GALATI-RANDO and Commissioner Of State Revenue

Case •

[2014] WASAT 164

•

5 DECEMBER 2014

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

ACT: TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION:   GALATI-RANDO and COMMISSIONER OF STATE REVENUE [2014] WASAT 164

MEMBER:   JUDGE T SHARP (DEPUTY PRESIDENT)

HEARD:   17 OCTOBER 2014

DELIVERED          :   5 DECEMBER 2014

FILE NO/S:   DR 60 of 2014

BETWEEN:   SANTO GALATI-RANDO

ANNUNZIATA GALATI-RANDO
Applicants

AND

COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

Land tax ­ Notice of assessment ­ Exemption denied by Commissioner ­ Consideration of s 29 of the Land Tax Assessment Act 2002 (WA) ­ Whether land used solely or principally for the purpose stated in s 29(3)

Legislation:

Interpretation Act 1984 (WA), s 19, s 19(1)(b)(ii), s 32(2)
Land Tax Assessment Act 1976 (WA), Sch cl 9, Pt 1, cl 12, s 21
Land Tax Assessment Act 2002 (WA), s 5, s 7, s 14, s 17, s 18, s 19, s 20, s 20(1)(d), s 29, cl 1, cl 4, Pt 3
Land Tax Assessment Bill 1976 (WA)
Land Tax Assessment Bill 2001 (WA)
State Administrative Tribunal Act 2004 (WA), s 17, s 27(1), s 29(1)
Taxation Administration Act 2003 (WA), s 17, s 34, s 40(1)

Result:

Reassessment ordered

Summary of Tribunal's decision:

The applicants are the joint owners of certain land at Lyon Road, Wandi.  One of the owners was at the relevant time using about 10% of that land as a market garden.  The remainder of the land was being used, also as a market garden, by a trust of which the general beneficiaries include the applicants' children.

The applicants considered that for the assessment years to 30 June 2012 and to 30 June 2013, the land should be exempt from land tax because on the relevant dates it was used by one of the applicants for a rural business.  The Commissioner of State Revenue denied the applicants' application for an exemption and assessed the land for land tax for those years. 

The Commissioner's reason for refusing to grant the exemption was, broadly, that he considered that the exemption only applied where the land in question was being used by the owners solely or principally for a rural business.  The Commissioner decided that only 10% of the land was being used by the owners for a rural business and even though they qualified for the exemption in other respects, this use was not sufficient for the exemption to apply.

On a review of that decision by the Tribunal, the Tribunal considered the wording of the exemption.  It also considered the statutory context of that exemption, including its legislative history.  The Tribunal concluded that the land was not fully exempt in respect of the years in question.

However, the Tribunal considered that the land should be partly exempt from land tax for those years to the extent of 10%. 

The Tribunal ordered a reassessment of land tax.

Category:    B

Representation:

Counsel:

Applicants:     Mr EM Heenan and Ms C Richards

Respondent:     Ms R Panetta

Solicitors:

Applicants:     Wilson & Atkinson

Respondent:     State Solicitor for Western Australia

Case(s) referred to in decision(s):

Aveland Pty Ltd and Commissioner of State Revenue [2013] WASAT 180

Barker v Midstyle Nominees Pty Ltd [2014] WASCA 75

Commissioner of State Revenue v Abbotts Exploration Pty Ltd [2014] WASCA 211

Commissioner of State Revenue v De Campo [2007] WASCA 136

Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503

Council of the City of Newcastle v Royal Newcastle Hospital (1957) CLR 493

Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [2012] WASCA 189

J M Bestall and Commissioner of State Revenue [2005] WASAT 32

Moradian v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 142 FCR 170

Quito Pty Ltd and Commissioner of State Revenue [2014] WASAT 8

R v Rintel (1991) 3 WAR 527

Re Minister for Resources; Ex Parte Cazaly Iron Pty Ltd and Another (2007) WAR 403

Taylor v Owners - Strata Plan No 11564 (2014) 306 ALR 547

Wentworth Securities Ltd v Jones [1980] AC 74

REASONS FOR DECISION OF THE TRIBUNAL: 

Introduction

  1. On 17 July 2013, the respondent (Commissioner) issued an assessment of land tax on certain land owned by the applicants in Wandi in the State of Western Australia.  The assessment included land tax for the years to 30 June 2012 and to 30 June 2013.

  2. On 4 September 2013, the applicants through their solicitors objected to the assessment. They considered that on the relevant dates the land in question was exempt from land tax pursuant to s 29 of the Land Tax Assessment Act 2002 (WA) (LTA Act). 

  3. The Commissioner on 20 December 2013 disallowed the objection for the 2011/2012 and 2012/2013 assessment years.  The Commissioner's position is that on 30 June 2012 and on 30 June 2013 only part of the land was being used by the owners for the exempt purpose and so the exemption did not apply.

  4. The applicants then applied to the Tribunal under the Taxation Administration Act 2003 (WA) (TA Act) for a review of the Commissioner's decision.

