Kinging v Chief Commisioner of State Revenue

[2005] NSWADT 239

CITATION:	Kinging and anor v Chief Commisioner of State Revenue [2005] NSWADT 239
DIVISION:	Revenue Division
PARTIES:	APPLICANT Lionel William Glen Kinging Susan Elizabeth Kinging RESPONDENT Chief Commisioner of State Revenue
FILE NUMBER:	056030
HEARING DATES:	05/09/2005
SUBMISSIONS CLOSED:	10/18/2005
DATE OF DECISION:	10/21/2005
BEFORE:	Block J - ADCJ (Judicial Member)
APPLICATION:	Land tax exemption - principal place of residence
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Interpretation Act 1987 Land Tax Management Act 1956
CASES CITED:	CIC Insurance Ltd v. Bankstown Football Club Ltd (1997) 141 ALR 618 at 634-5 CCSR v Incise Technologies [2004] NSWADTAP 19 Ryan v Chief Commissioner of Land Tax [1982] 1 NSWLR 305 Trust Co of Australia v Chief Commissioner [2002] NSWADT 21
REPRESENTATION:	APPLICANT R Hamilton, barrister RESPONDENT B Baker, solicitor
ORDERS:	The decision under review is affirmed

Part A. Introduction and Background

1 The decision under review is the disallowance by notice dated 20 February 2005 of an objection dated 10 December 2004 against assessments of land tax in respect of the property situated at 49 Lincoln Avenue, Collaroy (“the Property”) for the 2000 to 2004 (both inclusive) land tax years. The term “relevant years” refers to all five land tax years; each individual land tax years is referred to by reference to its own specific year. The Land Tax Management Act 1956 (“the Act”) was amended with effect from the commencement of the 2004 year; in particular and in relation to the principal place of residence exemption, Schedule 1A now contains many of the provisions referable to that exemption.

2 The Applicants conceded that the Act as it applied when Ryan v Chief Commissioner of Land Tax [1982] 1 NSWLR 305 (“Ryan” or “Ryan’s case”) was decided, and as applicable during all of the relevant years (other than the 2004 year) did not essentially differ. Accordingly the 2004 year will be dealt with, in part F, and to the extent relevant, separately; the legislative amendments referred to in clause 1 do not relate to the remaining relevant years.

3 The Tribunal accepted the tender of the documents furnished by the Respondent pursuant to section 58 of the Administrative Decisions Tribunal Act 1997. In addition the Tribunal admitted as exhibit A1 an affidavit by Mr Kinging date-stamped in the Tribunal on 22 July 2005. Mr Kinging gave oral evidence and was (briefly) cross-examined. During the course of his evidence, Mr Kinging showed the Tribunal photographs of the improvements on the Property, and also 51 Lincoln Ave, Collaroy, which adjoins the Property (and which is referred to in these reasons as “the Adjoining Property”). The photographs were not tendered because Mr Kinging wished to retain them. The photographs indicate that the improvements in question consist of a large house (on the Adjoining Property) and a tennis court, swimming pool, cabana, and walkway on the Property. The cabana is, according to the evidence, a small building which contains a sauna, a storage area, and also an area in which persons can sit sheltered from the sun. There was evidence before me that the cabana is a building in the sense that it has a roof and in contrast with the swimming pool and tennis court which do not; that evidence is not considered to be material to the findings of the Tribunal.

4 The Applicants’ Supplementary Submissions were furnished at or about the date of the hearing; Mr. Hamilton accepted that the Respondent was entitled to an opportunity to reply in detail and after the hearing had been concluded; it was in these circumstances that after the hearing, a time-table for further submissions was agreed and directed.

5 In October 1973 Mr Kinging purchased the Adjoining Property and it was registered in his name alone. Mr Kinging said that he thought that this occurred because his wife was away at the time. The house proper was constructed on the Adjoining Property.

