Kolln v Chief Commissioner of State Revenue
[2011] NSWADT 127
•31 May 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Kolln v Chief Commissioner of State Revenue [2011] NSWADT 127 Hearing dates: 16 May 2011 Decision date: 31 May 2011 Jurisdiction: Revenue Division Before: A Verick, Judicial Member Decision: The assessment for the land tax years 2005, 2006, 2007, 2008, and 2009 is affirmed
Catchwords: Land Tax Exemption - Principal Place Of Residence Legislation Cited: Land tax Management Act 1956
Taxation Administration Act 1996Cases Cited: Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8
Chief Commissioner of State Revenue v White and anor [2008] NSWADTAP 27
Wilks v Chief Commissioner of State Revenue [2002] NSWADT 248
Trust Co of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21Category: Principal judgment Parties: Ian Kolln (applicant)
Chief Commissioner of State Revenue (respondent)Representation: G Johnson SC (counsel for applicant)
J Mitchell (counsel for respondent)
Crown Solicitor (for respondent)
File Number(s): 106041
REASONS FOR DECISION
This is an application for review of an assessment for land tax years 2005, 2006, 2007, 2008, 2009, and 2010 land tax years in respect of land situated at 22 Greenpoint Road, Oyster Bay, New South Wales ("the Greenpoint Road property").
The issue is essentially whether the Greenpoint Road property was exempt from land tax in the land tax years under the "concession for unoccupied land intended to be owner's principal place of residence" pursuant to clause 6 of Schedule 1A to the Land Tax Management Act 1956 ("the LTM Act").
Factual Background
In addition to the documents made available by the respondent under s 58 of the Administrative Decisions Tribunal Act 1997 , a written statement was lodged by the applicant who gave evidence at the hearing. Both parties also made available written submissions.
The applicant and his wife, as tenants in common, acquired a lot which became 3 Shipwright Place, Oyster Bay, New South Wales ("the Shipwright Place property") in 1988. The applicant and his wife built a new house on the lot and have occupied it from July 1992 and in the land years under review. It was the place the applicant and his wife have lived and brought up their, now adult, children.
The applicant's mother died in 1993 and left to him the Greenpoint Road property. The title was transferred to him on 21 July 1994. This was a vacant lot. Sometime in 1995 he sought council approval to build a "new family home" on the Greenpoint Road property.
On 27 October 1995, the applicant obtained an owner builder permit and "brought in an excavator to level the house site" but the local council "issued a stop work order in December 1995" and prosecuted him for commencing work without their consent. The proceedings continued in the Land & Environment Court for about two years ending with "consent orders being made requiring remediation of the site". Remediation work was done in 1996-1997.
The local council also refused the applicant's building plan, which involved further proceedings in the Land and Environment Court. The Court gave approval on 12 July 1996 but with conditions the applicant was not happy with. The conditions included the removal of a "dilapidated shed (the Court struck out the word boat), removal of the original cottage foundations and a requirement to provide a drainage line and easement for the use of owner of 30 Greenpoint Rd".
In October 1996, the applicant was made redundant from his public service job. During the last part of his public service employment, whilst in dispute with the local council, he was "distressed" and obtained help from a clinical psychologist. During this period he was also involved in a dispute with his sister in relation to the family companies that were left by his late mother.
In mid 1999, the plans for the new family home were revised and a new development application was submitted. It was approved on 27 September 1999 but with conditions "unacceptable" to the applicant. This led to extended negotiations and another Land and Environment Court appeal. The Land and Environment Court made orders on 14 August 2001 allowing the boatshed to remain but requiring the removal of the foundations of the old cottage and to provide drainage to the next door property, 30 Greenpoint Road.
During this period, the applicant was also engaged in "efforts to finalise business matters" with his sister, which included "conciliation - mediation" and a Supreme Court action. In his written statement the applicant describes the events leading from the Supreme Court action as follows:
"... That resulted in further mediation, this time by Sir Laurence Street, which also failed, and then referral to an accountant for an arbitrated resolution. All of that process was very demanding upon me and I found myself with further symptoms of depression, obsession with trying to resolve my difficulties with my sister, frustration at being unable to do so and inability to concentrate on anything else. It also involved me in significant cost, particularly legal fees. The money that I would have used to progress 22-28 Greenpoint Rd was in the companies and was part of the subject-matter of the dispute before the Court.
21.The accountant-arbitrator, when appointed, took control as administrator of the family companies with the consequence that I had also then had no employment, or income for a period of four years - as well as the difficulty that my capital was tied up in the dispute before the Court.