Facts

Background facts

  1. These facts are not in dispute between the parties.

  2. In 1983, the applicants became the registered proprietors as joint tenants of Peel Estate Lot 677 being the whole of the land comprised in Certificate of Title Volume 241 Folio 9A (Lot 677). 

  3. In 1993, part of Lot 677 was resumed by the State Planning Commission for the construction of the Kwinana Freeway.  This had the effect of dividing Lot 677 into two unequal portions (the Large Portion and the Small Portion, together the Land) and caused the Small Portion to lose access to certain infrastructure such as electricity and running water.  A new Certificate of Title was issued and the Land became the whole of the land in Certificate of Title Volume 1979 Folio 881.

  4. In March 2013, the Land was subdivided into three lots, a fact which is only necessary to know in order to understand the chronology of the Commissioner's assessment of the Land which I describe later in these reasons.

  5. Mincha Pty Ltd (Mincha) was at all relevant dates the trustee of a trust named the Sam Galati Property Trust (Trust).  Mincha was registered on 16 November 1981 and the sole shareholders of Mincha were the applicants.  Mincha's directors were the applicants and their children, Carlo and Roberto Galati­Rando. 

  6. The Trust was established in 1991 and is a discretionary trust.  The general beneficiaries of the Trust include the applicants' children.

  7. As at 30 June 2011 and 30 June 2012, the registered proprietors of the Land were the applicants.

The use of the Land on the relevant dates

  1. At the time when the applicants' application was lodged with the Tribunal, some other facts were in dispute between the parties.  In particular, the Commissioner said that, as at 30 June 2011 and 30 June 2012, the Land was being used by Mincha, and not the applicants, for carrying out an agricultural business. 

  2. The applicants initially disputed this, saying that it was the applicants, not Mincha, using the Land for the business.  However, the applicants do not now appear to be pressing this assertion, instead saying that at the relevant dates 'a varying portion ' of the Large Portion was used by the applicants in carrying out a small agricultural business owned and operated by Mr Santo Galati­Rando, the first applicant, 'in his capacity of a sole trader'; see the applicants' amended statement of issues, facts and contentions dated 10 October 2014 at paragraph 3 of the summary and at paragraph 11 of the response to the Commissioner's statement of facts.

Facts now agreed

  1. Since the commencement of these proceedings, the issues in dispute between the parties have been considerably narrowed.  It is now common ground between the parties that as at 30 June 2011 and also at 30 June 2012:

    a)the Land was 'land in a non­rural zone' within the meaning of the LTA Act;

    b)the applicants were the owners of the Land as joint tenants;

    c)none of the Small Portion was being used in the carrying out of an agricultural business, due to the loss of access to necessary infrastructure for the carrying out of an agricultural business;

    d)10% of the Land was being used for a rural business carried on by the first applicant (Santo's Business); and

    e)one third of the applicants' total net income for the relevant financial years was derived from the carrying on of a rural business.

  2. Further, the applicants, through counsel, confirmed during oral submissions that 90% of the Land at the relevant dates was being used by Mincha and not the applicants for a rural business (T:32;17.10.14). 

Chronology of assessment and objection

  1. Until June 1996, the Land was exempted from land tax on the basis of a rural business exemption under the Land Tax Assessment Act 1976 (WA) (1976 Act), the precursor to the LTA Act.

  2. In June 1996, the relevant computer system at the Office of State Revenue automatically applied a land tax exemption for the Land on the mistaken basis that it was a private residential property under cl 9 Pt 1 of the Schedule to the 1976 Act.

  3. As a result of the Land being subdivided, in June 2013 the Commissioner issued a land tax notice of assessment and reassessment under s 14 of the LTA Act for the 2008/2009, 2009/2010, 2010/2011, 2011/2012 and 2012/2013 financial years. Section 14 of the LTA Act provides for the tax payable on newly subdivided private residential properties, and the assessment was therefore issued on a mistaken basis.

  4. In July 2013, the applicants wrote to the Commissioner stating that the Land was in fact being used in the carrying out of a rural business. The Commissioner replied advising that the assessment had been erroneously issued, and providing the applicants with an opportunity to apply for a rural business exemption. The Commissioner subsequently issued a land tax notice of reassessment reversing the application of s 14 of the LTA Act.

  5. On 17 July 2013, the Commissioner issued a further land tax notice of reassessment for the 2009/2010, 2010/2011, 2011/2012 and 2012/2013 assessment years. No reassessment was made for the 2008/2009 assessment year because of the five year limit that applies to reassessments under s 17 of the TA Act. No rural business exemption was applied to the land.

  6. On 4 September 2013, the applicants lodged an objection to the assessment issued on 17 July 2013. The basis of the objection was essentially that a rural business exemption from land tax should have been applied under s 29 of the LTA Act. The applicants also submitted a Land Tax Application for Exemption or Concession Rural Business Land form.

  7. On 1 November 2013, the Commissioner wrote to the applicants stating that s 29 of the LTA Act might not apply, and suggesting that the applicants instead apply for an exemption under s 20 of the LTA Act. This provision relevantly allows the Commissioner to apply a land tax exemption where land is not exempt due to the operation of s 29(3) and (4) of the LTA Act.