6 The Property was purchased in 1977 by the Applicants; it was registered in the names of both of them.

7 When plans for the improvement of the Property were submitted to the Council of the Shire of Warringa, the Applicants were advised that the plans would be passed only if the Property and the Adjoining Property were consolidated or alternatively if a “restriction as to user deed (“the restriction deed”), in respect of the Property was executed and registered. The latter course was chosen because it was less expensive. The restriction deed is Annexure B to exhibit A1; it provided in particular as follows:

No buildings shall be constructed on the subject land other than a tennis court, swimming pool and walkway and such improvements incidental thereto as are approved by the Council of the Shire of Warringa.

No part of the subject land shall be occupied or used otherwise that by the occupiers for the time being of Lot 41 in Deposited Plan 242932.

(Lot 41 in Deposited Plan 242932 is the Adjoining Property).

8 Following the execution and registration of the restriction deed, the Property was improved by the construction of the tennis court, swimming pool, cabana and the walkway.

9 Clauses 10 to 12 of exhibit A1 read as follows:

10. The tennis court, swimming pool, cabana, sauna and a walkway linking the two properties was subsequently constructed. The electricity for the structures erected on 49 Lincoln Avenue Collaroy, was taken from the meter attached to the home on 51 Lincoln Avenue, Collaroy. There was no dividing fence between the adjoining blocks.

11. The two lots have been separately value by the Valuer General and been separately rated by the Local Council and Sydney Water.

12. My family and I then continued to use and treat the two properties as effectively being one property until my wife and I moved out in approximately February 2004.

10 There is no dispute as to the fact that during the relevant years the Property and the Adjoining Property were together used by the Applicants and their family as if they constituted one property.

Part B. Ryan’s case; the facts and the judgment

11 At the very heart of this matter is the judgment of Hunt J. in Ryan’s case. If Ryan is binding on me (because it is not distinguishable), then the Applicants must fail (leaving aside for the moment separate contentions by them as to the 2004 year).

12 The facts in Ryan are analogous to the facts in this case. Hunt J. commenced by reciting the facts in Ryan at page 306 as follows:

In 1964, Mr and Mrs Ryan jointly purchased a block of land known as No 1 Baden Road, Kurraba Point. At the same time, and in his own name only, Mr Ryan purchased the contiguous block of land known as No 3 Baden Road, although completion of this purchase was delayed until 1966. The vendor in each case was the same, and one purchase price was paid for the two blocks. In 1965, a large house was constructed upon the land at No 1 Baden Road which, together with a garage, poolhouse, swimming pool and associated facilities, virtually fills the whole of that land. There is no physical separation between the two blocks of land. Number 3 Baden Road is used and occupied by Mr and Mrs Ryan as a garden entertainment and recreation area; gardens have been laid and a barbecue built. The only other building constructed upon the land at No 3 Baden Road consists of stone steps which commence on the land at No 1 Baden Road next to the house and cross the boundary into No 3 Baden Road. Mr Ryan says, and I accept, that both blocks of land have been used and occupied together at all times as the one residential area.

13 Hunt J then went on at pages 307 and 308 to define the issues in the following terms:

The issue between the parties is this. If the two blocks used as the one residential area are identified as together comprising one “parcel of residential land”, the Commissioner concedes that Mr Ryan is entitled to his exemption pursuant to s 10(1)(r)(ii). If, however, each block is identified individually as a “parcel of residential land”, Mr Ryan concedes that, in relation to the land known as No 3 Baden Road, he does not on that block use and occupy a building designed and constructed for residential purposes, and thus is not entitled to an exemption in relation to that block: s 10(1D). The matter which I have to resolve, therefore, is the meaning of the word “parcel” in the context of the phrase “parcel of residential land”. Mr Ryan submits that the ordinary English usage of the word, as described for example in the new Macquarie Dictionary, gives “parcel” the meaning of a separable, separate or distinct part or portion or section of land, and that in such sense this single residential area consisting of both blocks is properly termed a parcel of residential land. The Commissioner, on the other hand, argues that contiguous blocks of land can properly be termed a parcel of land only where they are undivided not only by physical separation but also in use, occupation and title. At the relevant time, No 1 Baden Road was in the name of Mr and Mrs Ryan and No 3 Baden Road was in the name of Mr Ryan only; therefore, the Commissioner says, the single residential area which both blocks comprise cannot properly be termed a parcel of land.

