Lo v Chief Commissioner of State Revenue
[2011] NSWADT 224
•19 September 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Lo v Chief Commissioner of State Revenue [2011] NSWADT 224 Hearing dates: 14 and 15 July 2011 Decision date: 19 September 2011 Jurisdiction: Revenue Division Before: J Block, Judicial member Decision: 1. The decision of the Chief Commissioner of State Revenue is affirmed.
2.If the Respondent wishes to pursue the application for costs referred to in his final written submissions he must serve and file an application, accompanied by supporting submissions, within twenty-eight (28) days of the date of this decision. If no such application is filed and served, there will be no order relating to the costs of the proceedings. If such an application is filed and served, the Applicant must file and serve submissions in reply within a further twenty-eight (28) days. Unless reasons are advanced for a hearing to be conducted in respect of costs,, the issue of costs will be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997. This order does not in any way affect a separate costs order made against the Applicant at an earlier time and before the hearing commenced.
Catchwords: Land tax - principal place of residence -nature of discretion in clause 2 (2) of Schedule 1A - not necessary for the purposes of the test that a place of residence be owned Legislation Cited: Land Tax Management Act 1956 Cases Cited: Gessner & anor v. Chief Commissioner of State Revenue (No.2) [2006] NSWADT 170;
Federal Commissioner of Taxation v GM Swift and ors 89 ATC 5101;
Giris Pty Ltd v Chief Commissioner of Taxation of the Commonwealth (1968) 119 CLR 365;
Doney v Chief Commissioner [2005] NSWADT 133;
Doney v Chief Commissioner (No.2) [2006] NSWADTAP 23;
Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50;
Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57;
Dean v Commissioner of Stamp Duties (Qld)(No 2) [1996] 2 Qd R 557
Re Ziino and Commissioner of State Revenue [2004] VCAT 1707;
Chief Commissioner of State Revenue v Farringdon (GD) [2004] NSWADTAP 41Category: Principal judgment Parties: Patrick Pak Kit Lo (Applicant)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel
D Miller (Applicant)
K Richardson (Respondent)
Gadens (Applicant)
Crown Solicitor (Respondent)
File Number(s): 106045
REasons for decision
The decision under review is the disallowance by the Respondent (who is sometimes referred to in this decision as the "Chief Commissioner") of an objection by the Applicant against land tax assessments referable to 12 Hopetoun Avenue, Mosman ("the Property") in respect of the 2005 to 2009 land tax years, both land tax years inclusive. The term "relevant years" refers to all five land tax years while any individual land tax year is referred to by reference to its actual year.
This matter was heard on 14 and 15 July 2011 although the hearing on the second hearing day was for reasons set out below short. It generated a large volume of paper; the Tribunal refers in this context to:
(1) the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997;
(2) written submissions by the parties which were available at the hearing and also (lengthy) written final submissions which were in accordance with an agreed time-table furnished thereafter;
(3) exhibits and including but not restricted to witness statements by the Applicant's father Wai Kong Lo (A1), the Applicant's wife Annette Wing Yan Yu (A2) and the Applicant himself (A3)
(4) a document entitled "Time spent in Hong Kong during Tax Years";
(5) a document entitled "Chronology" which sets out in considerable detail information as to the acquisition by the Applicant of the Property and also to passenger cards completed by the Applicant and his wife when they visited Australia and after taking up residence in Hong Kong;
(6) Tables summarizing declarations made by the Applicant and also his wife in passenger cards;
(7) a statement of agreed facts which will be referred to more fully later in these reasons.
The final written submissions furnished by the parties proved to be particularly helpful and I have drawn on them to some considerable extent for the purposes of these reasons; the term "AS" refers to the Applicant's final submissions while the term "RS" refers to the Respondent's final written submissions. At the time when arrangements were made in respect of final submissions the Applicant was granted a right of reply in response to RS; the Tribunal has received a letter from the Applicant's solicitors to the effect that he does not intend to furnish any further submissions in reply to RS, and noting that in his view the question of costs applied for by the Respondent should be held over to enable the parties to consider this decision. The Tribunal has also received a letter from the Respondent's solicitors to the effect that he does not object to the question of costs being held over on the basis suggested.
