Jackman v Commissioner of Land Tax
[2010] QLC 3
•27 January 2010
LAND COURT OF QUEENSLAND
CITATION: Jackman v Commissioner of Land Tax
[2010] QLC 0003PARTIES: Patrick T and Jodie M Jackman
(appellants)v. Commissioner of Land Tax
(respondent)FILE NO: LTA 223-09; LTA 224-09 DIVISION: Land Court of Queensland PROCEEDINGS: Appeals against assessments of Land Tax – Land Tax Act 1915 HEARD ON: 9 December 2009 DELIVERED ON: 27 January 2010 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER: Mr RS Jones ORDERS: 1. The appeals are allowed.
2. The disallowance decisions of the respondent are set aside.
3. The subject land tax assessments are to be remitted back to the respondent to assess the land tax liability of the appellants in accordance with the decision of this Court.
4. The parties are to be heard on the question of costs.
CATCHWORDS: STATUTORY CONSTRUCTION – LAND TAX – s.11(6)A and s.3E(1) of the Land Tax Act 1915 (as in force on 30 June 2008) – Consideration of the meaning and effect of the words “used as the principal place of residence” in s.3E(1)(b) of the Act – consideration of circumstances where the appellants were, due to no fault of their own, required to live at other premises for an extended period – need to consider all of the relevant facts and circumstances – whether or not land at the relevant date was being used as the principal place of residence a question of fact and degree.
LAND TAX – consideration of ameliorative and remedial legislation – legislation ought be construed so as to give the fullest relief the language used fairly and reasonably allows.
APPEARANCES: Mr R Gotterson QC, instructed by DLA Phillips Fox for the appellants.
Mr M Conrick of Counsel instructed by Keith Millman, Commercial Counsel, Treasury Department, for the respondent.
This case concerns an objection decision by the Commissioner of Land Tax (the respondent) not to exempt the appellants’ land from land tax on the basis of it being their principal place of residence. Dissatisfied with that decision the appellants have appealed to this Court.
While there are two appeals, because of the degree of common issues, evidence and circumstances, it was agreed that they be heard together with the evidence in one being evidence in the other.
Essentially there is only one issue before the Court; whether the subject land was used as the appellants’ principal place of residence for the purpose of section s.3E(1)(b) of the Land Tax Act 1915 at the relevant date, 30 June 2008.
One jurisdictional point to note is that the appeals had already commenced in the Land Court prior to the commencement of s.70 of The Land Tax and Taxation Administration Amendment Act 2009 and both parties requested that the matter be heard and determined by this Court.
Background
The land, described as lot 63 on Registered Plan 225821 and lot 162 on Registered Plan 40641, is located at 225 and 229 Hedges Avenue, Mermaid Beach respectively. The land at 225 Hedges Avenue has had a residence constructed on it since at least 1986. Since 1986, it had been the principal place of residence of Mr Jackman and since 1998 the principal place of residence of both appellants. The adjoining land at 229 Hedges Avenue was acquired by the appellants at or about July 2006 and, effective from 1 May 2007, both lots have been amalgamated and treated by the respondent as one parcel for land tax purposes.
The appellants own other property on the Gold Coast including at 19 Cronulla Avenue, Mermaid Beach, about 300 metres from the subject. This land is improved with a dwelling which was referred to in the conduct of these appeals as the “Blue House”. It was purchased by the appellants in June 2002 for the purposes of providing holiday accommodation, predominantly for family members but, as I understand it, also from time to time for friends of the family. This dwelling has never been rented and it is vacant for significant periods of time.
In late 2006 the appellants retained the services of architects to design major renovations for the house at Hedges Avenue, including its expansion onto the land at 229 Hedges Avenue. Mr Gotterson QC, counsel for the appellants, was concerned to point out that the works should be properly characterised as house refurbishments or renovations and not as the construction of a new house. I accept that characterisation.
On 7 May 2007 the appellants entered into a construction management contract with Geronimo Constructions Pty Ltd. Under the contract, the practical completion date for the works was 17 December 2007. However, the works were not in fact completed until about early November 2008. It is not necessary to go into the reasons for the delay in detail other than to say that they were beyond the control of the appellants and there was no suggestion that they were otherwise at fault or responsible for the delays. There is also no dispute that the appellants took up residence in the renovated dwelling almost immediately after the works were completed.