14 Hunt J. then proceeded to consider (in some detail) the meaning to be attributed to the word “parcel” in the following terms:

The word “parcel” is not defined in the Land Tax Management Act. It is used in s 9(2), in the phrase “each parcel of the land”, which phrase is used in contradistinction to the phrase “all the land”. It is also used in s 28 (in the phrase “separate parcels of land”) which deals with different blocks of land owned individually by different members of a partnership. Neither immediate context in which the word “parcel” is used is by itself of any significant assistance in the resolution of this particular dispute as to its interpretation, although its meaning in s 9 (2) is, as will shortly be seen, of substantial importance when seen in its wider context. Otherwise, the word “parcel” is used in this Act only in relation to those categories of land exempted from taxation because the land is used and occupied as the owner's principal place of residence (ss 10(1)(r)(ii) and 10(1)(u)), together with the definition section relevant to those two categories (s 10(1D)) and the pro rata taxing provisions relating thereto: s 10(4), s 10(5). The basic argument of the Commissioner is that both in the ordinary usage of the word in the general law and in the statutory context in which the Land Tax Management Act operates, the word “parcel” has been interpreted in the sense for which he contends. I have already referred to the incorporation within the valuation provisions of that Act of the valuations prepared pursuant to the Valuation of Land Act and the Local Government Act. The word “parcel” is used in both these other statutes in relation to the bases upon which such valuations are prepared, although it is not defined in either statute: see Valuation of Land Act, ss 19, 26; Local Government Act, ss 134, 136, 139. The Local Government Act, s 134(3), provides that any parcel of land separately valued under the Valuation of Land Act is to constitute a separate parcel for the purposes of the Local Government Act as well. The word “parcel” has been interpreted in this statutory context in the sense for which the Commissioner now contends. The predecessor to the Local Government Act, s 139(3) — the Local Government Act, 1906, s 136 — was so interpreted in accordance with the ordinary usage of the word in the general law by the Full Court in Patullo v Municipality of Condobolin (1918) 18 SR (NSW) 297, at p 301; 35 WN 100, at p 101, as was s 139(3) of the current Act in Halloran & Co v Municipality of Queanbeyan (1926) 26 SR (NSW) 50, at pp 52, 53; 43 WN 33, at p 34; see also Taree Municipal Council v Clerke (1936) 53 WN (NSW) 189, at p 190; 37 LGR 37, at p 38, per Owen AJ. In McMillan v Commissioner of Land Tax [1972] 1 NSWLR 545, Isaacs J held (at p 554) that the “close connection, inter-connection and interrelationship” between these particular provisions of the three statutes make these decisions in relation to the Local Government Act “highly persuasive” in the interpretation of the Land Tax Management Act. I agree. In McMillan's case, Isaacs J, was concerned with the construction of the Land Tax Management Act, s 9(3)(e) — since replaced by s 10(1)(r)(ii) — which allowed as a deduction: “land owned by a person ¼ used and occupied by that person solely as the site of a single dwelling-house. ¼” The word “land” was said by the Commissioner to be used in the same sense as the phrase “parcel of the land” to be found in s 9(2). His Honour (at p 555) adopted the earlier decisions in construing “parcel of the land” in s 9(2), and thus “land” in s 9(3)(e), in the way for which the Commissioner now contends. 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 to some categories of land which are exempted, including the category with which I am presently concerned. (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. This limitation was imposed following the decision of Else-Mitchell J in Richmond v Commissioner of Land Tax (1973) 3 ATR 664, from which an appeal by the Commissioner was pending at the time when the amending Act was passed. (The appeal was subsequently dismissed: Commissioner of Land Tax v Christie [1973] 2 NSWLR 526.) It was no doubt imposed at the instance of the Commissioner to overcome what he considered to be the undesirable effect of that decision upon the revenue: D R Fraser and Co Ltd v Minister of National Revenue [1949] AC 24, at pp 33, 34. (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's case, that the word “land” in s 9(3)(e) was used in the same sense as the phrase “parcel of the land” to be found in s 9(2). A further amendment was made in 1975 which restricted the exemption granted by s 10(1) (r) (ii) to land used as the owner's principal place of residence. This amendment followed the decision of Waddell J in Buckley v Commissioner of Land Tax [1975] 1 NSWLR 189, and was no doubt intended to overcome the effect of that decision. 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). In the absence of any context indicating a contrary intention, it is a sound rule of statutory construction to presume that the legislature intended to attach the same meaning to the same words both in different parts of the same statute and in different statutes in pair materia in statutes dealing with the same general subject matter: Court auld v Leigh (1869) LR 4 Exch 126, at p 130; Lennon v Gibson and Hows Ltd [1919] AC 709, at pp 711, 712; Bemean v ARTS Ltd [1949] 1 KB 550, at p 567. There does not seem to me to be any apparent context surrounding s 10(1) (r) (ii) which gives such an indication to the contrary.