It is convenient to commence by including the content of RS under the head of Procedural Background and contained in clauses 1 to 14 of RS (excluding footnotes) as follows:
The Applicant ( Patrick ) claims the principal place of residence ( PPR ) exemption in respect of the property at 12 Hopetoun Avenue, Mosman NSW 2088 (DP212953/Lot 1) ( the Property ). The Applicant's parents, Barbara (aka Kam Ling Lo) and Wai Kong Lo own and occupy 14 Hopetoun Avenue, which is situated behind the Property.
The Applicant's parents acquired both the Property and 14 Hopetoun Ave on 25 May 1994.
In July 1995, the Applicant moved to Hong Kong to work as an electrical engineer for Tektron Electronics (HK) Ltd ( Tektron ). The Applicant did not own the Property when he moved to Hong Kong.
Some three and half years later, the Property was transferred to Patrick by his parents on 29 December 1998.
The Chief Commissioner issued a Land Tax questionnaire to the Applicant with a fact sheet on 14 August 2009.
On 27 August 2009 the Applicant's father returned a completed questionnaire, listing the Property as the only property which he owned and claiming it as a PPR. The Applicant did not list the dates when he lived at the Property.
On 10 September 2009 the Chief Commissioner wrote to the Applicant to inform him of the usual documentation the Respondent looks at in respect of a claim for PPR and attached the Revenue Ruling No LT 82.
On 15 September 2009 the Chief Commissioner issued an assessment for Land Tax to the Applicant for the 2005-2009 Land Tax Years ( the Tax Years ).
The Applicant objected to the assessment on 24 September 2009 asserting that the Property was his PPR.
On 23 December 2009 the Chief Commissioner wrote to the Applicant requesting dates when he resided at the Property during the Tax Years and requesting further documentary evidence.
On 23 February 2010 the Applicant sent the Chief Commissioner a response to the request made on 23 December 2009. The Applicant:
sent photographs and sketches of the Property, some home and contents insurance policy statements including a Certificate of Insurance in the Applicant's and his mother's name addressed to "12-14 Hopetoun Ave", and Optus Mobile Phone invoices in the Applicant's name addressed to the Property;
failed to respond to the Chief Commissioner's request to identify the dates he resided at the Property during the Tax Years.
Under cover of letter dated 20 April 2010 the Chief Commissioner disallowed the Applicant's objection on the basis that he is not satisfied that the Applicant presently uses, or did use for the Tax Years, the Property as his PPR, on the basis of the following:
the Applicant had not demonstrated that he in fact did "use and occupy" the Property.
the Applicant had stayed in Australia for an average of 20 days per year during the tax years, which is minimal and insufficient to satisfy the PPR exemption;1
the Chief Commissioner was not satisfied that the Applicant in fact resided in the Property during his visits to Australia.
In his letter of 20 April 2010, the Chief Commissioner wrote:
"Had you stayed in the [Property] while present in Australia, it would still be insufficient to claim an exemption for Principal Place of Residence given the minimal time spent in the property.
Moreover you have not demonstrated that you did reside in the property during this time. Based on the information provided by yourself, together with our own investigations, we are not satisfied that 12 Hopetoun Ave was your "Principal Place of Residence" during the tax years in question."
The Applicant filed an Application with the Tribunal on 17 June 2010.
As set out previously this matter relates to the relevant years only and in respect of which the Applicant claims that he is entitled to the benefit of the principal place of residence ("PPR") exemption provided by the Land Tax Management Act 1956 ("the Act" or "LTMA").
Part B other miscellaneous aspects
Prior to the hearings in July 2011 the Applicant applied for the vacation of the hearings on the basis that the matter could be decided on the papers. That application was opposed by the Respondent and was not pressed by the Applicant. In the view of the Tribunal a factual matter such as this cannot be decided on the papers and so that that application was misconceived.
Prior to the hearings the Tribunal was advised that the Applicant would require the assistance of an interpreter. It is to be noted that the Applicant was educated at both high school and to university level in Sydney. An interpreter was however provided; the Tribunal accepts that this application was made having regard to the Applicant's health problems...
Oral evidence was given by each of the Applicant's father, the Applicant's wife and (briefly only) by the Applicant; the Applicant's wife was cross-examined at some length as to the configuration of the Property (and its content) s and also as to statements in immigration cards made by her when, during the relevant years, she visited Sydney. When the Applicant came to give evidence he commenced in English but very soon required the assistance of the interpreter; after only a very short cross-examination it became clear that he could not continue. I refer in this context to his illness as described in clauses 15 and 16 of AS which read as follows:
15. The cross-examination of Patrick commenced but it quickly became apparent that it was unable to proceed. Something should be said about that at the outset.