  8. On 5 December 2013, the applicants forwarded further information to the Commissioner and also applied for an exemption under s 20 of the LTA Act.

  9. On 13 December 2013, the Commissioner refused the applicants' application for exemption under s 20 of the LTA Act and informed the applicants that the assessments issued for the 2009/2010 and 2010/2011 financial years would be cancelled.

  10. On 20 December 2013, the Commissioner disallowed the applicants' objection in relation to the remaining assessments for the 2011/2012 and 2012/2013 assessment years and formally disallowed their application for exemption under s 29(3) of the LTA Act.

  11. On 12 February 2014, the Commissioner issued a land notice of reassessment for the 2011/2012 and 2012/2013 assessment years.

  12. On 18 February 2014, the applicants applied to the Tribunal for a review of the Commissioner's 20 December 2013 decision.

Legislation

Taxation Administration Act 2003 (WA)

  1. Section 34 of the TA Act allows a taxpayer the right to object to an assessment made by the Commissioner.

  2. Section 40(1) of the TA Act then relevantly provides that where a taxpayer is dissatisfied with the Commissioner's decision on an objection, they may apply to the Tribunal for a review of that decision.

State Administrative Tribunal Act 2004 (WA)

  1. These proceedings fall within the Tribunal's review jurisdiction in accordance with s 17 of the State Administrative Tribunal Act 2004 (WA) (SAT Act). The review is therefore to be by way of hearing de novo: s 27(1) of the SAT Act.

  2. The Tribunal has all the functions and discretions corresponding to those exercisable by the decision­maker in making the reviewable decision: s 29(1) of the SAT Act. The Tribunal can consider submissions that were not made to the Commissioner and evidence that was not before the Commissioner at the time of the assessment, although that evidence and those submissions must relate to the situation at the relevant assessment dates. They cannot have a retrospective effect; J M Bestall and Commissioner of State Revenue [2005] WASAT 32 at [19].

Interpretation Act 1984 (WA)

  1. Section 19 of the Interpretation Act 1984 (WA) (Interpretation Act) provides as follows:

    Extrinsic material, use of in interpretation

    (1)Subject to subsection (3), in the interpretation of a provision of a written law, if any material not forming part of the written law is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material ­ 

    (a)to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the written law and the purpose or object underlying the written law; or

    (b)to determine the meaning of the provision when ­ 

    (i)the provision is ambiguous or obscure; or

    (ii)the ordinary meaning conveyed by the text of the provision taking into account its context in the written law and the purpose or object underlying the written law leads to a result that is manifestly absurd or is unreasonable.

    (2)Without limiting the generality of subsection (1), the material that may be considered in accordance with that subsection in the interpretation of a provision of a written law includes ­ 

    (a)all matters not forming part of the written law that are set out in the document containing the text of the written law as printed by the Government Printer; and

    (b)any relevant report of a Royal Commission, Law Reform Commission, committee of inquiry or other similar body that was laid before either House of Parliament before the time when the provision was enacted; and

    (c)any relevant report of a committee of Parliament or of either House of Parliament that was made to Parliament or that House of Parliament before the time when the provision was enacted; and

    (d)any treaty or other international agreement that is referred to in the written law; and

    (e)any explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before, or furnished to the members of, either House of Parliament by a Minister before the time when the provision was enacted; and

    (f)the speech made to a House of Parliament by a Minister on the occasion of the moving of a motion that the Bill containing the provision be read a second time in that House; and

    (g)any document (whether or not a document to which a preceding paragraph applies) that is declared by the written law to be a relevant document for the purposes of this section; and

    (h)any relevant material in any official record of proceedings in either House of Parliament.

    (3)In determining whether consideration should be given to any material in accordance with subsection (1), or in considering the weight to be given to any such material, regard shall be had, in addition to any other relevant matters, to ­ 

    (a)the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision taking into account its context in the written law and the purpose or object underlying the written law; and

    (b)the need to avoid prolonging legal or other proceedings without compensating advantage.

Land Tax Assessment Act 2002 (WA)

  1. The relevant provisions of the LTA Act are set out below:

    5.       Taxable land

    Land tax is payable, in accordance with the land tax Acts, for each financial year for all land in the State except land that is exempt under section 17.

    7.Liability to pay land tax

    (1)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 financial year.

    (2)However, if a person or a taxable authority is taken under section 8 to be the owner of the land at that time, the land tax is payable by the person or the taxable authority respectively.

    (3)If a person and a taxable authority are each taken under section 8(1) and (2) respectively to be an owner of the land at that time, the land tax is payable by the taxable authority.

    (4)Joint owners of land are jointly and severally liable for land tax payable on the land regardless of each of the joint owner's respective interests in, or use of, the land.

    (5)A person or taxable authority who is liable to pay land tax is also liable to pay any additional taxes, interest, penalties or charges payable under a land tax Act in relation to the land tax.