15 Hunt J. concluded by determining the issue (page 310) in the following terms:

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 – (Emphasis added by the Tribunal)

16 In this case, as in Ryan, the two properties are separated as to title. However Mr Hamilton sought to distinguish Ryan on two bases. In the first place he contended that since Ryan was decided there been a significant shift in the manner in which statutes are interpreted and that Hunt J did not, as would be required today, have regard, in interpreting the phrase “parcel of residential land”, to the purpose or object of the Act. This contention is referred to as “the first basis”. In the second place Mr. Hamilton contended that Ryan should be distinguished on factual grounds and in particular:

(a) the timing of the purchase;

(b) the fact that in this case there were buildings on both properties whereas in Ryan there were buildings on both; and

(c) the fact that in this case there is a restriction as to user in respect of the Property.

The Applicants’ factual contentions in this context are referred to as “the second basis”.

17 Mr Hamilton’s contentions as to the first basis upon which Ryan should, in his view be distinguished, are encapsulated in clauses 8 to 12 of the Applicants’ Supplementary Submissions, as follows:

8. In 1987, s.33 of the Interpretation Act (NSW) came into effect and provided:

Section 33

In the interpretation of a provision of an Act or statutory rule, a construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purpose or object is expressly stated in the Act or statutory rule or, in the case of a statutory rule, in the Act under which the rule was made) shall be preferred to a construction that would not promote that purpose or object.

9. The High Court, in cases such as CIC Insurance Ltd v. Bankstown Football Club Ltd (1997) 141 ALR 618 at 634-5 Brennan CJ, Dawson, Toohey and Gummow JJ said:

The modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as reference to reports of law reform bodies, one may discern the statute was intended to remedy.
10. This approach to interpretation has been reaffirmed in numerous subsequent cases. Pierce & Geddes ‘Statutory Interpretation in Australia’ 5th Ed. say at paragraph 2.10 (pg. 27):

11. It clear, then, that the task of the Court under s.15AA [the Commonwealth provision] and its [state] equivalents is to seek to discover the underlying purpose or object of the provision in question and, if possible, to adopt the interpretation of that provision that furthers the purpose or object.

12. It is submitted that Hunt J in Ryan’s case, although he did consider context in his interpretation of “a parcel of residential land” by reference to related provisions of other statutes, did not give consideration to the broader context of the purpose or object underlying the exemption from land tax provided for the principal place of residence.

18 The Respondent dealt with the Applicants’ contentions as to the first basis in comprehensive fashion in his Supplementary Submissions, under the heading “First Argument: Principles of Statutory Construction”,(clauses 11 to 20) as follows:

11. The applicants submit that there has been a “significant shift” in the approach to the interpretation of statutes since Ryan was decided. The applicants submit that the effect of s. 33 of the Interpretation Act 1987 is that the purpose, object or “context” of the statute must be considered in the first instance. The applicants further submit that in Ryan , Hunt J did not consider the purpose or object of the LTMA when interpreting the phrase “parcel of residential land”.

