Franz Enterprises Pty Ltd v The Commissioner of Land Tax
[2001] QLC 89
•27 August 2001
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BRISBANE
27 August 2001
Re: Appeals against Land Tax
Land Tax Act
Assessment No: 98845
Local Government: Noosa
(A2000-0027)
Franz Enterprises Pty Ltd
v.
The Commissioner of Land Tax
D E C I S I O N
This is an appeal by Franz Enterprises Pty Ltd against land tax assessments for the financial years ending 30 June 1995, 1996 and 1999 (Assessment No. 98845) issued by the Commissioner of Land Tax. The assessments amended the land tax liability of the taxpayer for those financial years by reducing the benefit of the reduction for the principal place of residence on Lot 78 on RP 840223 under section 26C of the Land Tax Act 1915 (the Act).
Mr JH Franz appeared on behalf of the appellant. Mr Redmond of Counsel appeared on behalf of the respondent.
The land in question originally formed part of Portions 78 and 79 on Mch 1297 which was purchased by the appellant in 1979. The land is held by the appellant as trustee of the Franz Family Trust. In 1981, the Franz family built their family home on a small elevated knoll on Portion 78.
In 1991, the appellant “reconfigured” each portion by registered plan 840223 which cancelled Portions 78 and 79 and replaced them with Lots 78 and 79. The effect of this transaction was to increase the size of the lot on which the family home was built (the new Lot 78) from 3.514 hectares to 5.222 hectares. Accordingly, the area of the new Lot 79 was 2.125 hectares. Lot 79 on RP 840223 was sold in 1994.
In December 1999, the appellant subdivided Lot 78 on RP 840223 into Lots 78 and 80 by registering plan of subdivision SP 116879. The new Lot 78 has an area of 3.046 hectares and Lot 80 is 2.176 hectares.
It was that transaction that caused the respondent to issue, on 8 June 2000, the notice of assessment under appeal in this case. Prior to the 1999 subdivision, no land tax liability arose in respect of Lot 78 on RP 840223 because the land qualified for an exemption under s 11(6D) of the Act as it was being used as a principal place of residence by the beneficiaries of the Franz Family Trust. The assessment amended the land tax liability of the appellant for the financial years ending 30 June 1995, 1996 and 1999 by reducing the benefit of the deduction for the principal place of residence on Lot 78 on RP 840223. The amended assessments were issued pursuant to s 26C of the Act. No assessments were issued for the financial years ending 30 June 1997 and 1998 because the taxable value of Lot 78 on RP 840223 was below the threshold for a trustee landholder.
The appellant objected to the assessment by notice of objection dated 30 June 2000 accompanied by a letter dated 3 July 2000. The objection was disallowed by letter to the appellant dated 25 October 2000. The appellant appealed to this Court by Notice of Appeal and letter dated 24 November 2000.
Section 26C provides, no far as is relevant:
“(1) Where during or after the financial year commencing on 1 July 1989 any land is subdivided …, the amount of land tax for which the owner of that land at the time at which it is subdivided is then liable for each financial year during the relevant period in respect of which -
(a)that owner obtained the benefit of a deduction under section 11(6A) or (6D) in respect of that land; …
is an amount equal to the land tax that would have been assessed as payable by that owner for that year if –
(c) in respect of the taxable portion of that land – that owner had not been entitled to the benefit of that deduction; …
less the amount (if any) of land tax … paid or otherwise payable by that owner for that year.
(2) For the purposes of this section -
(a) land is subdivided when a plan of subdivision of the land is registered under the Land Title Act 1994;
…
(3)For the purposes of the assessment and levying of land tax as a consequence of the operation of subsection (1), the relevant unimproved value of the taxable portion of the land that is subdivided shall be an amount that bears to the relevant unimproved value of the whole of that land as at midnight on 30 June immediately preceding the financial year in and for which the land tax is to be levied the same proportion as the area of the taxable portion bears to the area of the whole.
(4) In the section -
“the relevant period” means -
(a) the five financial years reckoned retrospectively from but excluding the financial year in which the land is subdivided;
…
“the taxable portion”, in relation to land that is subdivided, means that land –
(a)after subtracting the parcel of land on which, at the time of subdivision, is situated a dwelling house the occupancy of which gave rise to the deduction referred to in subsection (1)(a)…”.