22. For these reasons, I was unable to progress any work on 22-28 Greenpoint Road while the dispute with my sister remained unresolved. Eventually, one of the companies was returned to my control by the arbitrator in March 2008. The arbitrator also provided a capital payment to me of about $600,000. I was then in a position to finalise my family home plans.
23. A new plan was submitted, approved, and the building was commenced in August 2009. It is now completed, except for minor works, for issue of the final occupation certificate."
...
33. At all times since I acquired 22-28 Greenpoint Road, following my mother's death, I have regarded it as my home and I have believed it to be my principal place of residence. I have attempted to complete a home for that purpose and to move there as soon as possible. I have had a series of difficulties as a result of which I have not been able to complete that task sooner. I have always since my mother's death intended to use and occupy the land solely as my principal place of residence. I intend to live there for the rest of my life."
The applicant and his wife are now separated and he and his wife have ceased to occupy the Shipwright Place property sometime in late December 2010 and early in January 2011.
Relevant Legislative Provisions
By the combined effect of sections 7, 8, and 9 of the LTM Act, land tax is levied each year on land value of all land in New South Wales owned at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied other than land which is exempt from taxation under the LTM Act.
Section 10 of the Act sets out various categories of land that enjoy exemption from land tax under the LTM Act. So far as it is relevant in relation to the "principal place of residence exemption", the exemption under s 10(1)(r) is in the following broad terms:
" 10. Land exempted from tax
(1) Except where otherwise expressly provided in the Act the following lands shall, subject to sections 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act:
...
(r) land that is exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1A."
The "principal place exemption" is fully expanded in clause 2 of Schedule 1A to the LTM Act, which relevantly for the land tax years under review, provided that:
"(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 2004 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 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"."
Clause 6, relevant for purposes of this matter, provides a principal place of residence exemption to an owner who acquires either vacant land to build his or her principal place of residence or purchases an existing residence, which requires refurbishment. In the relevant land tax years, clause 6 was in the following terms:
" 6. Concession for unoccupied land intended to be the owner's principal place of residence
(1) If the Chief Commissioner is satisfied that the owner of unoccupied land intends to use and occupy the land solely as his or her principal place of residence, the owner is taken, for the purposes of the principal place of residence exemption, to use and occupy that land as his or her principal place of residence.
(2) This clause does not apply unless the Chief Commissioner is satisfied that:
(a) the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence, and
(b) if those buildings or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since that commencement, and
(c) the intended use and occupation of the land is not unlawful.
(3) This clause applies in respect of the assessment of a person's ownership of land only in the period of:
(a) 2 tax years immediately following the year in which the person became owner of the land, or
(b) if the land is used and occupied for residential purposes by a person other than the owner at any time after the person became owner, 2 tax years immediately following the tax year in which the building or other works necessary to facilitate the owner's intended use and occupation of the land are physically commenced on the land.
(4) The Chief Commissioner may extend the period in which this clause applies if satisfied that:
(a) there is a delay in the completion or, in a case referred to in subclause (3)(b), the commencement of the building or other works necessary to facilitate the owner's intended use and occupation, and
(b) the delay is due primarily to reasons beyond the control of the owner.
(5) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person's ownership of the land to continue to so use and occupy the land for at least 6 months.
(6) The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the land in respect of any tax year to which, but for the revocation, it would have applied. Land tax liability is to be assessed or reassessed accordingly.
(7) This clause does not apply in respect of land owned by a person if:
(a) the person or any member of the person's family (within the meaning of clause 12) is entitled to have his or her actual use and occupation of other land taken into account under section 9C or under this Schedule. or
(b) the person or any joint owner of the land owns land outside New South Wales that is the principal place of residence of the person or joint owner, or
(c) the land, or other land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it.
(8) For the purpose of this clause:
unoccupied land means land that is not being used or occupied for any purpose."
Clause 12, also relevant in this matter, restricts the principal place of residence exemption to only one principal place of residence for all members of the same family. It provides as follows:
" 12 Only one principal place of residence for all members of same family
(1) For the purposes of the principal place of residence exemption, only one place of residence may be treated as the principal place of residence of all members of the same family.
(2) If members of a family own (whether jointly or separately) more than one residence used and occupied by any of them as a principal place of residence, the Chief Commissioner is to treat the one place elected as the principal place of residence of the family as the principal place of residence of all members of the family in respect of a tax year.