16.In his affidavit at [11] to [13], Patrick Lo deposed to the development in recent years of his spinocerebellar ataxia with cerebellar atrophy. This condition clearly causes him great difficulty. It has significantly and detrimentally affected his speech and physical movements, at the least. His ability to handle stressful situations is obviously impaired, as was plain from his presentation in the short time he attempted to give oral evidence. So much was flagged by the Applicant in written outline submissions prior to the hearing. As was there stated, Patrick's ability to recall events and place them into chronological order has been severely diminished. When under stress he is prone to become confused and anxious. He blanks out - something he was seen to do when cross examined. Preparation of his affidavit as a result was a slow and careful process, and much care was taken to try and ensure that statements by Patrick as to past events were supported, where possible, by documents.
At the commencement of the second hearing day the problems arising from the inability of the Applicant to give evidence were dealt with in the following manner:
(a) the parties handed up a document entitled "Agreed Facts to be Read with the Affidavit of P.Lo (as redacted and amended -such being noted below)"; that document, which is the document referred to previously in these reasons< and which is referred to in brief as "the Agreed Statement" is of such importance and relevance that it is included in full (but excluding amendments as to the Applicant's witness statement) as follows:
Agreed Statement of Additional Facts to be Read with the Affidavit of P Lo
Definitions
Tax Years means 2005, 2006, 2007, 2008 and 2009.
Work
(1) Patrick worked in a full time job for Tektron in Hong Kong between July 1995 and October 2010.
(2) Patrick resigned from his employment in October 2010 and returned to live in Australia on 23 November 2010.
(3) Patrick has a Hong Kong identification card and is able to enter and depart Hong Kong without the need for a visa.
(4) Between about 1996 and October 2010, Patrick was a resident of Hong Kong. He was also (and remains) an Australian Citizen travelling with his Australian passport.
(5) Between about 1996 and October 2010, Patrick paid income tax in Hong Kong.
(6) In about 1997, Annette Wing Yan Yu (later to become his wife) moved to Hong Kong to be with him, but she lived in a different apartment in Hong Kong until they were married in October 2004.
Apartments in Hong Kong
(7) During the Tax Years, while in Hong Kong Patrick lived at the following rented apartments:
(8) Flat G, 1OF Block 36, Laguna City, Hong Kong - from the time of his marriage in October 2004 until about May 2009; and
(9) Flat E, 26/F BLK 28 Laguna City, Hong Kong - from about May 2009 until about November 2010.
(the two apartments)
(10) In relation to Flat 0, 1OF Block 36, Laguna City, Hong Kong, Annette was living there on her own prior to their marriage. After their marriage, Patrick moved into the apartment with Annette and his employer took over the lease as tenant.
(11) 8APatrick was employed by Tektron in Hong Kong for 15 years, during which time Tektron always provided him with a rented apartment for his use; being three rented apartments over the 15 year period.
(12) In relation to each of the two apartments during the Tax Years:
(a) Patrick and Annette were entitled to occupy the apartments by reason of his employment with Tektron and for so long as that employment continued.
(b) the only persons who had keys to the apartments were Patrick, his wife and the landlord;
(c) no other person (including any employee of Tektron) was entitled to enter or stay at the apartments, for so long as Patrick remained employed by Tektron;
(d) the apartments were unfurnished - all of the furniture in the apartments was paid for by either Annette or Patrick;
(e) Patrick paid for some furniture, including a marital bed and furniture for Adrian, which was kept at the apartments, the majority of the furnishings being Annette's from prior to the marriage;
(f) Patrick and Annette were not entitled to paint / decorate or alter the apartments (save for placing in them their furnishings and possessions);
(g) nearly all of Patrick's clothes were kept at the apartments and would bring some clothes with him when he came to Australia;
(h) Adrian has at all times lived with his parents since his birth;
(i) nearly all of Annette's and Adrian's clothes were kept at the apartments;
(j) nearly all of Adrian's toys were kept at the apartments;
(k) most of Patrick's personal effects (including toiletries, books and photographs) were kept at the apartments - the remainder being kept at 12 Hopetoun Ave, Mosman;
(l) Annette and Patrick cooked and ate all meals at the apartments while in Hong Kong (unless they went out to eat).