    17.Exempt land

    Land is exempt from land tax for an assessment year if -

    (a)the Commissioner grants an exemption for the assessment year under section 20; or

    (b)it is exempt for the assessment year under another provision of this Part.

    18.Partial exemptions or concessions

    If ­

    (a)an exemption or concession under another provision of this Act would apply to land if it were used or occupied solely for an exempt purpose or purposes, or owned, used or occupied solely by a person or persons in a particular class or classes, or both, as mentioned in the respective provision; and

    (b)the land is used or occupied partly for the exempt purpose or purposes and partly for another purpose or purposes, or is owned, used or occupied partly by persons in the particular class or classes, and partly by another person or persons,

    then the exemption or concession applies to the proportion of the land that is used or occupied for the exempt purpose or purposes, or is owned, used or occupied by the persons in the particular class or classes, or both, as the case requires.

    19.     Applying for exemption or concession

    The Commissioner may require an owner of land -

    (a)to lodge an application in the approved form for an exemption or concession under this Part; and

    (b)to give the Commissioner any information within the owner's knowledge or control that is relevant to deciding whether or not the land is eligible for an exemption or concession.

    20.     Commissioner's power to exempt land

    (1)A taxpayer may apply to the Commissioner for an exemption, concession or further concession for any of the following land -

    …

    (c)land used as holding paddocks for stock that is not exempt under section 29 only because it is not used for that purpose in the course of carrying on a rural business of a kind referred to in section 29;

    (d)land that is not exempt under section 29 because of the operation of section 29(3) or (4);

    …

    (2)The Commissioner may grant the exemption, concession or further concession for the whole or part of the land if the Commissioner is satisfied that there are reasonable grounds for doing so.

    …

    29.     Land used solely or principally for rural business, exemption for

    (1)Land (except land in a non­rural zone) is exempt for an assessment year if, at midnight on 30 June in the previous financial year, it is or was used solely or principally on a commercial basis to produce income to the user from the sale of produce or stock in the course of carrying out one or more of the following kinds of rural business -

    (a)an agricultural business, silvicultural business or reafforestation business;

    (b)a grazing business, horse­breeding business, horticultural business, viticultural business, apicultural business, pig­raising business or poultry farming business.

    (2)However, land used as holding paddocks for stock is not exempt unless it is used in the course of carrying out a rural business.

    (3)Land in a non­rural zone that is used by the owner of the land for a rural business or rural businesses is exempt from land tax for an assessment year if more than one third of the owner's total net income for the previous financial year was derived from the owner's carrying out a business or businesses of that kind in the State.

    (4)However, even if subsection (3) does not apply to land in a non­rural zone used for a silvicultural business or reafforestation business or both, the land is exempt for an assessment year if -

    (a)it is at least 100 hectares in area; and

    (b)at midnight on 30 June in the previous financial year it is fully stocked for the purposes of the business or businesses.

  1. Clause 1 of the Glossary at the end of the LTA Act provides the following relevant definitions:

    exempt purpose, in relation to land, means a purpose for which the land is used or reserved and by virtue of which the land is exempt[.]

    rural business, in relation to land, means the use of the land on a commercial basis to produce income to the user from the sale of produce or stock in the course of carrying out a business of a kind referred to in section 29(1)(a) or (b);

    rural business land means land on which a rural business has been or is being carried on[.]

  2. Clause 4 of the Glossary at the end of the LTA Act provides as follows:

    Land in non­rural zone

    Land is in a non­rural zone if the land is in the metropolitan region, or is outside the metropolitan region but is not in an area zoned for rural purposes under a local planning scheme or an improvement scheme.

Issue to be determined

  1. Self-evidently, the issue in the review is whether the Land was exempt from land tax under s 29(3) of the LTA Act for the 2011/2012 and 2012/2013 assessment periods.

  2. The parties have agreed, and I accept, that in addressing the applicants' application, the Tribunal must answer this question: Does s 29(3) of the LTA Act require that, for the rural business exemption to apply to land in a non­rural zone, the owner must on the relevant date be using that land 'solely or principally' for a rural business?

  3. The fact that Santo's Business is owned by only one of the joint owners of the Land is not regarded by either party as a relevant consideration.

Commissioner's submissions

  1. The Commissioner accepts that, when read literally, s 29(3) of the LTA Act contains a 'mere use' provision, in that it does not expressly require the land to be solely, or solely or principally, used for a rural business.

  2. However, the Commissioner says that a literal interpretation of the words in s 29(3) does not reflect the purpose of the provision.

  3. The Commissioner says that the text must be considered in its proper statutory context, which includes reading the Act as a whole, examining the existing state of the law, including the legislative history and considering the underlying purpose of the provision in question.

  4. Accordingly, regard should be had to extrinsic materials and the legislative history, so long as in so doing the clear meaning of the text is not displaced.

  5. Reading the LTA Act as a whole, the Commissioner points to the heading of s 29, which refers to land used 'solely or principally' for a rural business. The Commissioner also points to the express requirement for sole or principal use in s 29(1) of the LTA Act, which is the rural business exemption applying to land in a rural zone.