(3) Such an election is to be made, by or on behalf of the members of the family, in writing and must be lodged with the Chief Commissioner within the period for the lodging of objections under section 89 of the Taxation Administration Act 1996.
(4) An election may be made, in respect of a tax year, by the end of the period allowed for the lodging of an objection to a notice of assessment of land tax liability (being an initial assessment of land tax liability) for that tax year.
(5) If an election is not made, the Chief Commissioner is to treat the residence that has the highest land value for land tax purposes as the principal place of residence of all members of the family.
(6) For the purposes of this clause, a "family" consists of the following:
(a) a person and his or her spouse (if any),
(b) any dependent child or dependent step-child of the person and his or her spouse (or of either of them) who ordinarily resides with the person or his or her spouse.
(7) A person is the "spouse" of another person if:
(a) they are legally married, or
(b) they are living together as a couple in a de facto relationship within the meaning of the Property (Relationship) Act 1984.
(8) However, if the Chief Commissioner is satisfied that a person:
(a) is legally married to another person but not cohabiting with that other person, and
(b) has no intention of resuming cohabitation with that other person,
the person is not to be regarded as the spouse of that other person and if a dependent child or dependent step-child of the person has a joint interest in the principal place of residence of the spouse, that interest is to be disregarded.
(9) A person who is the child or step-child of another is a "dependent child" or a "dependent step-child" if the person is under 18 years of age and is not legally married.
(10) Nothing in this clause prevents more than one residence from being treated as the principal place of residence of members of a family under clause 7 (Concession for sale of former principal place of residence)."
Submissions
The applicant's case was, as submitted by his counsel, as follows:
"5. Mr Kolln claims the benefit of clause 2 of Schedule 1A.
6. Regardless of whether Mr Kolln would otherwise meet that clause, he would be entitled by clause 6(1) of Schedule 1A to be taken , for the purposes of the principal place of residence exception, to use and occupy the land as his or her principal place of residence.
7. That alternative argument, relying upon clause 6 of Schedule 1A, fastens upon the land being unoccupied at the time that Mr Kolln acquired the land from his late mother's estate and upon his clear intention, at all times from that date, to use and occupy the land solely as his principal place of residence.
8.The Tribunal should not see the availability of clause 6 as being in any way curtailed in this case as a result of subclause 6(3). Although Mr Kolln did not complete a house on the land and move in to that house within two years of his having become owner of the land, the Tribunal (in the shoes of the Commissioner for purposes of reviewing these decisions) has power under subclause 6(4) to extend the two years period in clause 6(3) if Mr Kolln demonstrates that there is delay in the completion of the building or other works necessary to facilitate his intended use and occupation of the land and that delay is due primarily to reasons beyond his control. His abovementioned statement sets out the evidence upon which he asks the Tribunal to be so satisfied.
9. Nor is Mr Kolln deprived of the principal place of residence exception by any other subclause of clause 6, or otherwise. The Commissioner has referred to Clause 12 of Schedule 1A, but that assists the applicant's argument and certainly does not defeat it. It does not appear to be in dispute that 3 Shipwright Place Oyster Bay is of a lower land value than 22-28 Greenpoint Rd, or that Mr Kolln's share of that tenancy in common with the wife (from whom he has now separated) at 3 Shipwright Place is less than the threshold. Nor does it appear to be in dispute that no election has been made of the kind envisaged by sub-clause 12(2) and (3) nominating 3 Shipwright Place. The effect of clause 12 of Schedule 1A, relevantly, in this case, is that the applicant would be entitled by sub-clause 12(5) to have the higher valued property (22-28 Greenpoint Rd) treated as his principal place of residence - indeed, as the principal place of residence of his 'family' as defined in cl 12(6) and following."
The respondent's case was that the applicant has not established that the Greenpoint Road property "has been used or occupied by the Applicant for residential purposes in the relevant tax years" as required by clause 2 of Schedule 1A to the LTM Act. It was submitted that, on the applicant's own evidence, "the Applicant did not live at the Green Point Road property during the relevant land tax years because the land was vacant" and that during "the relevant land tax years the Applicant and his wife and children were residing at the Shipwright Place property".
The respondent further submitted that "even if it is accepted that the Applicant intended during the relevant land tax years for the Green Point Road property to become his principal place of residence, that fact is rendered irrelevant" by clause 6(7)(a) of Schedule 1A. In support of his submission the respondent cited the following cases: Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8 at [53] and [64] and Chief Commissioner of State Revenue v White [2008] NSWADTAP 27 at [30]. And it was submitted that even if clause 6 applied in this matter, there were no grounds to extend the period of two years allowed because the applicant "has not demonstrated that in that sixteen year period he was unable to complete the construction of residential premises on the Green Point Road property primarily due to reasons beyond his control: clause 6(4)(b)".