(13) Patrick and his family returned to live in the apartment at Flat E, 26/F BLK 28 Laguna City, Hong Kong in about April 2011 because Patrick resumed working for Tektron, on reduced hours, and because working was felt to be better for his health / mental state. His continued employment by Tektron is dependent on his state of health.
(14) Patrick had bank accounts and credit cards with Hong Kong banks while working in Hong Kong. Those bank accounts and credits cards were used to pay his day-to-day living expenses while he was in I-long Kong. The bank statements for those accounts and cards were sent to his Hong Kong address.
(15) Patrick had a mobile phone with a Hong Kong company while working in Hong Kong. The statements for that mobile account were sent to his Hong Kong address.
(16) Patrick had a landline phone with a Hong Kong company while working in Hong Kong. The statements for that landline account were sent to his Hong Kong address.
(17) Patrick had treating doctors in Hong Kong while working there. The accounts, reports and other statements generated in connection with the treatment by those Hong Kong doctors were sent to his Hong Kong address.
Sydney
(18) 12 Hopetoun Ave (# 12) has 7 car spaces. Patrick allowed his parents to park their cars in the car spaces on #12 on a regular basis and then to walk from the car space on #. 12 to 14 Hopetoun Ave (# 14),
(19) When Patrick was staying at # 12, if he had a family dinner with his parents (which was not at a restaurant) the dinner would be held at # 14.
(20) There are no gates or fence between it 12 and # 14.
(21) Patrick's father (who lives at #14) has keys to # 12 in order to allow him to organise cleaners and maintenance at #12 on Patrick's behalf.
(22) Between July 1995 and October 2010, Patrick did not own a car. When Patrick was in Sydney, if he drove a car, he would drive one of his parent's cars.
(23) Patrick does not have a landline phone at #12 that he pays for. There is a communal landline phone that rings in #12 and 014 at the same time, which is paid for by his father.
(24) An application was made in accordance with section 71(4) of the Administrative Decisions Tribunal Act 1997 for the appointment of the Applicant's father as his representative; that application was not opposed and was granted.
At a time when the evidence stage was effectively completed Mr. Miller informed the Tribunal from the bar table that the Applicant and his family had in April 2011, and thus prior to the commencement of the hearings, returned to Hong Kong and where the Applicant was once again employed by Tektron but in a less demanding position. The Tribunal was informed that the Applicant on his return to Australia in October 2010 found inactivity hard to tolerate and that it was for this reason that the Applicant and his family returned to Hong Kong.
The evidence before the Tribunal at the hearing did not in any way indicate that the Chief Commissioner had allowed the Applicant a PPR exemption in respect of one land tax year (occurring after the relevant years) and incorrectly described in AS as the 2010 year. In a separate response dealing with those references the Respondent pointed out that references in AS to the 2010 year were erroneous in that the Applicant should have referred to the 2011 year; moreover the Respondent in that response referred to a letter dated 2 July 2011 and described by the Respondent as "the 2011 tax year letter" and in which the Chief Commissioner allowed a PPR exemption in respect of the 2011 land tax year..
The 2011 year is not a relevant year; the Respondent has correctly noted that no mention was made during the hearings of the 2011 tax year letter and so that evidence as to such letter cannot be admitted at this stage in the absence of an application to reopen and where that application is granted. No such application has been made.
Part C. The evidence in the context of the Agreed Statement
The content of the Agreed Statement is such that the Tribunal does not consider it necessary to deal with the oral evidence given by the Applicant's father and his wife in great detail. The Tribunal proposes to deal in brief terms with some aspects of that evidence.
As appears from the extract from RS entitled "Procedural Background" quoted previously in these reasons the Applicant acquired the Property from his parents on 29 December 1998 and some years after he had moved to Hong Kong. Again as appears from that extract his parents acquired the Property, and also 14 Hopetoun Avenue in May 1994. The Applicant's father said that they sold the Property to the Applicant for about $600,000 and which had been paid. As to how a young man at the beginning of his professional career could have financed so large an amount and in cash was not in evidence before the Tribunal. I was informed by the parties' barristers on the second hearing day that they did not consider that this aspect was relevant and the Tribunal accepted their view.