12. With respect, it is submitted that the applicants’ submissions concerning statutory construction are misconceived. The applicants overemphasise the change in the approach to statutory construction that was occasioned by the enactment of the Interpretation Act. It is true that s. 33 of the Interpretation Act requires the Court to consider the “purpose or object” underlying an Act. The High Court has said that this “modern approach” to statutory interpretation:

“(a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as reference to law reform bodies, one may discern the statute was intended to remedy.” ( CIC Insurance Ltd v. Bankstown Football Club Ltd (1987) 187 CLR 384 at 408, per Brennan CJ, Dawson, Toohey and Gummow JJ)
13. In cases where there is no ambiguity in the statute, the “modern approach” will be different to the pre- Interpretation Act approach, in that the Court will consider purpose and object from the outset. But when ambiguity is present – such as was the case in Ryan - courts have always adopted the construction that is consistent with the purpose of the statute. Indeed, as will be discussed further below, Hunt J did consider the purpose and object of the LTMA when considering the meaning of the words “parcel of residential land”.

14. The applicants submit that the principal place of residence exemption was intended by the legislature to be available in factual circumstances where it is clear that an individual or individuals are using and occupying the land for residential purposes. With respect, such an “intention” cannot be attributed to Parliament. There is no secondary material, such as Second Reading Speeches or Law Reform Commission Reports, which assists in the construction of the phrase “parcel of residential land” as it appears in the principal place of residence exemption.

15. In this connection, the task of ascertaining the “purpose or object” of the statute is one that must be undertaken with caution. As Griffith CJ commented in Richardson v Austin (1911) 12 CLR 463 at 470:

“There is nothing more dangerous and fallacious in interpreting a statute than first of all to assume that the legislature had a particular intention, and then, having made up one’s own mind what that intention was, to conclude that that intention must necessarily be expressed in the statute and proceed to find it.”
16. Similarly as Gummow J noted in Wik Peoplesv. State of Queensland (1996) 187 CLR 1 at 168, it is important to bear in mind that:
“… statute law may be the result of a compromise between contending factions and interest groups and of accommodations between and within political organisations which are not made public and cannot readily be made apparent to a court.”
See also Metal Manufacturers Pty Ltd v. Lewis (1988) 13 NSWLR 315 at 326 per Mahoney JA. This is particularly so in the case of a statute such as the LTMA , which was ultimately enacted for the purpose of raising revenue, but which contains numerous technical exemptions.

17. In the absence of any relevant Law Reform Commission Reports, or Second Reading Speeches considering the issue, the only accurate guide to ascertaining Parliament’s intention is that described by the High Court in CIC Insurance, namely, the “context” of the LTMA, as seen against “the existing state of the law”. The decision of the Supreme Court in Ryan is critical in this regard.

18. The existing provisions of the LTMA concerning the principal place of residence exemption centre on the phrase “parcel of residential land”. In Ryan, the Supreme Court concluded that two lots could only constitute a “parcel of residential land” if the two lots were “undivided in use, occupation and title.” (at 310) Hunt J reached this conclusion after considering the interpretation of the phrase “parcel of residential land” in earlier sections of the LTMA (McMillan v. Chief Commissioner of Land Tax [1972] 1 NSWLR 545), and in other statutory contexts (Patullo v. Municipality of Condobolin (1918) 18 SR (NSW) 297; Halloran & Co v. Municipality of Queanbeyan (1926) 26 SR (NSW) 50; and Taree Municipal Council v. Clerke (1936) 53 WN (NSW) 189). Patullo, Halloran and Taree dealt with the concept of a parcel of land – two step process – requirement is acknowledged – ss. 26 and 27.

19. In this connection, the observation of Hunt J in Ryan (at 309) is particularly apposite:

“In the absence of any context indicating a contrary intention, it is a sound rule of statutory construction to presume that the legislature intended to attach the same meaning to the same words both in different parts of the same statute and in different statutes in pari materia or in statutes dealing with the same subject matter.”
20. Hunt J’s observation has even more force in the circumstances of the present case, where Parliament has continued to use the phrase “parcel of residential land” after the Supreme Court has declared that those words require continuity of title. The applicants’ submissions (particularly those at para 16 of the Applicants’ Supplementary Submissions) amount to an attack on the correctness of the decision of Ryan . Such an attack cannot be made in this Tribunal, which is bound by Ryan. (The Tribunal wonders whether the words “continuity of title” should not have read “community of title”)