  6. The Commissioner also refers to the second reading speech of the Land Tax Assessment Bill 2001 (WA), which indicates that there was not intended to be any significant policy change between the LTA Act and its predecessor, the 1976 Act. The Commissioner then points out that the explanatory memorandum for the 1976 Act indicates that the predecessor provision to s 29(3) had a requirement that the relevant land be used 'solely or principally'.

  7. The Commissioner considers that the Tribunal must therefore conclude that the grammatical meaning of the wording of s 29(3) is inconsistent with the purpose of that provision. The Commissioner says that the result of this is that the Tribunal may then take one of three approaches.

  8. One approach, the Commissioner says, draws heavily on the structure of the whole of s 29 of the LTA Act, and involves viewing s 29(3) as an 'extension' of the exemption given by s 29(1). On this basis, the Commissioner says that the words 'solely or principally' in s 29(1) are carried through to s 29(3) and s 29(3) should be read accordingly.

  9. The second approach applies where, due to a drafting error, the statutory language of a provision defeats the purpose of that provision.  The drafting error must be just that, not a gap in the legislation to which the Parliament has failed to turn its mind.  The Commissioner refers to the judgement of Lord Diplock in Wentworth Securities Ltd v Jones [1980] AC 74 (Wentworth), who at 105 found that words may be implied into a statute if the following three conditions are satisfied:

    a)it must be possible to determine precisely the mischief (purpose) of the provision in the context of the Act as a whole;

    b)it must be apparent that Parliament inadvertently overlooked, and therefore omitted to deal with, an eventuality that must be dealt with if the provision is to achieve its purpose; and

    c)it must be possible to state with certainty the additional words that would have been inserted in the provision by Parliament had it become aware of the deficiency before enactment of the statute.

  10. As the Commissioner accepts, in Taylor v Owners - Strata Plan No 11564 (2014) 306 ALR 547 (Taylor), the High Court declined to consider the necessity for, or sufficiency of, Lord Diplock's three conditions. The High Court instead said, at 557, that the question of whether a court is justified in reading a statutory provision as if it contained an additional word or it omitted words 'involves a judgment of matters of degree'.

  11. The Commissioner agrees that this approach does not allow the Tribunal to 'divine unexpressed legislative inattention' (see Taylor at 564). However, it will allow the Tribunal to amend 'simple, grammatical drafting errors' (Taylor at 557).

  12. In relation to this second approach, the Commissioner says that the explanatory memorandum to the 1976 Act shows that the Parliament considered and decided that this type of exemption should require sole or principal use. The Commissioner says that due to a grammatical drafting error, the words, 'solely and principally' were not included in s 29(3) of the LTA Act. The Commissioner says that this is only a small variation that narrows the scope of s 29(3) of the LTA Act. On this basis, the Commissioner says it is open to the Tribunal to read the words 'solely or principally' into s 29(3) of the LTA Act.

  13. The third approach referred to by the Commissioner derives from s 19(1)(b)(ii) of the Interpretation Act. The Commissioner says that this provision allows extrinsic materials to be considered and potentially change an interpretation of a legislative provision which would otherwise have been arrived at, in circumstances where:

    the ordinary meaning conveyed by the text of the provision taking into account its context in the written law and the purpose or object underlying the written law leads to a result that is manifestly absurd or is unreasonable.

  14. Such extrinsic material could include section headings and other materials described in s 19(2) of the Interpretation Act.

  15. However, the Commissioner says that before applying the third approach it is necessary to determine the underlying purpose of s 29(3) of the LTA Act. The Commissioner says that it is permissible to resort to extrinsic materials for this purpose; Moradian v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 142 FCR 170 at 180. It is then necessary to assess whether the ordinary literal reading of s 29(3) would lead to a result that is 'manifestly absurd or unreasonable'.

  16. The Commissioner says that the ordinary meaning of s 29(3) of the LTA Act is that for a land tax exemption to apply the owner of the non­rural land may use the land for a rural business to any extent (even 1%) and still gain an exemption for the whole of the land. The Commissioner says that on face value s 29(3) appears to apply what it calls a 'mere use' exemption. The Commissioner says that this would be a manifestly absurd or unreasonable interpretation given the clear intention that this exemption be based on sole or principal use of the land for a rural business.

  17. Therefore, the Commissioner says that I should uphold my decision in Quito Pty Ltd and Commissioner of State Revenue [2014] WASAT 8 (Quito) and find that s 29(3) of the LTA Act requires the land be 'solely or principally' used for a rural business.

  18. The Commissioner, in concluding, accepts that 10% of the Land was being used for a rural business by one of the joint owners of the Land. However, because this does not constitute the sole or principal use of the Land, the Commissioner says that the Land is not exempt under s 29(3). Further, on the authority of Quito (at [121]), the Commissioner says that a partial exemption under s 18 of the LTA Act does not apply.

Applicants' submissions

  1. The applicants agree with the principles of 'proper statutory construction' identified by the Commissioner in his submissions. 

