on the perimeter of the subject property was an essential work and that it was preparatory work to allow the work to proceed once the development approval had been obtained, that it was important preparatory work and triggered the exemption at that time. The applicants further submitted that this was the essence of the applicants' contention that the exemption should be granted.
In further submissions the applicants drew attention to the letters, provided to the respondent by the applicants, from various contractors concerning the work undertaken at the subject property indicating that there had been delays in relation to obtaining the development approval from the local council, that it was desirable to commence works as soon as possible on the subject property and to prepare the subject property for the purposes of the alterations and additions which could occur after the development approval commenced. These letters also referred to the desirability of planting the trees on the perimeter of the subject property albeit they were leighton green cypress and there was reference to the adjoining neighbours being in agreement with this landscaping that was to occur.
The applicants submitted that the work undertaken in landscaping the subject property was necessary to facilitate the intended use of the subject property as the applicants' principal place of residence.
The applicants relied on Schedule 1A, Clause 2 that the applicants intended to occupy the subject property as their principal place of residence and for no other purpose. That the friends who were occupying the subject property during the period 30 August 2007 to 28 February 2008 did so and were there "standing in the shoes of the applicants". That therefore they were to be considered the owners of the subject property and accordingly the exemption was available.
The applicants further referred to the concession set out in Clause 6 of Schedule 1A, subclause (2)(a) and (b). The applicants submitted that the subject property, if it was considered to be unoccupied land, would be exempt because the owner intended to carry out building or other works necessary to facilitate the intended use and occupation of the land by the applicants as their principal place of residence. That the building or other works had physically commenced on the land by way of the landscaping of the subject property in preparation and in anticipation of the development approval being granted. That no income had been derived from the subject property as the usual market rental for a property in the area of the subject property was probably between two to three times more than the amount paid pursuant to the residential tenancy agreement.
The applicants further submitted that they have not withheld information and were completely open and transparent with what had been undertaken. That a liberal interpretation should be applied to the friends occupying the subject property. That there are many circumstances where people stand in for others.
Respondent's submissions
The respondent provided written submissions to the Tribunal and then drew attention to particular parts of those submissions.
The respondent's representative drew attention to the filing of the application on the 17 August 2010 which predates the decision under review being 16 September 2010. The application was amended to take this into account and accordingly the Tribunal has power to hear and determine the application.
The respondent's representative agreed with the facts set out at paragraph 2 above and added further to that chronology a reference to various letters between the applicants and the respondent.
The respondent's representative drew attention to the fact that the applicants bore the onus of proving that they were entitled to an exemption.
The respondent's representative submitted that the applicants were the registered proprietors of the subject property as at 31 December 2007 and accordingly unless there was an exemption available the subject property would be subject to land tax.
The respondent's representative submitted that pursuant to Section 10(1)(r) LTMA the subject property would be exempt from assessment to land tax as the principal place of residence of the applicants if they occupied and used the subject property as their principal place of residence.
The respondent's representative submitted that the assessment forwarded on 8 October 2008 was based on the applicants living in the subject property. A questionnaire was forwarded to the applicants on 30 April 2010 in the ordinary course of the procedures of the respondent and following receipt of the reply there was a review of the exemption that had previously been relied on.
The respondent's representative drew attention to definition of "Owner" included in section 3 LTMA. The subject property was occupied by friends of the applicants and they could not be considered to be the owner pursuant to the definition. Clause 2 of Schedule 1A LTMA provides that the land be used and occupied by the owner and for no other purpose. That it was not possible to substitute another family in place of the applicants.
The respondent's representative drew attention to Revenue Ruling No LT82 and that this Ruling only applied to land as and from 15 August 2008 being the issue date of the Ruling. Therefore this Ruling is not applicable to this matter.
The respondent's representative drew attention to the requirements of Schedule 1A Clause 6 LTMA particularly the definition of "Unoccupied land" defined as " means land that is not being used or occupied for any purpose". However the friends of the applicants were in occupation in the subject property during the relevant period and they were there subject to a residential tenancy agreement albeit at a rental rate less than what may have been considered to be the market rental rate and it was the principal place of residence of those friends. It was not possible to argue that the friends were caretakers as they were paying rent pursuant to an agreement. The payment of rent invigorated the provisions of subclause (2)(b) of Clause 6 Schedule 1A LTMA in that the exemption provided in clause 6 relies on there being no income derived from the use and occupation of the land from the commencement of building or other works. The applicants had submitted that the other works deemed necessary to facilitate the applicants' intended use and occupation of the subject property commenced as and from the purchase of the subject property.
The respondent's representative submitted that the commencement of the work could only occur as and from the date of the development approval by the local council and drew attention to a condition of that development approval which appeared to disclose an inconsistency with the planting of the leighton green cypress. Following the date of the development approval the demolition and construction works commenced on the subject property in March 2008.