19 The thrust of the Applicants’ contentions as to the first basis is that, consistently with the modern approach, the purpose of the relevant statute must be considered from the outset and that Hunt J in Ryan did not do so. Implicit in this argument must be a contention that if Hunt J had adopted the modern approach he would have reached a different conclusion. I have quoted extensively from the judgment in Ryan specifically in order to demonstrate that Hunt J did in fact have in mind the purpose of the Act and in particular the purpose served by the relevant exemption; see in particular clause 14 above. The detailed reasoning of Hunt J in Ryan leads me to conclude that if he had been called upon to decide Ryan in 2005 rather than in 1982 his decision would not have been different. As the judgment in Ryan demonstrates Hunt J was called upon to consider the meaning of the words “parcel of residential land” in relation to the principal place of residence exemption. Put in succinct terms he concluded that, as a matter of statutory interpretation two adjoining properties cannot, although treated as one by their owner or owners, constitute a parcel unless they are undivided as to title. It is my view that His Honour was correct; that this is so is not altogether to the point simply because it is the judgment of a superior court of this State and as such binding on this Tribunal. The Respondent’s contentions in this regard as to the first basis are correct.

Part D. Ryan’s case; the alleged factual distinction; the second basis.

20 It was suggested, although not with much conviction, that there was some undisclosed (probably tax-based) motive in Ryan’s case for the holding of the two properties in different names. There is no such suggestion in the judgment and Hunt J accepted Mr. Ryan’s evidence that the two blocks of land were used and occupied as one residential area.

21 The fact that there is in respect of the Property a restriction as to user does not appear to the Tribunal to be relevant. There is no dispute as to the fact that the Property and the Adjoining Property were used and occupied as one. And Hunt J in Ryan accepted that this was so in relation to the two properties in that case. (Page 306). The ratio decidendi in Ryan as to the fact that two properties cannot constitute a parcel unless there is community of title is not in any way affected... If only for the sake of completeness I note that in further written submissions dated 18 October 2005, the Applicants contend that the restriction as to user should be “regarded as tantamount to a consolidation of the two blocks given that as a legal and practical matter they could be used occupied and dealt with together which it the equivalent of the “units of title” requirement which emerges from Ryan”. I do not accept that contention as sound. The Applicants chose the restriction method because it was more economical than consolidation; there is not suggestion that that choice was in any way unreasonable. There was in Ryan and in practical terms the “unity” to which the Applicants refer. Hunt J held that nevertheless Ryan failed because title was divided. Once it is concluded, (as is the case) that Ryan is binding on this Tribunal arguments as to “practicality” are not tenable.

22 The presence of buildings on the Property similarly cannot bear on the question of whether the Property and the Adjoining Property constitute one parcel of residential land.

23 The Tribunal finds that there is no factual distinction between this case and Ryan which is relevant for the purposes of this decision.

Part E. Ryan’s case: Conclusion

24 It follows that the Tribunal does not consider that Ryan is distinguishable. The decision in Ryan (as indicated previously) as the judgment of a superior court of this State is binding on this Tribunal. Accordingly the Tribunal finds against the Applicants in respect of the main issue in relation to all of the relevant years other than the 2004 year.

Part F. The 2004 year

25 With effect from the 2004 year, the provisions of the Act in respect of the principal place of residence exemption were amended; some of the provisions in respect of the exemption were set out in a new schedule 1A to-the Act. Mr Hamilton contended that clause 2(2)(b) of Schedule 1A amounted to the grant to the Respondent of a discretion (of wide import) and pursuant to which, so he contended, the Respondent could, and failing the Respondent this Tribunal standing in the shoes of the Respondent should, exercise the discretion in favour of the Applicants.

26 Clause 2(2)(b) of Schedule 1A to the Act cannot be considered in isolation. It is a part only of clause 2 of schedule 1A; that clause is set out in these reasons 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.

(3) If the owner of the land is entitled to the exemption conferred by this clause, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner’s entitlement to the exemption.

(4) The exemption conferred by this clause is referred to as the "principal place of residence exemption".

