Lloyd v Chief Commissioner of State Revenue
[2016] NSWCATAD 230
•12 October 2016
Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Lloyd v Chief Commissioner of State Revenue [2016] NSWCATAD 230 Hearing dates: 16 September 2016 Date of orders: 12 October 2016 Decision date: 12 October 2016 Jurisdiction: Administrative and Equal Opportunity Division Before: S Frost, Senior Member Decision: (1) Land tax assessments for land tax years 2013, 2014 and 2015 confirmed.
(2) No award of costs.Catchwords: REVENUE – land tax – principal place of residence – property not used and occupied by owner – concession for unoccupied property – conditions for exemption not met – exemption not available – land tax assessments confirmed Legislation Cited: Land Tax Management Act 1956 (NSW)
Taxation Administration Act 1996 (NSW)Cases Cited: Cornish Investments Pty Ltd v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Category: Principal judgment Parties: Jennifer Lloyd and Peter Lloyd (Applicants)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel:
Solicitors:
I Sethi (Respondent)
Jennifer Lloyd (Applicant in person)
Crown Solicitor’s Office (Respondent)
File Number(s): 1610275
Reasons for decision
Introduction
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The Applicants have been assessed to land tax on a property they bought in Balgowlah in October 2012. They claim the land tax assessments are wrong. The basis of that claim is that it is the only property they own in New South Wales (or indeed anywhere), and they plan to live there as their principal place of residence.
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The Respondent, the Chief Commissioner, discovered that the property had been rented out for about 15 months in 2014 and 2015, and on that basis he concluded that whatever land tax exemption the Applicants might have assumed they were entitled to, was not available. That triggered the making of land tax assessments for the 2013, 2014 and 2015 land tax years. The Applicants objected against the assessments but the objections were disallowed. They have now sought review of the assessments in this Tribunal.
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I have concluded that the assessments are correct, and must be confirmed. These are my reasons.
The issues before the Tribunal
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There are two issues for the Tribunal to decide:
First, whether the Chief Commissioner was able to make the assessments he purported to make; and
Second (but only if the answer to the first issues is ‘yes’), whether land tax is payable for the relevant years.
Factual background
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The property has a house on it, which at the time of purchase by the Applicants was in very poor condition; Mrs Lloyd described it as ‘uninhabitable’. She and her husband have never lived there.
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The Applicants say their initial plan was to knock down the house and rebuild, with the intention that they would live in the new home. At some stage they appear to have modified that plan, deciding instead to renovate the building enough to allow them to move in. They started renovating in about March or April 2013 and spent about a year working on the old house. By then, according to Mrs Lloyd, they had spent $20,000 to $30,000 on the work but, realising they had only done about half the amount of work required, and mindful that they would be demolishing the house anyway, they stopped the renovation work and decided instead to rent the property out.
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They had a tenant in the property from March 2014 until June 2015. They received a rental bond from the tenant, which they lodged with the Rental Bond Board. The Chief Commissioner became aware of the renting of the property through the information held by the Rental Bond Board, and concluded that the property was likely subject to land tax. In July 2015 the Chief Commissioner made the land tax assessments.
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The Applicants’ son now lives in the old house on the property, although it is not clear when he moved in. Mrs Lloyd said her son ‘makes a contribution’ towards the upkeep of the house – by which I took her to mean that he does not pay rent, as such, but probably pays the utility bills and pays his parents an amount over and above, to help defray the cost of holding the property.
The relevant law
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The main relevant piece of legislation is the Land Tax Management Act 1956 (the LTM Act).
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A person’s principal place of residence is exempt from land tax, by virtue of s 10(1)(r) of the LTM Act, in combination with clause 2 in Schedule 1A. To attract that exemption, the land must be ‘used and occupied’ by the owner as the principal place of residence. Plainly, the property has not been covered by that exemption provision at any time during the Applicants’ ownership since they do not ‘use and occupy’ the property, and they never have.
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Clause 6 in Schedule 1A is a concessional provision that allows an owner to claim land as his or her principal place of residence if the land is ‘unoccupied land’ and the owner ‘intends to use and occupy the land solely as his or her principal place of residence’. If the criteria in the provision are met then the owner is ‘taken’ to be using and occupying the land as his or her principal place of residence.
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The criteria are very strict. The two I have already mentioned are in subclause (1) – the land must be unoccupied land, and the owner must intend to use and occupy it solely as his or her place of residence. But there are other requirements as well. Subclause 6(2) says that the concession does not apply unless:
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
if those building 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
the intended use and occupation of the land is not unlawful.
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Subclause (3) imposes a time restriction on the availability of the clause 6 concession. It says:
This clause [that is, clause 6] applies in respect of the assessment of a person’s ownership of land only in the period of:
(a) 4 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, 4 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.
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Furthermore, subclauses (5) and (6) provide further qualifications, as follows:
(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 and 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.
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I also need to consider the Chief Commissioner’s power to make assessments, or reassessments, of land tax.