The respondent also submitted that under clause 12(5) of Schedule 1A "only one place of residence may be treated as the principal place of residence of all members of the same family" and that in "the present case the Shipwright Place property has been treated as the primary place of residence".
Reasons
The applicant's case was essentially that the applicant was entitled, in respect of the Greenpoint Road property, to the concession for the principal place of residence exemption under the combined effect of clauses 6 and 12 of Schedule 1A to the LTM Act in the relevant land tax years.
In Aronstan a similar claim was made by the applicants and in rejecting that claim I set out in detail the way the exemption provisions, in particular clauses 6 and 12, of Schedule 1A operate. The relevant parts of my decision in Aronstan which equally apply in this matter are:
37 The principal place of residence exemption under Schedule 1A of the LTM Act must be read in conjunction with the definition of the expression "principal place of residence of a person" found in s 3(1) of the LTM Act. The expression "principal place of residence of a person" is defined to mean "the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person".
38 This is clearly an objective test and the conclusion is determined by considering the extent and quality of use and occupation of a residence in each case. The definition requires that only one residence can be regarded as the principal place of residence of a person.
...
41 The principal provision dealing with the exemption is found in clause 2 of Schedule 1A. In particular, subclause 2(2) provides that land is not used and occupied as the principal place 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 that 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".
...
43 The exemption is generally only given to an owner in respect of a residence that is actually used and occupied by the owner. But the provisions have been extended to an owner of unoccupied land who intends to use the land solely as his or her principal place of residence. Clause 6 deals with this concession in respect of land on which a new family residence is being built or an existing residence is being refurbished. The concession given by clause 6 is only available to an owner if the all the requirements, in particular those set out in subclauses 6(2) and 6(7), are satisfied.
...
48 Subclause 6(7) sets out a further and quite critical requirement to be satisfied before the owner of vacant land or a residence acquired for refurbishment is entitled to the concession for the principal place of residence exemption under clause 6. The concession is not available if:
(a) the person seeking the concession or any member of the person's family (within the meaning of clause 12) is entitled to have his or her actual use and occupation of another residence or property taken into account under section 9 of the LTM Act in respect of a flat or under Schedule 1A of the LTM Act, or
(b) the person or any joint owner of the land owns land outside New South Wales that is the principal place of residence of the person or joint owner, or
(c) the land, or the land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it.
49 Subclause 6(7) simply denies the concession available under clause 6 if the person seeking the concession owns another residence within or outside New South Wales, which is on the relevant taxing date being used and occupied as the principal place of residence of the person. The subclause also prevents an owner of land, if the land or in combination of any adjoining land is capable of being developed, to have either two residences or residential units.
50 In the present matter, the Chief Commissioner has denied the concession on grounds that subclause 6(7), in particular paragraph (a), applies to the applicants. The predecessor of subclause 6(7)(a) was subsection 10T(3)(a) which provided as follows:
"the person or any joint owner of the land is entitled to have his or her actual use and occupation of other land taken into account under section 9C or 10(1)(r)".
51 The effect of the proviso in s 10T(3)(a) was considered by the Tribunal in Wilks v Chief Commissioner of State Revenue [2002] NSWADT 248 where Judicial Member Block held at paragraph 19 as follows:
"... The concession under section 10T was available only where the Applicant was not entitled to an exemption for another property under section 10(1)(r) and the plain fact is that he was so entitled in respect of the McMahons Property in relation to the relevant year. This is so having regard also to section 3(3)(a) of the Act and the fact that property had been "continuously used and occupied ... for residential purposes" since the preceding 1 July. The McMahons Property may at that time and from the Applicant's subjective point of view have been owned by him on a temporary basis in the sense that he intended to sell it at a convenient time thereafter but that is not the point. The plain fact is that once the McMahons Property qualified for the section 10(1)(r) exemption in relation to the relevant year (and it clearly did) then and in respect of the Castlecrag Property the section10T concession was not available."
52 The test considered in Wilks is similar to the current test found in subclause 6(7)(a) and the provisions of subclause 6(7)(a) apply in the same manner. If, an owner has another residence which is his or her principal place of residence in the relevant year for purposes of Schedule 1A, then the concession under clause 6 is not available to that owner. Judicial Member Block's observations would thus equally apply to the operation of subclause 6(7)(a). The language of the subclause is clear and the concession is simply denied to an owner who is in occupation of another property, which for purposes of Schedule 1A is his or her principal place of residence on the relevant taxing date.