27 Clause 2(2) is cast in the same terms as section 3(3) of the Act, prior to the amendments which came into effect from the commencement of the 2004 year; section 3(3) of the Act previously provided as follows:

3) 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 the principal place of residence of a person unless:

(a) that land or flat and no other land or flat has, since before the first day of July that last preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for no other purpose, 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.

28 Just as it was necessary to read section 3(3)(b) in the context of section 3(3)(a) so it is necessary to read clause 2(2)(b) of Schedule 1A in the context of clause 2(2)(a); that this must be so arises from the opening words “in any other case” which appear at the commencement of section 3(3)(b) of the Act prior to its amendment and in clause 2(2)(b) of Schedule 1A to the Act in its current form

29 The import of clause 2(2)(a) is clear. In order to qualify for the principal place of residence exemption in relation to any given land tax a year, an owner must have owned the property and occupied it as his principal place of residence since the preceding 1 July. Clause 2.(2)(b) does no more than insert a relieving discretion to be applied by the Respondent in circumstances where the owner has not owned and occupied the relevant property since the preceding 1 July. Where a person acquires title and takes occupation, (for example only in the preceding August or preceding September), the Respondent might in certain circumstances be satisfied as to that owner’s intention to use that property as his principal place of residence and if so satisfied, will exercise that discretion in favour of the owner. The discretion in question is by no means a general discretion as contended by Mr Hamilton. It is a discretion which empowers the Respondent to treat a lesser period of residence as sufficient. As the Respondent contends, clause 2(2)(b) does not detract from the general requirements of clause 2 and especially clause 2(1). The discretion in clause 2(2)(b) is purely an ameliorating provision which can in certain circumstances provide relief from the harsh consequences of failure to comply with the timing requirements of clause 2(2)(a). There is therefore no basis upon which the 2004 year should be treated in any manner different from that applicable to the other relevant years, and in respect of the 2004 year also the Tribunal finds against the Applicants in relation to the main issue.

Part G. Interest

30 In this case the Respondent imposed interest at the market rate; the assessments do not include interest at the premium rate.

31 In CCSR v. Incise Technologies [2004] NSWADTAP 19, at para [60], the Appeal Panel of this Tribunal ruled:

“In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank’s Accepted Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation”

32 In Trust Co of Australia v. Chief Commissioner [2002] NSWADT 21 at para [25], Judicial Member Verick ruled:

“In cases where an amount of interest is imposed by the application of the market rate, only exceptional circumstances would justify any remission. The narrow category of circumstances would include cases where the ‘tax default’ is entirely due to a fault of the Chief Commissioner. Other circumstances would include situations completely out of the control of the taxpayer, such as postal strikes, serious illness of the taxpayer and natural disasters (bush fires, floods and earthquakes).

33 The position then is that in general terms market rate interest will be remitted only in very exceptional circumstances such as fault on the part of the Respondent. There is no suggestion of any such circumstances in this case.

34 Mr Hamilton contended that land tax is an area of which investors in real property are aware but that ordinary homeowners are not and that accordingly the Applicants deserve, because of their lack of knowledge in this area, a concession as regards interest. I do not think that there is merit in this contention; awareness (or the lack of awareness) of land tax is not so confined. In this case, as a matter of law land tax should have been paid in respect of the Property and it was not. In the course of his evidence Mr. Kinging said that he knew of other instances where land tax was not paid in respect of a tennis court area forming part of a residence. This may be so, but it is not to the point. In their submissions dated 18 October 2005 the Applicants contended (in clause 18) that they were not put upon their enquiry as to their land tax liability. This may well be so, and I note that in general terms this is not a case where there is a fault aspect in respect of the Applicants (and equally there is no fault aspect in respect of the Respondent), but again this is not to the point. As set out in previously in this clause land tax should have been paid but it was not. As to why it was not paid is not generally (in the absence of fault on the part of the Respondent) relevant in respect of market rate interest, in contradistinction with premium rate interest where different considerations apply. Market rate interest is, as was noted in Incise (also binding on the Tribunal) designed to compensate the Respondent for the fact that he did not receive the tax when it fell due. Having regard in particular to Incise (and its binding nature) there is no basis upon which the Tribunal can remit the market rate interest assessed..

35 Accordingly the decision under review must be affirmed