  2. The applicants point out that s 29(3) of the LTA Act does not expressly require the Land to be used solely or principally for a rural business before an exemption is to apply. The applicants say that the plain meaning of s 29(3) is clear and there is no hint or suggestion in the text of the LTA Act that the land must be used solely or principally for a rural business.

  3. The applicants submit that the construction of s 29(3) from its plain meaning is reinforced by consideration of the LTA Act as a whole. First, the applicants say that the section heading of s 29 of the LTA Act does not inform the construction of the clause in its proper statutory context because section headings do not form part of the written law; Interpretation Act s 32(2).

  4. Second, the applicants say that other provisions of the LTA Act specifically distinguish between exemptions which apply if the land is merely used for a specified purpose and those which apply if the land is used solely or principally for a specified purpose. The applicants say that the deliberate use by Parliament of 'solely and principally' in s 29(1) but not in s 29(3) supports the construction advanced by the applicants.

  5. The applicants' submission is that there is no inconsistency or absurdity with the applicants' interpretation. The applicants say that the requirement for sole or principal use, which is in s 29(1) but not in s 29(3), is not the only difference between the two provisions. The applicants say that these provisions treat rural and non­rural zones quite differently. They submit that apart from the 'loose connection' that both exemptions involve some sort of rural business, there are no elements in common between the criteria specified in s 29(1) and (3).

  6. The applicants say that, contrary to my observation in Quito at [99], s 29(3) does not expand the exemption for land in a rural zone but rather specifies a different test for a different class of land.

  7. Further, the applicants say that it is untenable to expect taxpayers to look to the explanatory memorandum of the 1976 Act to construe their obligations under the LTA Act. In any event, the applicants contend that whatever might be the relevance of the second reading speech of the LTA Act it cannot displace the plain meaning of the statutory text.

  8. The applicants' submissions then address the three corrective approaches suggested by the Commissioner.

  9. In relation to the first approach, the applicants say that, for reasons previously expressed, the statutory text of s 29(3) has only one possible construction and that therefore the approach advanced by the Commissioner is not reasonably open.

  10. In relation to the second approach, the applicants submit that the criteria expressed in Wentworth do not apply under Australian law. However, the applicants say, even if they do, the applicants' construction does not 'clearly defeat' the purposes of the LTA Act. It therefore follows that it is not open to the Commissioner to displace the meaning of the statutory text.

  11. In relation to the third approach, the applicants say that s 19 of the Interpretation Act does not apply because their construction is neither manifestly absurd nor unreasonable. They say that it 'is a perfectly workable construction' which is entirely consistent with the concession provided by s 29(3) of the LTA Act. They say that there are enough other factors in s 29(3) to avoid any misapplication of the exemption, particularly the one third income test.

Does s 29(3) of the LTA Act require that the land in question be 'solely or principally' used for a rural business if that land is to be exempt from land tax?

  1. In Quito at [99], I concluded that s 29 of the LTA Act read as a whole provides a single exemption for land used for a rural business. Section 29(1) deals with the exemption where the land in question is in a rural zone and s 29(3) where the land in question is in a non­rural zone.

  2. However, these remarks in Quito were made without affecting the outcome of the decision in that case and they were only made because the issue had been raised by the parties in that proceeding.

  3. I believe that it is appropriate for the issue to be reconsidered.

The word 'used' in the LTA Act generally and in particular in s 29

  1. The word 'used' is a word of wide import; Council of the City of Newcastle v Royal Newcastle Hospital (1957) CLR 493 at 515. The ordinary meaning of the verb 'to use' is to utilise or to employ for or with some aim or purpose; R v Rintel (1991) 3 WAR 527 at 529. 'Uses' has a broad connotation but its meaning is controlled by the context; Commissioner of State Revenue v De Campo [2007] WASCA 136 at [41].

  2. The LTA Act, particularly in Pt 3 ­ 'Exemptions, concessions and rebates', contains numerous references to land being 'used'. The word 'used' is not defined in the LTA Act. It is sometimes on its own, sometimes followed by the word 'solely' and other times it is followed by the phrase 'solely or principally'.

  3. In s 29(1), the word 'used' is followed by the words 'solely or principally'. In s 29(3), the word 'used' is not qualified at all, either by the words 'solely or principally' or, it must be said, by the words 'to any extent' or any words to that effect. It simply says 'used by the owner of the land for a rural business'.

  4. In my view, it is not possible to discern from the text of s 29(3) whether the word 'used', when given its ordinary meaning, should be construed as 'used to any extent', or as 'used solely or principally'. I believe that the word can be read in either way. Accordingly, in order to establish what is required for land to be exempt under s 29(3), the text of that subsection needs to be considered in its context; Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at [39].

What may be considered in order to establish context?

  1. As Buss JA said in Commissioner of State Revenue v Abbotts Exploration Pty Ltd[2014] WASCA 211 (Abbotts) at [160]:

    The modern approach to statutory construction is purposive.  The statutory text is the surest guide to Parliament's intention.  A decision as to the meaning of the text must begin by considering the context, in its widest sense.  This will include the general purpose and policy of the provision. (citations omitted). 