For a short period of time the appellants and their teenage son continued to reside in the house while the renovation works took place. However, it soon became apparent that this was both uncomfortable and impractical and, by July 2007 the appellants were sharing their living arrangements between the house at Hedges Avenue and the so called Blue House.
Between May and July 2007 the appellants had progressively been moving personal items, including books, ornaments, crockery, cutlery, linen, clothing and some items of furniture and storing them at the Blue House. As I understand the evidence, by no later than mid July early August 2007 the appellants were spending more time at this house than they were at Hedges Avenue. Also, by July/August 2007 the appellants were eating a significant proportion of their meals at venues other than Hedges Avenue or the Blue House. By September 2007 the appellants were essentially residing at the Blue House.
Some time between August and September 2007 the appellants decided that the Blue House was not suitable accommodation. In the appellants’ outline of argument the reasons for this are summarised as follows[1]:
“30. The Blue House lacks many of the domestic facilities that (the appellants) were used to, the Blue House being furnished as a holiday beach house and in a number of respects was uncomfortable due the house being used as storage for items from the Hedges Avenue residence. …”
Because of their business and other commitments (which were extensive) the appellants also decided that they needed a “base” with home office facilities. The Blue House was not capable of providing those facilities.
[1] See also the Respondent’s outline of argument at paragraph 19.
On 25 September 2007 the appellants went on an overseas vacation. By this time they had decided that they would rent a unit in an apartment building known as “La Sabia” which is also located on the Gold Coast. On 23 October 2007, the appellants returned from vacation and entered into a tenancy agreement which commenced on 31 October 2007 and was to expire on 30 April 2008. The appellants resided in the unit at La Sabia from the time they returned from overseas to the time they moved back into their home at Hedges Avenue. Notwithstanding that the term of the tenancy prescribed under the tenancy agreement expired on 30 April 2008, as has already been mentioned, the appellants remained in occupation until after the works were completed in November 2008.
Initially the Commissioner intended to deny the appellants the benefit of the principal place of residence exemption for both the 2007 and 2008 financial years. However, on 16 April 2009 the Hedges Avenue property was accepted by the Commissioner to be the appellant’s principal place of residence up until midnight 30 June 2007. The Commissioner did not allow the deduction for the 2008/2009 financial year for the following reasons:
“Given the above statements made by your client in her statutory declaration, it is clear that s.3E(1)(a) of the Land Tax Act would not be applicable in her circumstances for the 2008-2009 financial year because your client did not use the property continuously for a 6 month period prior to 30 June 2008. Therefore, the Commissioner would be need to be satisfied (sic) under s.3E(1)(b) in order for the property to be your client’s PPR for the 2008-2009 financial year.
Despite having given consideration to the objection submissions you have made on your client’s behalf and also the contents of the statutory declaration furnished by your client, I am unable to agree with your submission that the property should be considered your client’s PPR pursuant to s.3E(1)(b). According to your client’s statutory declaration, from July 2007 she was sleeping at the Blue House ‘more than occasionally’ and by 25 September 2007 she had ceased sleeping at the property. From the time that your client returned from holidays on 23 October 2007, she took up residence at La Sabia, where she continued to reside until November 2008. It is for this reason that the Commissioner is not satisfied that your client used the property as her principal place of residence for the 2008-2009 financial year. I accept that the building works of the property took longer than anticipated and thwarted your client’s plan of recommencing occupation, however, this is not a matter which is, in this instance, relevant in determining if the property was your client’s PPR for the 2008-2009 financial year.”[2]
[2] Exhibit 1 at page 7, Decision on Objection, dated 16 April 2009.
Some Relevant Statutory Provisions
The appeal to this Court is by way of rehearing[3] and the appellants bear the burden of proof. In deciding this appeal the Land Court has the same powers as the Commissioner and may confirm, set aside or substitute another decision for the decision under appeal[4].
[3] s.27 Land Tax Act 1915 and s.429 Land Act 1994.
