Hyde Page v Chief Commissioner of State Revenue

[2009] NSWADT 229

CITATION:	Hyde Page v Chief Commissioner of State Revenue [2009] NSWADT 229
DIVISION:	Revenue Division
PARTIES:	Applicant: Dolores Hyde Page Respondent: Chief Commissioner of State Revenue
FILE NUMBER:	086134
HEARING DATES:	1 June 09 4 August 09
SUBMISSIONS CLOSED:	4 August 2009
DATE OF DECISION:	3 September 2009
BEFORE:	Perrignon R - Judicial Member
CATCHWORDS:	Land tax- Exemption - Principal place of residence - Strata lots - Whether two strata lots comprise a ‘lot’
LEGISLATION CITED:	Land Tax Management Act 1956 Taxation Administration Act 1996
CASES CITED:	Castle v Chief Commissioner of State Revenue [2007] NSWADT 242 Chief Commissioner of State Revenue v Geoffrey Coleman & Another [2007] NSWSC 625 Chief Commissioner of State Revenue v McGrath & anor [2008] NSWSC 387 Chief Commissioner of State Revenue v Sacco [2008] NSWADTAP 61 Chief Commissioner of State Revenue v Sacco [2008] NSWADTAP 61 Chief Commissioner of State Revenue v Timbs [2006] NSWADTAP 25 Coleman v Chief Commissioner of State Revenue [2005] NSWADT 236 Constantine v Chief Commissioner of State Revenue [2007] NSWADT 234 Cooper-Brookes (Wollongong) Pty Limited v FCT (1981) 25 ALR 151 Kamper v Chief Commissioner of State Revenue [2005] NSWADT 256 Kinging v Chief Commissioner of State Revenue [2005] NSWADT 239 Ryan & anor v Commissioner of Land Tax [1982] 1 NSWLR 305
REPRESENTATION:	Applicant Representative: J Hyde Page, solicitor Respondent Representative: I Mescher, barrister-at-law
ORDERS:	1. The assessment of Lot 39 to land tax in respect of the 2008 tax year is revoked. 2. The said assessment is replaced by a decision that Lot 39 is exempt from land tax in respect of the 2008 tax year, by reason of clause 2(1)(b) of Schedule 1A to the Act

REASONS FOR DECISION

1 Mrs. Hyde Page has lived with her family at on the 9^th floor of a residential apartment block in Elizabeth Bay, Sydney, since about 2006. At all relevant times, the family has occupied two adjacent units as the one place of residence. Each unit constitutes a separate strata lot. The larger of the two units comprises Lot 38 in Strata Plan 3740. The smaller, Lot 39.

2 For the tax year 2008, the Chief Commissioner of State Revenue assessed Mrs. Hyde Page to land tax in respect of the smaller unit. She seeks review of that decision. She argues that both units together attracted the ‘principal place of residence’ exemption under section 10(1)(r) of the Land Tax Management Act 1956.

3 Objection has been lodged under section 86 of the Taxation Administration Act 1996, and disallowed by the Chief Commissioner. It follows that the Tribunal enjoys jurisdiction under section 96 of the Act to review the assessment.

Principal Place of Residence Exemption

4 Land tax is levied and paid on the taxable value of all land in New South Wales which is owned by taxpayers, unless the land is exempt: section 7, Land Tax Management Act 1956. Land is exempt if, inter alia, it attracts the ‘principal place of residence exemption’ in Schedule 1A of the Act, which came into effect on 31 December 2003: section 10(1)(r). Land tax is charged on land as owned at midnight on 31 December immediately preceding the relevant tax year, which is a calendar year: section 8.

5 Whether the smaller unit attracted the ‘principal place of residence’ exemption for the 2008 tax year depends on the nature of its ownership as at midnight on 31 December 2007 - referred to in Schedule 1A to the Act as the ‘taxing date’.

6 As at the taxing date, Mrs. Hyde Page was the registered proprietor of the larger unit. She was not then the registered proprietor of the smaller unit. It remained an asset in her late mother’s estate, and was registered in her late mother’s name. It had been bequeathed to Mrs Hyde Page, but had not yet been transferred into her name. That has since occurred.