  2. I may also have regard to extrinsic material without necessarily invoking the provisions of s 19 of the Interpretation Act. As his Honour has also said in Abbotts at [91]:

    At common law (that is, independently of s 19 of the Interpretation Act), this court is permitted, in construing a statutory provision, to have regard to the words used by Parliament in their legal and historical context and, if appropriate, to give them a meaning that will give effect to any purpose of the legislation that can be deduced from that context. The context includes reference to the legislative history of the provision and any relevant reports of law reform bodies which describe the matters requiring legislative reform.

  3. See also Re Minister for Resources; Ex Parte Cazaly Iron Pty Ltd and Another (2007) WAR 403 at [221], Barker v Midstyle Nominees Pty Ltd [2014] WASCA 75 at [27] and Harman Nominees Pty Ltd v Leighton Shores Pty Ltd [2012] WASCA 189 at [11].

  4. It follows that, in order to establish whether the Land is fully exempt under s 29(3) of the LTA Act, the approach that I must take is to consider the word 'used' as it appears in s 29(3) in its context. That context should not be restricted merely to the other words of s 29(3). That context includes the LTA Act as a whole. It is also open to me to have regard to the legislative history of the section as part of the context, along with other relevant material. If the purpose of the provision in question can be ascertained from that material, then a meaning which gives effect to that purpose should be preferred.

  5. Importantly, I do not need to first find that applying the ordinary meaning of the word 'used' will lead to a result that is manifestly absurd or unreasonable. 

Legislative history

  1. I turn to the legislative history of the LTA Act and in particular to the history of s 29.

  2. As mentioned earlier in these reasons, the predecessor Act to the LTA Act was the 1976 Act. According to the second reading speech for the Land Tax Assessment Bill 1976 (WA), the purpose of the Bill was to 'remove land tax completely from land under the family home', to 'update our land tax legislation' and to 'correct anomalies, and remove the relatively high unimproved scale'; Western Australia, Parliamentary Debates, Legislative Council, 11 May 1976 (N McNeill, Minister for Justice).

  3. With regard to the passage in the second reading speech dealing with what was then the rural business exemption under the then existing legislation, this exemption was described as being 'regularly abused' by making it 'possible for a person to fence a large tract of land in the metropolitan area, arrange for a few sheep or other animals to be grazed on it, and successfully claim exemption.'  Another example given of that 'abuse' was the case of a significant area of urban land owned by a syndicate and leased to one member who then 'uses it in a minor way for grazing purposes' and claims the exemption.

  4. The 1976 Act commenced on 1 July 1976. Section 21 of the 1976 Act provided that certain 'classes of land' described in the Schedule were exempt from assessment and taxation, subject to any specified qualifications. The rural business exemption was found in cl 12 of the Schedule. It relevantly stated as follows:

    …

    (b)Class of Land

    Land used solely or principally for all or any of the following businesses ­ 

    (i)an agricultural, silvicultural, or reafforestation business; and

    (ii)a grazing, horse­breeding, horticultural, viticultural, apicultural, pig­raising, or poultry farming business.

    (c)Qualifications

    …

    (ii)Where land used solely or principally for one or more of the businesses specified in paragraph (b) is situated in the metropolitan region, or is situated outside that region and is zoned for other than rural purposes under a town planning scheme, the land shall not be exempt land unless ­ 

    (I)the person or persons so using the land is or are the owner or owners of the land;

    (II)that person or those persons derive in excess of 33 % of his or their total net income by carrying out within the State a business or businesses specified in paragraph (b) or, where the land is used for a silvicultural or reafforestation business, either that income requirement is satisfied or the lot or parcel so used has an area of not less than 100 hectares which is fully stocked for that business.

    (iii)Where land would be exempt land under this clause but for the operation of subparagraph (ii)(II), the owner or owners of the land shall be liable for assessment and taxation under this Act at 50% of the rate imposed by the Land Tax Act 1976.

    …

  5. Thus, for the rural business exemption to apply under the 1976 Act, the land in question, wherever situated, had to be used solely or principally for one of the businesses specified in paragraph (b) of cl 12. There were then further conditions which applied if that land was situated in the metropolitan region or was outside that region but zoned under a town planning scheme for other than rural purposes.

  1. The 1976 Act was repealed on 1 July 2003 and replaced with the LTA Act.

  2. The second reading speech for the Land Tax Assessment Bill 2001 (WA) includes a statement that the Bill 're-enacts the [1976 Act]'.  It 'does not alter the policy settings of the existing Act in any significant manner'; Western Australia, Parliamentary Debates, Legislative Assembly, 5 December 2001 (Mr E Ripper). While this in itself is not a reason to regard the wording of the equivalent provision of the 1976 Act as determinative of the meaning of the same provision in the LTA Act, that wording cannot be ignored.

  3. It is clear that the intention of the rural business exemption in the 1976 Act was to restrict that exemption to land solely and principally used by 'genuine primary producer owners' for carrying on a rural business.  The exemption was expressed as a single exemption, dealing with all land, both rural and non-rural.  The exemption when applied to non­rural land then had some additional qualifications added.