[4] s.27(3) Land Tax Act1915 and s.429 Land Act1994.
Pursuant to s.11(1) of the Land Tax Act 1915 (LTA), land tax shall be payable by every owner of land which is not exempt from taxation under the Act. Relevant to this appeal s.11(6)(A) of the LTA provides:
“In addition to any deduction allowable under subsection (3), if land comprising 1 parcel is owned by an individual otherwise than in the capacity of a trustee and is used as the individual’s principal place of residence but is not exempt under the provisions of section 13(1)(h), in calculating the taxable value of all land owned by the individual the allowable PPR deduction must be deducted.”
Section 13(1)(h) of the Act is not relevant in the circumstances of these appeals.
The phrase or term “principal place of residence” is not defined in the LTA or, as far am I aware, in any other Queensland statute. However, notwithstanding that the LTA does not provide a specific definition it does, by virtue of the operation of s.3E, give some guidance by identifying or stipulating that land is not used as a person’s principal place of residence unless either one of the two limbs of s.3E(1) are satisfied. Section 3E(1) relevantly provides:
“When land is a principal place of residence
(1) In respect of any year in respect of which land tax is leviable or payable, land is not used as the principal place of residence of a person unless—
(a) that land and no other land has, for the period of 6 months immediately preceding the time when the ownership of land for the purposes of this Act is determined, been continuously used for residential purposes by the person (whether alone or with other persons); or
(b) in any other case—the commissioner is satisfied the land is used as the principal place of residence of the person (whether alone or with other persons), …”
Issues in the Appeal – s. 3E(1)(b) of LTA
Mr Gotterson conceded that in the circumstances of these appeals, the appellants can only rely on s.3E(1)(b) of the LTA.
The first thing to note about s.3E(1)(b) is that it is concerned with the use of the land as the principal place of residence. While the definition of “residential area” is clear in s.2 of the LTA[5], the meaning and effect of the words “use” and “principal place of residence” must be considered in the context of the facts and circumstances of each case. The second thing to note is that s.3E is beneficial or ameliorative in nature providing an exemption from taxation in certain circumstances. Consistent established authority states such sections ought be construed so as to give the fullest relief that the language fairly and reasonably allows[6].
[5] Residential area means a building, part of a building, or another place of accommodation, that is used, or, if not being used, is available for use, for residential purposes.
Examples-
A house, home unit, flat or granny flat, manufactured home within the meaning of section 13, or an outbuilding associated with a house.
[6] Minister v NSW Aboriginal Council (2009) 237 CLR 285 at 288-289 per Kirby J; Bull & Ors v Attorney General (NSW) (1913) 17 CLR 370 at 384 per Isaacs J; Zangzinchai v Milanta (1994) 125 ALR 265 at 272.
In Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation,[7] His Honour Williams J said:
“The place of residence of an individual is determined, not by the situation of some business or property which he is carrying on or owns, but by reference to where he eats and sleeps and has his settled or usual abode. If he maintains a home or homes he resides in the locality or localities where it or they are situate, but he may also reside where he habitually lives even if this is in hotels or on a yacht or some other place of abode.”
A person’s place of residence is where a person usually or habitually lives particularised as the place where the person usually eats and sleeps in the ordinary course of his/her life.[8]
[7] (1941) 64 CLR 241 at p.249: cited with approval by the Land Court in Rosara Pty Ltd v The Commissioner of Land Tax 64 QLCR 56 at 62 and Chu v Commissioner of Land Tax [2004] QLC 0035.
[8] See also Commissioner of Taxation v Miller 73 CLR 93 at 99-100 per Latham CJ; Rosara Pty Ltd at pp 61-62 per Trickett P.
The LTA however requires that the subject property be the taxpayer’s “principal” place of residence. Whether a residence satisfies that description depends whether, on the evidence before the court, it could be reasonably said that it, among other residences of the taxpayer, ranks first in order of importance.[9] How a person divides his time between various residences will be an important consideration but not necessarily determinative.[10]
[9] Rosara Pty Ltd at 63: cited with approval in Chu at para 19.