7 As at the taxing date, Mrs Hyde Page asserts that she was the beneficial owner of the smaller unit, because her mother’s estate had been fully administered but for the transfer of the unit into her name, and she was the specific devisee of the unit. Neither the assertion of beneficial ownership, nor the facts on which it was based, were challenged by the Chief Commissioner. Without admission, he indicated that he was content for the case to be decided on that basis. The Tribunal proceeds on the assumption that, as at the taxing date, Mrs Hyde Page held the entire beneficial interest in the smaller unit.

8 Mrs Hyde Page submits that the smaller unit attracted the ‘principal place of residence’ exemption, because it was one of two strata lots which together were owned and occupied by her as her principal place of residence, and attracted the operation of Clause 2(1)(b) of Schedule 1A to the Act. At the taxing date, Clauses 2(1) and (2) provided as follows.

‘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 lot under the Strata Schemes (Freehold Development) Act 1973 or a lot under the Strata Schemes (Leasehold Development) Act 1986 .

(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.’

9 The sole question for determination by the Tribunal is whether the smaller unit attracted the ‘principal place of residence’ exemption by reason of Clause 2(1) of the Schedule.

The four unities

10 In Ryan & anor v Commissioner of Land Tax [1982] 1 NSWLR 305 at 310, Hunt J approved a test formulated by the Chief Commissioner for determining whether two adjacent blocks of land should be considered one “parcel of residential land” for the purposes of section 10(1)(r)(ii) of the Act, which was later replaced by clause 2(1)(a) of Schedule 1A. He said at 310:

‘[I]n my view … contiguous blocks of land can comprise a ‘parcel of residential land’ within s 10(1)(r )(ii) only where they are undivided not only by physical separation but also in use, occupation and title.’

11 On the facts, he found that two adjacent blocks of land were not undivided in title, because one was owned by the taxpayer, and the other jointly by the taxpayer and his wife.

12 Over the years, Hunt J’s four requirements have come to be known as the “four unities”. They have been described as having achieved ‘quasi legislative status’: Chief Commissioner of State Revenue v Sacco [2008] NSWADTAP 61 at para 10. They are generally applied in determining whether two parcels of land should be regarded as one for the purposes of clause 2(1)(a): Chief Commissioner of State Revenue v Sacco [2008] NSWADTAP 61 (at para 41); Chief Commissioner of State Revenue v Geoffrey Harry Coleman & Another [2007] NSWSC 625; Constantine v Chief Commissioner of State Revenue [2007] NSWADT 234; Chief Commissioner of State Revenue v McGrath & anor [2008] NSWSC 387.

13 In Chief Commissioner of State Revenue v Timbs [2006] NSWADTAP 25, a majority of the Appeals Panel of this Tribunal construed the words ‘a lot’ in clause 2(1)(b) of the Schedule as including a reference to two lots, at least where the ‘four unities’ were satisfied. Applying section 8(b) of the Interpretation Act 1936, it found that the singular included the plural, and that two adjacent home units there under consideration, including car spaces forming part of each lot, together constituted ‘a lot’ for the purposes of clause 2(1)(b), and attracted the principal place of residence exemption.

14 The facts in this case are similar to those in Timbs, save that in this case two car spaces are each comprised in separate lots. Neither of those lots has been assessed to land tax.

Submissions

15 The Chief Commissioner concedes that both home units were occupied by Mrs Hyde Page as her principal place of residence from 1 July 2007, and that on the taxing date three of the unities were satisfied - namely, unity of use, unity of occupation, and the absence of physical separation.

16 On the facts, he says that Mrs Hyde Page cannot demonstrate unity of ‘title’ because, as at the taxing date, she was the registered proprietor of the larger unit only, and her late mother’s name remained on the register as the proprietor of the smaller unit. ‘Title’ was thus divided, even if Mrs Hyde Page was the beneficial owner of the smaller unit, and the legal and beneficial owner of the larger unit.