  4. The reason why non-rural land was subject to additional qualifications was to address the potential 'abuse' referred to earlier.  It is not beyond contemplation that a rural business owner (in the sense of someone who derives more than one third of his or her total net income from that business) could also be the owner of commercial or industrial land in a non­rural zone.  Parliament clearly intended that in those circumstances the owner should not be able to claim a total exemption for that land merely by, say, planting some vegetables on a small part of it.

Did the LTA Act amend the scope of the rural business exemption in the 1976 Act?

  1. There is nothing in any of the Parliamentary debates or written materials to suggest that the Parliament when re-enacting the 1976 Act intended to change the scope of the rural business exemption as it applied to non-rural land. However, if I accept the applicants' interpretation that, for the exemption to apply, s 29(3) only requires that a small proportion of non­rural land needs to be used by the owner for the purpose of a rural business, then this would have precisely that effect.

  2. As I have already said, that in itself is not determinative. The terms of the relevant second reading speech could not be the only basis for my decision. However, turning to the LTA Act itself, there are a number of factors which together tend to support the Commissioner's interpretation.

  3. First, I consider that, even though the heading to s 29 is not part of the LTA Act, it is open to me to consider that heading in the context of endeavouring to discern the general purpose of the section. Section 29 has the heading 'Land used solely or principally for rural business, exemption for'. This is not a heading for subsection (1) of s 29. It is the heading for the whole section. The applicant argues that s 29 contains at least two separate and distinct exemptions, one for rural land and one for non­rural land, one requiring use solely and principally, the other requiring mere use. If that is so, then a question arises as to why the words 'solely or principally' appear in the heading.

  4. Further, in s 29(2), the first word is 'However'. Therefore subsection (2) cannot stand alone. It has to be read as part of, and could even have been included in, subsection (1). Subsection (3) could be read alone, but its phrasing and language suggest to me that it too is meant to be read as part of the whole section. That being so, it is not unreasonable to conclude that the draftsperson intended that s 29 should also be read as a whole rather than, as the applicants argue, as different exemptions for different types of land.

  5. This then opens the possibility that the draftsperson did not feel the need to repeat the words 'solely or principally' in that subsection, instead assuming that those words would be carried through from s 29(1).

  6. It is a drafting error in that sense, but not in the sense that the draftsperson simply failed to consider the issue at all.

  7. Finally, I note that s 20(1)(d) of the LTA Act refers to land 'not exempt under section 29 because of the operation of section 29(3) or (4)'. Importantly, it does not say 'land not exempt under s 29(3) …', instead suggesting that there is a single exemption under s 29.

Conclusion

  1. On balance, I consider that the text of s 29(3), construed in the context of the whole of the LTA Act, permits a construction of the word 'used' in s 29(3) to mean 'used solely or principally'.

  2. Further, I prefer this construction because it gives effect to the clear intention of the Parliament that the exemption for land in a non­rural zone being used for a rural business should not be extended to land being used only partly for a rural business.

Is the land in question partially exempt?

  1. The LTA Act provides that land tax is payable for all land except land that is exempt under s 17.

  2. Section 17 provides that land is exempt if the Commissioner grants an exemption under s 20, or if it is exempt under another provision of Pt 3 of the LTA Act. Section 18 and s 29 are both in Pt 3.

  3. I observed in both Aveland Pty Ltd and Commissioner of State Revenue [2013] WASAT 180 (Aveland) and in Quito that s 18 only applies if the relevant underlying exemption requires a sole use. I said that s 18 would not apply when the underlying exemption provided for something less than sole use.

  4. In neither case did that observation affect the outcome of those reviews.  In Quito I found that the land in question was in fact being used solely or principally for a rural business.  Aveland was decided on its own facts and on the basis that the land in question was wholly exempt under a different section of the LTA Act.

  5. It is now clear to me that I was wrong when I made that observation. Under s 17 and s 18, if an exemption would apply to land if used solely for a particular purpose, and it is only used partly for that purpose then, unless the land is already entirely exempt under another provision of Pt 3, the exemption applies to the proportion of the land that is used for the exempt purpose.

  6. It is not in dispute that the Land is in a non­rural zone and that the owners were at the relevant time deriving more than one third of their income from carrying out a rural business in the State.  If the owners of the land used the whole of the Land for a rural business, the Land would be exempt.

  7. It is accepted that 10% of the Land was on the relevant dates used by one of the joint owners for a rural business. I therefore consider that under s 18 of the LTA Act the exemption from land tax under s 29(3) of the LTA Act should apply to 10% of the Land for the relevant assessment years.

Orders

1.The application is upheld to the extent that the Commissioner of State Revenue is to reassess land tax payable in relation to No 548 Lyon Road, Wandi in accordance with these reasons for decision.

2.The application is otherwise dismissed.

I certify that this and the preceding [104] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

JUDGE T SHARP, DEPUTY PRESIDENT

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

0