The evidence before the Tribunal suggests that the Applicant lived in the property after his parents acquired it and before he moved to Hong Kong while taking his meals with his parents at 14 Hopetoun Avenue. Assuming that this is correct the period involved could not have lasted for more than approximately a year; even more to the point is that his period of residence prior to his acquisition of the Property is of limited relevance. The Applicant's father gave evidence as to his payment of outgoings referable to the Property by drawing on a banking account of the Applicant and where he, the Applicant's father, had the power to make withdrawals.
The Applicant's wife was cross-examined at some length as to the configuration of the Property and its contents and also as to statements made by her in landing cards when visiting Australia during the relevant years as to where in Australia she intended to reside. On some occasions addresses other than that of the Property were specified. It is sufficient to note that some of the responses of the Applicant's wife in this context were in some respects confused and inconsistent.
The Property and 14 Hopetoun Avenue can, it would seem, be described as "a compound" in that there is free access between the two and the parents of the Applicant (and their invitees) were at all times able without restriction to use the parking facilities and also the tennis court on the Property. The Property itself is a somewhat unusual structure consisting as it does of two flats one below the other and both beneath the tennis court; it was, one would think, rather an odd residence for a single man or for that matter a young couple, although of course its closeness to the home of the Applicant's parents may have been a relevant factor.. The two flats were apparently sparsely furnished and the Applicant and his wife when they stayed in it (and this did not occur other than sporadically) tended to use one of the two flats although keeping some few items of furniture and effects in both.
I do not think it necessary to deal in precise detail with the periods of time spent by the Applicant and his wife in Australia during the relevant years. It seems likely that those time periods might be summarized in brief terms on the basis that the Applicant spent, according to one of the documents to which I have referred, 11 days in Australia in the 2005 year,. 14 days in the 2006 year, 15 days in the 2007 year. 14 days in the 2008 year and 33 days in the 2009 year. While the Applicant's wife spent, and in the same land tax years, 11 days. 14 days. 39 days. 109 days and 89 days respectively. There was some degree of dispute as to where in Sydney the Applicant's wife stayed and when in particular she stayed at the home of her parents and when she stayed at the Property; on one occasion the Applicant and his wife stayed at the Four Seasons Hotel and this was explained on the basis that the stay at the hotel was part of a package with the airfares. Leaving aside for the moment the fact that there are some disputes as to where precisely and when they or either of them stayed at the Property the overall situation is that very little time indeed was spent in the Property; for reasons set out previously it is not necessary to go into detail. It would not in the view of the Tribunal be unreasonable to categorise the Property during the relevant years as analogous to a holiday home which was used (although very infrequently) and usually for short periods on visits to Sydney.
The Chronology to which I referred earlier in these reasons is a very lengthy and detailed document which sets out in minute detail the periods spent in Australia and how landing cards and the like were dealt with. I do not think it necessary to reproduce the content of the Chronology; suffice it to say that leaving aside inconsistent statements as to where the Applicant or his wife would reside or in fact resided while in Australia they at all relevant times completed immigration information on the basis that they were visitors to or visitors departing from Australia. .
Overall and in respect of all of the relevant years there can be no doubt that the Applicant and his wife were throughout resident in Hong Kong and regarded themselves as residents of Hong Kong.
The Applicant contends that the fact that his son Adrian is registered for a place at a school in Mosman assists his case. It is of course of marginal relevance only. Children are often entered for schools at or soon after birth but it does not follow that they will take those places. As to whether Adrian ever becomes a pupil of the school in Mosman will depend on where his parents live and this in turn will be related to his father's health.
The position on analysis (and having regard to the Agreed Statement) is remarkably clear. During the relevant years the Applicant and his wife were resident in Hong Kong and they are again resident there. They lived, and presumably now again live, in an apartment provided by his employers and where their belongings are situated to a substantial extent. The fact that they did not own the apartment in question (and there were two different apartments during the relevant years) is not to the point. Nor is it to the point that they travel on Australian passports. It is possible that they have in mind that at some time in the future they may return to Australia but as to when and whether this will occur is altogether unclear.
I should mention although in brief terms only that there was evidence before the Tribunal of the comparatively recent acquisition by the Applicant of another residence in Sydney; mention was made of it being acquired for the Applicant's mother and fir her convenience but if so one has to wonder why the acquisition was not made by the Applicant's father who appears to be a man of considerable means.
Part D. The law and including case law
Clause 2 of Schedule 1A to the Land Tax Management Act 1956 ("the Act" or "LTMA") (excluding subsection (5) reads 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 strata lot or, subject to this Schedule, land comprised of 2 or more strata lots.