17 He argues that the ‘four unities’ must be strictly complied with, relying on Ryan at 306F, 308B and 310E; Kamper v Chief Commissioner of State Revenue [2005] NSWADT 256; Kinging v Chief Commissioner of State Revenue [2005] NSWADT 239 at para 19; Coleman v Chief Commissioner of State Revenue [2005] NSWADT 236 at para 40; and Castle v Chief Commissioner of State Revenue [2007] NSWADT 242 at para 22.

18 In reply, Mrs. Hyde Page submits that unity of title is necessary only in respect of parcels of land under clause 2(1)(a), and not in respect of strata lots under clause 2(1)(b). In support of this proposition, she submits that the Appeals Panel in Timbs assumed, without deciding the issue, that the four unities were equally applicable to strata lots under clause 2(1)(b).

19 In the alternative, she submits that the requirement for unity of title is satisfied where, as here, there is unity of beneficial ownership.

Unity of title – application to strata lots

20 Her first submission - that the Appeals Panel in Timbs did not decide whether unity of title is necessary in respect of strata lots - is supported by the reasoning of the majority in that case. In his fifth ground of appeal, the Chief Commissioner had argued that the Tribunal at first instance erred in finding ‘that, for the purposes of clause 2(1)(b)(ii) … there exists a unity of title, use and occupation test”. This ground was dismissed by the Appeals Panel. However, its reasoning discloses that, on appeal, the Chief Commissioner argued only that the two units in question were not undivided in a physical sense. The Appeals Panel observed that, on the facts, the two units in question were physically undivided within the meaning of the Ryan test. It did not specifically consider the other three unities, undoubtedly because it was not required to do so.

21 It falls to the Tribunal in this case to decide whether the unity of title test should operate in applying clause 2(1)(b). No policy reason has been advanced which would justify the application of some of the four unities and not others. On the contrary, it is likely that parliament intended the two limbs of clause 2(1) to operate consistently with one another, and they ought be so construed. For those reasons, the Tribunal finds that, for two lots to be construed as ‘a lot’ for the purposes of clause 2(1)(b), they must satisfy all four of the unities described in Ryan’s case.

22 The submission that unity of title is not required when dealing with strata lots must be rejected.

Unity of beneficial ownership

23 It remains to determine whether the requirement for unity of title is satisfied by common beneficial ownership, as distinct from registered proprietorship – for instance, where, as here, the taxpayer is the registered proprietor of one lot, but merely the beneficial owner of the other.

24 In Ryan, Hunt J made no finding to the effect that, absent unity of registered proprietorship, unity of beneficial ownership was of no account. That question did not arise on the facts before him. Neither the Court, nor the parties, were required to consider it.

25 The Ryan tests must be strictly complied with: Castle at para 42. The question at issue is how one of those four tests is properly to be applied to the facts of this case, having regard to the following.

a. Unity of beneficial ownership was not considered by the Court in Ryan, nor has it since been considered by any Court or Tribunal in construing clause 2(1)(b), so far as the researches of counsel can ascertain.

b. The Tribunal is not dealing with a statutory formulation, but a test devised by the Chief Commissioner in Ryan’s case, which was judicially approved in the context of the facts of that case, and has often since been judicially applied.

c. The test is designed to give effect to the presumed intention of parliament in the way that the exemption provided for by Clause 2 is applied.

26 The primary object in construing legislation, including revenue statutes, is to ascertain the intention of the legislature, whether or not such an intention favours the taxpayer: Cooper-Brookes (Wollongong) Pty Limited v FCT (1981) 25 ALR 151, per Mason and Wilson JJ at 171. A construction which promotes the underlying purpose or object of the relevant Act is to be preferred to one which does not: section 33, Interpretation Act 1987.

27 In Kinging, the Tribunal found that, even though section 33 did not exist when Hunt J decided Ryan’s case, his reasoning demonstrated that he had adopted the kind of purposive construction which would later be required by section 33.