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Section 14 of the LTM Act, headed ‘Assessments to be made’, provides:
(1) Subject to this Act and the Taxation Administration Act 1996, the Chief Commissioner shall from the returns and from any other information in the Commissioner’s possession or from any one or both of those sources, and whether any return has been furnished or not, cause an assessment to be made of the taxable value of the land owned by any taxpayer and of the land tax payable thereon.
(2) An assessment can be made even if the time for lodging returns has not yet expired.
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There are also provisions of the Taxation Administration Act 1996 (TAA) that are relevant. Section 8 of the TAA, headed ‘General power to make assessment’, provides as follows:
(1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer.
(2) An assessment of a tax liability may consist of a determination that there is not a particular tax liability.
(3) For the avoidance of doubt, an assessment of tax liability is taken to have been made when the Chief Commissioner calculates the tax liability of a taxpayer based on a return under the Payroll Tax Act 2007 or any other Act prescribed by the regulations for the purposes of this subsection (whether or not the Chief Commissioner issues a notice of assessment as a result of that calculation or otherwise notifies the taxpayer of the calculation).
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Section 9 of the TAA gives the Chief Commissioner a general power to re-assess a taxpayer – unconditionally for a period of 5 years; and for a longer period subject to specified criteria.
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Finally, s 100(3) of the TAA provides that on an application for review of an assessment by the Tribunal, the Applicants have the onus of proving their case. They must do so on the normal civil standard of the balance of probabilities, and to be successful they must prove all matters necessary to enable the Tribunal to answer the statutory questions in their favour: Cornish Investments Pty Ltd v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [36].
Consideration of the assessment provisions
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The Applicants’ argument that the Chief Commissioner lacked the power to make the land tax assessment or assessments is without merit. The power to assess or reassess in circumstances such as these is clear beyond argument: see s 14 of the LTM Act and ss 8 and 9 of the TAA. This aspect of the Applicants’ argument fails.
Consideration of the exemption provisions
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Whether the land is exempt from land tax is a question that must be considered separately for each year, by reference to the relevant taxing date for each land tax year.
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For the 2013 land tax year, the relevant taxing date is 31 December 2012. The evidence is that the property was unoccupied at that date. I find that to have been the case.
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But that only satisfies one of the requirements in clause 6(1). The second requirement is that the owner ‘intends to use and occupy the land solely as his or her principal place of residence’. The Applicants say this was their intention, but it is instructive to note that, as at the date of the Tribunal’s hearing of this application (four years after the Applicants purchased the property), they have still not used or occupied the land at all – not even for a day – as their principal place of residence. Nor is there any evidence that they have, in accordance with their stated intention to knock down and rebuild, lodged a development application with the local council to undertake the work they say they intended to undertake.
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The Applicants’ case is that, after initially intending to knock down and rebuild, they decided instead to do a partial renovation and live in the original residence. But they did not do that either. They started to renovate, and then changed their minds, stopping the work because (as they said) it was getting too expensive, and putting in a tenant, who ended up staying there for 15 months.
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Furthermore, clause 6(2)(a) provides that the reason for land being unoccupied at a taxing date must be ‘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’. Once again, this provision presents difficulties for the Applicants since there is no explanation of what work they carried out, or intended to carry out, and no evidence of the extent to which (if at all) any such work was ‘necessary’ to facilitate their intended use and occupation of the property as their principal place of residence.
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Similar problems exist for the Applicants’ case in respect of the 2014 land tax year, for which the taxing date is 31 December 2013. Although I accept that the property was unoccupied at that date, all the shortcomings identified at [23]-[25] above for 2013 apply in relation to 2014 as well.
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The Applicants have failed to establish that several of the statutory requirements for exemption were satisfied for the 2013 and 2014 land tax years. They bore the onus of proving their case and they have failed to do so.
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For completeness, I note that there is a further potential problem for the Applicants, arising from the time restriction provision in clause 6(3)(b). The potential problem arises because the land has been ‘used and occupied for residential purposes by a person other than the owner at any time after the person became owner’. In that event the concession under clause 6 is only available for the ‘4 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’. If it is the case that the works on the land were ‘necessary to facilitate the owner’s intended use and occupation of the land’, then the concession would not commence until the 2015 land tax year (the year immediately following the tax year when the works commenced, which was 2014) – and then only if the other provisions of the clause were satisfied. That would mean that the concession would not be available for the 2013 or 2014 tax years in any event.
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For the 2015 land tax year, the relevant taxing date is 31 December 2014. By that date things had changed. There was now a tenant in the property. That means the land was no longer ‘unoccupied’, and clause 6 simply cannot apply because subclause (1) was not satisfied at that date.
Costs
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Towards the conclusion of the hearing the Chief Commissioner made an application for costs under s 60 of the Civil and Administrative Tribunal Act 2013 (the NCAT Act).
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The Chief Commissioner’s counsel claimed that the Applicants had been put on notice that the application would be made, but correspondence from the Crown Solicitor’s Office received by the Tribunal on 19 September 2016 explains that the claim was incorrect. The application for costs was withdrawn.
Decision
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I decide as follows:
Land tax assessments for 2013, 2014 and 2015 confirmed.
No award of costs.
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
Decision last updated: 12 October 2016
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