The respondent's representative submitted that the planting of the leighton green cypress and the landscaping was not necessary to facilitate the intended use and occupation of the subject property, it was not essential for the development application and could only be considered to have been desirable from the point of view of the applicants as they believed that it was necessary to allow design options that may not have been available otherwise. Therefore the logical date to be considered in relation to the provisions of subclause 2(a) Schedule 1A LTMA would be the commencement of that work after the development approval had been granted. This is so as it is not possible for work that would be required to be the subject of a development approval to be commenced on the basis that there had been "tacit approval" from the local council.
The respondent's representative submitted that the question was a matter of fact and law. That there could not be a substitution of other people in the place of the owners to satisfy the purposes of the concessions available for land intended to be the owners principal place of residence, the subject property was the principal place of residence of those substituted people and therefore it was not the principal place of residence of the applicants.
The respondent's representative submitted that clause 6(3)(b) of Schedule 1A LTMA must be considered in context with clause 6(4) LTMA. This permits the respondent to extend the time period in certain circumstances. Subclause 6(3)(b) LTMA only allows an extension of time where the building or other works necessary to facilitate the owners intended use and occupation have been physically commenced on the land. It was submitted that the respondent had granted the extension referred to in clause 6(4) LTMA in relation to the subsequent land tax year to the one under consideration in this matter on the basis that the building or other works necessary had commenced and had not been completed by 31 December 2008.
The respondent's representative submitted that clauses 6(1) and (2) of Schedule 1A LTMA apply to this matter in relation to the period prior to the 31 December 2007. That where the owner intended to carry out building or other works necessary to facilitate the intended use and occupation of the land as a principal place of residence then subclause (b) applies. It becomes critical in that there must be no income derived from the use and occupation of the land since the date of commencement of the building or other works. Therefore if the works being deemed to be necessary to facilitate the intended use and occupation had occurred as and from the date of the planting of leighton green cypress and other landscaping then the exemption was still not available due to the derivation of income. This was so notwithstanding that the income may have been less than the market rental which may have been otherwise payable.
Decision
Following purchase of the land by the applicants on 27 July 2007 they entered into a residential tenancy agreement whereby friends occupied the property from 30 August 2007 to 28 February 2008. In the absence of any other information the subject property would have been subject to land tax as at 31 December 2007.
The applicants intended to use the subject property as their principal place of residence and with a view to doing so they wished to undertake certain renovations to the house built on the subject property which would require the local council's approval. With a view to facilitating the local council approval, and to providing the best possible options available to design the concept and construct of the additions and alterations, the applicants undertook certain landscaping of the subject property including the planting of 27 leighton green cypress and some other minor works. The applicants undertook this as and from the date of purchase being 27 July 2007.
The applicants made an application to the local council to undertake the works and it was submitted that the process was delayed although there was no further evidence provided in relation to this delay other than the submissions made. In any event the delay in granting a development approval for the purposes described in the approval, even if submitted to the council fairly quickly after the date of purchase, seems to be not unusual in these circumstances. There is no evidence supplied as to the delay invigorating Schedule 1A Clause 6(4)(b) LTMA even if the applicants as owners had been in occupation of the subject property.
The applicants' submissions that the friends occupying the property 'stood in the shoes' of the applicants as owner is not supported by an exemption or provision in the legislation. The applicants agreed that the friends would not be able to do all the things that an owner would do in relation to the subject property and therefore they did not have the full benefit or responsibility as an owner. In the absence of a legislative provision permitting the substitution of others for the owner this submission can not be accepted.
The lack of a facility to substitute another party as the owner, for the purposes of claiming the principal place of residence exemption, precludes consideration whether the planting of trees and other landscaping could be considered to be 'the other works' referred to in Schedule 1A Clause 6(2)(a) LTMA as "other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence". The works undertaken, being the planting of the leighton green cypress and other minor landscaping work, was desirable from the point of view of the applicants although it was not necessary to facilitate the use and occupation within the terms of the subclause. It was possible for the applicants to undertake this work in the absence of council's approval notwithstanding that the trees being planted were not trees of favour and are referred to in the ultimate development approval as "trees that should not be planted". The development approval appeared to be given on the basis that those trees were already on site and that the requirement of the condition, that it prevail if there was an inconsistency, permitted them to remain.
Revenue Ruling LT82 does not apply in relation to the land tax year under consideration.
All land in New South Wales in subject to land tax unless an exemption is available. The onus is on the applicants to provide evidence that an exemption is available and the applicants have not done so.
The subject property was occupied at the relevant date, 31 December 2007, by the friends pursuant to a residential tenancy agreement. It was those friends' principal place of residence, and as the applicants received rental as at that date in relation to the occupation and use of the subject property by the friends then the decision of the respondent is confirmed.
ORDERS
1. The decision of the Chief Commissioner of State Revenue is confirmed.
Decision last updated: 12 April 2011
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