[10] AAT case 8769 (11 June 1993) 93 ATC 320 at para [9].
When read in context, the natural and ordinary meaning of the word “used” involves the land being put into service for or the purpose of providing the principal place of residence of the taxpayer. In Commissioner of Land Tax v Christie & Ors[11] the Court of Appeal of New South Wales was relevantly concerned with the construction of the Land Tax Management Act 1956 (NSW). Section 9(3)(e) of that Act provided for a tax deduction in circumstances:
“Where as at midnight on the 31st day of October, 1971 or any succeeding year, land owned by a person is used and occupied by that person solely as the site of a single dwelling house as defined in … .”
[11] [1973] 2 NSW LR 526.
In considering the words I have emphasised, Bowen JA[12] relevantly said:
“ ‘Use’ has regard to the purpose to which is land is put. Under s.9(3)(e) it must be shown to be devoted to the purpose of constituting the site of a dwelling house. Provided there is a unity in the land in question in a physical sense and a unity in what is done in devoting it to the purpose of providing or constituting the site, and provided there is a sufficiently proximate and not too remote connection between the dwelling house and its requirements or the requirements of its users or occupants on the one hand and the whole of the land in question on the other hand, then this element will be sufficiently established to demonstrate ‘use’ as the site of a dwelling house.
‘Occupation’ is not synonymous with legal possession. It includes possession, but it also includes something more; … . It involves an element of control, of preventing or being in a position to prevent the intrusion of strangers … . It is for this reason that physical presence on the land and fencing are evidence of occupation. But continuous physical presence or physical presence on every part of the land does not have to be shown in order to establish occupation. …”
[12] At 533-534.
Section 3E(1)(B) of course requires the land to be used, not for the purpose of a dwelling house but as a principal place of residence. In Flaracos v Chief Commissioner of State Revenue[13] Gzell J was concerned with, among other things, s.10(1)(r) of the Land Tax Management Act 1956 (NSW) which relevantly provided:
“Except where otherwise expressly provided in this Act the following lands shall, subject to … (be) exempt from taxation under this Act: …
(r) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1998 or any succeeding year, land that has a land value in respect of the year less than the premium tax threshold and that is used and occupied as the principal place of residence of the owner of the land. …”
Section 3(3) of that Act also provided that:
“For the purposes of this Act, in respect of any year in respect of which taxation is leviable or payable, land or a flat is not used or occupied as a principal place of residence of a person unless:
(a) that land or flat and no other land or flat has, since before the 1st day of July that last proceeded the commencement of that year, being continuously used and occupied by that person for residential purposes and for no other purposes; or
(b) in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person’s principal place of residence.”
In considering the application of these provisions His Honour, as I respectfully do, adopted the analysis of the word “use” applied by Bowen JA. In order for it to be said that land was being used as an individual’s principal place of residence it must be devoted to the purpose of providing the individual’s principal place of residence.
[13] [2003] NSWSC 68.
The similarities between the sections of the New South Wales legislation set out above and s.3E of the LTA are obvious. There are also obvious differences. Section 3E does not require the land to be “occupied”.
The fact that s.3E does not also require occupation is of some significance. The focus of attention of s.3E(1)(b) is on the actual use to which the land was being put at the relevant time and not so much on whether or not the dwelling on the land was in fact physically occupied during that period. Of course though, the concepts of use and occupation must to an extent be necessarily linked and overlap when considering whether the land was being used as a principal place of residence. Regardless of the intentions of the owner of land, a dwelling situated thereon could not be a principal place of residence in circumstances where it had never been occupied in the sense of providing the location where the person usually or ordinarily ate and slept or been voluntarily unoccupied by the owner for an extended period.[14]
[14] Re Newman v Commissioner of A.C.T. Revenue 26 ATR 1379 where the owner had not occupied the dwelling for 5½ years.
Central to the case for the respondent is that a sufficient degree of actual occupation or residency of the dwelling on the land is required. That is, the land could not be said to be used for the purpose of providing a principal place of residence in circumstances where the appellants, for an extended period of time, resided elsewhere.