28 In construing section 10(1)(r)(ii) – the predecessor of Clause 2 of the Schedule – Hunt J noted that it had replaced the former section 9(3)(e) of the Act, and reasoned as follows [at 309]:

‘In 1973, s 9(3)(e) was, as I have said, replaced by s 10(1)(r)(ii). There are, however, some differences between the two provisions:

(1) The deduction previously allowed has now become an exemption. Whether or not a deduction is and was allowed by s 9 depends primarily upon the use to which the land is or was put; whether or not an exemption is granted by s 10 depends, as I have also said, primarily upon the identity of the owner of the land , although use is relevant as well …

(2) Strata lands are now exempted; previously no deduction was allowed. This appears to do no more than remedy an earlier oversight.

(3) There is now a limitation upon the area of the land which is exempted. ….

(4) The change in expression from ‘land’ in s 9(3)(e) to a “parcel of residential land” in s 10(1)(r)(ii) appears to be a recognition by the legislature of the argument accepted by Isaacs J in [McMillan v Commissioner of Land Tax (1973) 3 ATR 664] , that the word “land” in s 9(3)(e) was used in the same senses as the phrase “parcel of the land” to be found in s 9(2).

…..

Both provisions, however, relate to what may compendiously be called a man’s home, or to the land he owns upon which his home is constructed. The change from deduction to exemption, with its corresponding change in emphasis from use to ownership, serves only to assist the Commissioner’s claim that the earlier interpretation of the expression “land” in s 9(3)(e) and of “parcel of the land” in s 9(2) should be applied also to “parcel of residential land” in s 10(1)(r)(ii). ….’ ( emphases added ).

29 He concluded [at 310]:

‘It follows, in my view, that contiguous blocks of land can comprise a “parcel of residential land” within s 10(1)(r)(ii) only where they are undivided not only by physical separation but also in use, occupation and title.’

30 These passages demonstrate that His Honour had regard, not only to the purposes of the legislation, but also to its context and history. In doing so, he observed that eligibility for the exemption depended primarily upon the identity of the ‘owner’, that the exemption and the deduction which preceded it both related to land which the taxpayer ‘owns’, and that the history of the legislation disclosed a change in emphasis from use to ‘ownership’. Nowhere in his reasoning did His Honour suggest that the legislation was confined in its operation to considerations of registered title, as distinct from ownership.

31 His conclusion, in which he makes specific reference to title, is properly to be construed by reference to the reasoning which preceded it. Thus construed, His Honour must either have used the word ‘title’ in an extended sense, to include ownership, or if he used it in the restricted sense of registered proprietorship, he was confining his attention to the facts before him. His reasoning does not disclose any justification for ignoring unity of beneficial ownership, or any intention that it should be ignored. For that reason, it is unlikely that he intended such unities to be excluded from consideration, where they exist.

32 Such an interpretation of His Honour’s conclusion is consistent with the scheme of the Act, which provides for land tax to be levied and paid in respect of land ‘owned’ by taxpayers (section 7), and extends the principal place of residence exemption to land used and occupied exclusively for residential purposes by its ‘owner’ (Clause 2, Schedule 1A). ‘Owner’ is defined in section 3 to include both legal and beneficial owners. To fall within the definition of ‘owner’, it is not necessary to be a registered proprietor of the land.

33 Whether Hunt J was using ‘title’ in an extended sense, or was simply confining himself to the facts before him, the result is the same – namely, that unity of title may be satisfied, not only where there is unity of registered proprietorship, but also where, as here, beneficial title to both units is held entirely by the same person or persons.

Decision

34 For those reasons, the Tribunal finds that, as at the taxing date, both units together constituted ‘a lot’ for the purposes of clause 2(1)(b) of Schedule 1A, and attracted the ‘principal place of residence’ exemption under section 10(1)(r) of the Land Tax Management Act 1956.

Orders

35 The Tribunal makes the following orders.

1. The assessment of Lot 39 to land tax in respect of the 2008 tax year is revoked.

2. The said assessment is replaced by a decision that Lot 39 is exempt from land tax in respect of the 2008 tax year, by reason of clause 2(1)(b) of Schedule 1A to the Act.