53 As observed by Judicial Member Block in Wilks it does not matter that, from an owner's subjective point of view the occupation of a particular residence is on a temporary basis after the purchase of another property, which is intended to be the future principal place of residence. The fact that a property has been continuously used and occupied and is regarded as the principal place of residence will only cease to be the principal place of residence of a person when he or she ceases to continuously use and occupy the property.
...
55 A great deal of reliance was placed by the applicants on White & Anor v Chief Commissioner of State Revenue and in the present matter on the operation of clause 12. Clause 12, as correctly submitted by counsel for the Chief Commissioner, has been inserted as an anti-avoidance provision to prevent a family from obtaining more than one principal place of residence exemption from land tax.
56 The provision is designed to apply where a family uses or occupies more than one place of residence as their principal place of residence. This could arise in a number of situations. For example, a city apartment may be used by part of a family as their principal place of residence and is owned by one spouse, whilst the rest of the family use and occupy a suburban residence owned by the other spouse as their principal place of residence. In the absence of clause 12, both properties would be entitled to the principal place of residence. In fairness to other owners of land in New South Wales, this clause restricts the exemption to only one residence for a family. Under this clause, the family is allowed to nominate by way of an election one property as their principal place of residence for purposes of the exemption under the LTM Act.
57 Clause 12 is not a provision that enables an owner of two or more residences to nominate one of the residences for purposes of the principal place of residence exemption. The residence that is used and occupied by a person, as his or her principal place of residence has to be determined by an objective test having regard to all the facts and surrounding circumstances. A person can have only one residence as his or her principal place of residence. It is only in the case of a family that two or more residences may qualify as the principal place of residence of the family members when taken into account as a group. As indicated above, clause 12 confines the exemption to only one property in such cases."
In Chief Commissioner of State Revenue v White and anor [2008] NSWADTAP 27, the Appeal Panel also considered the operation of clauses 6 and 12 and reached similar conclusions. In relation to subclause 6(7)(a), the Panel said that the "clear words of the statute say that if the respondents are entitled to claim an exemption elsewhere, they may not take advantage of the 6(1) concession". And in relation to clause 12 the Panel said:
"33 Clause 12, in clear terms, refers to the principal place of residence exemption rather than 6(1) concession. While the 6(1) concession is part of the greater picture, the principal place of residence exemption is set out in clause 2. Accordingly, unless necessity points to a wider reading, clause 12 must be read as limiting the operation of the principal place of residence exemption to, as the heading explains, 'only one ... for all members of the same family'".
This claim can be rejected on the same basis the claims in both Aronstan and White were rejected. In this matter it was argued that, under clause 6 the Greenpoint Road property, although a vacant lot in the relevant land tax years, the owner is "taken" for purposes of the principal place exemption to use and occupy the unoccupied land as his or her principal place of residence. But under clause 6 the exemption is only available if the owner is, inter alia , not entitled to have his or her actual use and occupation of other land taken into account under section 9C or under Schedule 1A. In the applicant's case his own evidence was that during the relevant land tax years (and since July 1992) he and his family used and occupied the Shipwright Place property as their residence. In terms of subclause 6(7)(a), the applicant was entitled to have his "actual use and occupation" of the Shipwright Place property taken into account under Schedule 1A. Accordingly, the applicant was not entitled to the concession available under clause 6.
Clause 12 also does not assist the applicant. Clause 12 only operates where a family has more than one residence in use and occupation as their principal place of residence. In this matter, the only residence that was used and occupied by the applicant was the Shipwright property in the relevant land tax years.
The matter that remains is the imposition of interest in the assessment. The late lodgement interest was remitted to market rate by the respondent. As explained in Trust Co of Australia v Chief Commissioner of State Revenue [2002] NSWADT 21 the market rate interest compensates the state for being denied the use of the funds which it was entitled at an earlier point in time and "only exceptional circumstances would justify any remission". It was suggested that remission might be available in the following circumstances:
"27 ... 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)."
There was no evidence before the tribunal of any of the above circumstances.
Accordingly, the respondent's assessment of the applicant's liability for payment of land tax in respect of the Greenpoint Road property for the land tax years 2005, 2006, 2007, 2008 and 2009 is affirmed.
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I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.
Registrar
Decision last updated: 31 May 2011
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