The evidence is that during the relevant tax year, the appellants really only ate and slept regularly at Hedges Avenue for a period of probably less than 2 months between May and July 2007. About three months were spent at the Blue House (between July and late September), about 1 month was spent overseas and for the balance of the financial year the appellants resided at La Sabia.
However, it is also relevant that during that time it is tolerably clear that the appellants always considered Hedges Avenue to be the site of their home or, to put it another way, to be the location of their usual or ordinary place of residence. Consistent with this, at no time did the appellants consider any of the other places where they resided from time to time as being anything other than providing temporary accommodation until the work at Hedges Avenue was complete. Also, apart from the contractual obligations under the building contract concerning possession of the site[15], at no time did the appellants part with possession and control of the land and the house located thereon. The Hedges Avenue address also remained the appellants’ mailing address and address for the electoral roll. As La Sabia was furnished the appellants did not move any of their furniture to the unit and there was no attempt made to move, in any material way, personal items such as books, ornaments, linen etc to the unit.
[15] Pursuant to clause 10.1 of the contract the appellants gave to the construction manager appointed under the contract possession of the site to allow him to execute the works in accordance with the contract. (Ex 2, Anx C)
At the relevant time there were two Telstra landlines services connected to Hedges Avenue. These services were redirected from Hedges Avenue to the Blue House at or about 5 June 2007. These services were never redirected to La Sabia as, during their stay there, the appellants relied on their mobile telephones to conduct their affairs. The connection of water and electricity services to Hedges Avenue were also maintained. However, in this regard Mr Conrick correctly pointed out that the retention of these services was necessary to facilitate the construction works being carried out on the site.
On the evidence before me, the only uses to which it could be said the land was being put at the relevant times were either as the appellants’ principal place of residence or as a building site of some sort. To classify the use of the land as a building site would be to ignore or give insufficient weight to the material facts and circumstances referred to above. This is not a case involving the construction of a new dwelling on otherwise vacant land. It involves the extension and/or renovation of a house which, for a significant number of years, had been the appellants’ principal place of residence. As soon as was practicable after the works were completed, the appellants again took up residency therein. The only reason for the break in continual residency for such a lengthy period of time was the unforeseeable and unfortunate delay in the completion of the building works. But for that delay the appellants probably would have been back in occupation some 6 months or more before midnight 30 June 2008. It is relevant that the appellants were obliged, as opposed to freely chose, to spend time at other residences for material parts of the relevant time period.[16]
[16] AAT Decision No 8769, 11 June 1993 at [11].
In the circumstances of this case, I have come to the conclusion that the commissioner should have been satisfied that, for the relevant period, the land was being used for the purpose of the appellants’ principal place of residence.
While this is a difficult case, as was acknowledged by counsel for both parties no sufficiently comparable precedent was able to be found, I have reached the conclusion that at the relevant time the land was being used as the appellants’ principal place of residence. In reaching this conclusion, I am comforted by the following. First, to construe s.3E(1)(b) in the way contended for by the respondent could lead to a consequence that it is unlikely that Parliament would have intended. By way of example, owners, through no fault of their own, might be forced to leave their residence because it was rendered uninhabitable as a result of natural disaster or accident. It would be surprising if Parliament intended owners of land in such circumstances to lose otherwise legitimate tax exemptions in circumstances where the repairs were, again through no fault of theirs, materially delayed. Second, to accept the respondent’s position that La Sabia was the appellants’ principal place of residence does not sit comfortably with the facts. Residency of this unit was not ordinary or usual but forced by circumstances beyond the appellants’ control.
While the facts of this case can be readily distinguished from those in Re Newman[17] both in respect of time and the circumstances of the appellants absence, it is a case which, as I have already said, was a difficult one to decide and emphasises how cases such as these will turn very much on their own particular facts and circumstances.
[17] Referred to in paragraph [26] above.
Orders:
For the reasons set out above I order that:
1.The appeals are allowed.
2.The disallowance decisions of the respondent are set aside.
3.The subject land tax assessments are to be remitted back to the respondent to assess the land tax liability of the appellants in accordance with the decision of this Court.
4.The parties are to be heard on the question of costs.
RS JONES
MEMBER OF THE LAND COURT
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