The appellant relied on a number of arguments in support of the appeal. The first related to the history of the subdivision of the land. As explained above, the original area of the lot on which the principal place of residence was built (the home lot), which was then Portion 78 (on Mch 1297) was 3.514 hectares. Following the registration of RP 840223 in 1991, the area of the home lot was increased to 5.222 hectares and then, in 1999, on registration of SP 116879 the area of the home lot was reduced to 3.046 hectares. The appellant submitted that the registration of RP 840223 in 1991 did not constitute a subdivision of the land. Rather, it was simply a boundary change and therefore, for the purposes of applying s 26C, the increase in area of the house lot to 5.222 hectares, between 1991 and 1999, should be ignored. The correct approach, it was submitted, was to treat the home lot immediately before the registration of SP 116879 as comprising an area of 3.514 hectares. The appellant also submitted, in support of this approach, that the increase in size of the home lot had not resulted in any increase in the value of that land. When SP 116879 was registered in 1999, the home lot was reduced from 3.514 hectares (that is, if the interim increase to 5.222 hectares were ignored) to 3.046 hectares. Therefore, the appellant submitted, the land tax should be calculated on .468 of 3.514 hectares.
The appellant also pointed out that instead of increasing the area of the home lot to 5.222 hectares in 1991, it could have reduced the area of the lot to 3.046 hectares. This would have left the other parcel as a large area, which could, subsequently, have been subdivided. If that had been done, the appellant said, there would have been no land tax incurred. It was anomalous, therefore, it was submitted, that land tax had been levied in the present case.
The first issue to be considered is whether the registration of RP 840223, in 1991, amounted to a subdivision or, as the appellant submits, a mere boundary change. It appears that the purpose of the registration of RP 840223 was to change the boundary between the then Portions 78 and 79, in order to move that boundary further from the house situated on the home lot. This was to ensure privacy for that house as the appellant intended to, and did sell the new Lot 79. The appellant says that is all that occurred – the boundary was changed, and there was no subdivision. This is because, it was submitted, the meaning of subdivide is to section off land. Here there were two blocks originally and two blocks remained, and therefore there was no subdivision. The appellant said, therefore, that s 26C(2)(a) (which provides that for the purpose of the section land is subdivided when a plan of subdivision of the land is registered under the Land Title Act 1994) did not apply to the registration of RP 840223 in 1991 because there was no subdivision but simply a boundary change.
The appellant’s reference to s 26C(2)(a) is not relevant in considering the 1991 transaction. The purpose of s 26C is to impose liability for land tax following a subdivision of land, if certain conditions apply, for a period of five years preceding the financial year in which the land is subdivided. The relevant subdivision, for this purpose, is the 1999 subdivision. Even if s 26C were relevant to the registration of RP 840223 in 1991, the appellant’s argument still could not succeed as s 26C(2)(a) provided, in 1991, that for the purposes of the section, land is subdivided when a plan of subdivision of the land is recorded in the register maintained by the Registrar of Titles under the Real Property Act 1861 - 1988. Thus under that provision, the home lot was subdivided on 27 August 1991 when RP 840223 was registered.
Leaving aside s 26C, there remains the question of whether the appellant’s submission that there was no subdivision in 1991, is correct. The Macquarie Dictionary (second edition) defines “subdivide” as 1. to divide (a part, or an already divided whole) into smaller parts; divide anew after a first division 2. to divide into parts. Thus the appellant’s submission may be correct, on the plain meaning of the word “subdivide”. However, RP 840223 was registered under the provisions of the Real Property Act 1861. For the purposes of that Act, RP 840223 is a plan of subdivision, and s 119(3) of that Act provided that after registration of a plan of subdivision, “the land shall not be dealt with under this Act otherwise than in accordance with that plan of subdivision”. It is not possible, therefore, to ignore the effect of the registration of RP 840223. Registration of RP 840223 subdivided the land into 2 new lots, Lots 78 and 79.
Alternatively, the appellant appealed against the assessment on the ground that the valuation of Lot 80 on which the land tax was assessed does not reflect accurately the difference between the values of the home lot and Lot 80. Mr Franz submitted that the home lot has always been far more valuable than Lot 80 because of the elevated house site near the lake on the home lot. In the letter accompanying his Notice of Appeal Mr Franz said that in today’s market Lot 80 is only able to achieve 25 % of the price of the home lot.
Land tax is levied on the unimproved value of land, and in a case where s 26C is applied, sub-s (3) sets out the way in which the unimproved value is to be determined. The effect of sub-s (3) is that the unimproved value of Lot 80 is to be determined by subtracting the unimproved value of Lot 78 on SP 116879 from the unimproved value of Lot 78 on RP 840223, that is from Lot 78 before the 1999 subdivision. This is what the respondent has done and there is no room for applying another method of assessing the unimproved value of Lot 80.
Conclusion:For the reasons set out above, I have decided that the respondent Commissioner’s assessment of land tax for the years ending 30 June 1995, 1996 and 1999 was correct. Therefore the appeal is dismissed.
CAC MACDONALD
MEMBER OF THE LAND COURT
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