(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".
Mention was made in AS of the relevance of clause 8 of the same schedule. The Applicant is clearly not entitled to relief under clause 8 and it unnecessary to quote its terns in this decision.
The Applicant referred in AS to clause 2(2)(b) as a discretionary power; I refer in this context to clause 26 and also clause 29 of AS which are included as follows:
Clearly the discretionary power in s.63 of the Tribunal Act must not be utilised in such manner that it would defeat the primary purpose of the taxing legislation in this instance. The threshold beyond which the purpose of the legislation would be defeated must not be crossed: cf Gessner & anor v. Chief Commissioner of State Revenue (No.2) [2006] NSWADT 170 at [27] citing French J in Federal Commissioner of Taxation v GM Swift and ors 89 ATC 5101 at 5116 and 5118, Giris Pty Ltd v Chief Commissioner of Taxation of the Commonwealth (1968) 119 CLR 365 at 380/381 and 384, and Doney v Chief Commissioner [2005] NSWADT 133, and Doney v Chief Commissioner (No.2) [2006] NSWADTAP 23 - cases of dispensing discretionary powers in other taxation and vendor duty contexts.
29. At its broadest the policy of the legislation is to tax (by way of annual land tax assessments) land owners who do not in the relevant year own, and then "use and occupy", a particular NSW property as their PPR: see s.7 of the LTM Act. However, when the taxing legislation is looked at more closely it is plain that other factors are referred to that would suggest that the exemption could be permitted at the Tribunal's satisfaction in a broad range of circumstances. For example:
(a) While the taxing power is to apply to the 'owner' of the fee simple, and the PPR exemption in cl.2(2)(b) is similarly addressed, an inquiry for PPR exemption purposes is not so limited to considerations only of what the owner him or herself may have done or not done. It is the family situation of that person that is to be weighed in the exercise of the discretion. That is the inevitable consequence of cl 12(1), which states in terms that only one place of residence may be treated as the PPR of all members of the same family. It is all the circumstances of the owner and the owner's family (a term relevantly defined in cl.12(6) of Schedule 1A).
(b) The legislation further expressly recognises that a family can in the one year own and have more than one residence that is their PPR as a matter of fact - see, cl.12(2). Clearly it must be that 'occupation' of the Property (and any other properties alone or in aggregate) in such circumstances cannot be 'equal'. On the simplest of views, a year has 365 days. Put another way, this clause illustrates that PPR does not turn solely on a test of days or percentage of time the Property is used, or slept in.
(c)Similarly, if a family does own and have two PPR's, they will have to elect which one is to be subject to taxation: cl. 12(3).
(d) The legislation anticipates the possibility of extensive absences. Clause 8 to Schedule 1A sets out criteria pursuant to which a person is deemed to continue to use and occupy a residence owned by them as their PPR (and qualify for the exemption) despite the fact that that person is absent and uses other land (whether or not in New South Wales) has his or her PPR. Such is an explicit recognition in the legislation that absence from a former residence, and ordinary residence elsewhere in rental accommodation (ie, for the purposes of employment), does not of itself displace PPR. But beyond that deeming provision, the legislature does not seek to limit an 'absentee exemption' only to the factual and temporal circumstances outlined in cl.8. Instead, and recognising the potential for any number of factual scenarios to arise, the cl.2(2)(b) discretion arises for consideration where cl.8 is not in its terms engaged.
In my view that the Applicant has incorrectly categorised clause 2(2) (b); it is not a true discretionary power at all. That this is so is demonstrated by the analysis of s. 3(3)(b), the predecessor provision to clause 2(2)(b), in Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50, where the Appeal Panel held at [26]:
"Section 3(3) (b) of the Act does not confer a true discretion on the Chief Commissioner. If the evidence of the factual circumstances supports that a particular parcel of land or a flat is used and occupied by a person as the person's principal place of residence (as defined in Section 3(1) of the Act) as at midnight on 31 December in a particular year, the Chief Commissioner must be "satisfied" of that fact. If the factual circumstances do not support that a parcel of land or a flat is used and occupied by a person as the person's principal place of residence as at midnight on 31 December in a particular year, the Chief Commissioner cannot be "satisfied" of that fact.")
Cases involving a competition between two places of residence usually relate to a taxpayer who owns two residences and spends some time in each of them and thus requiring a factual analysis on an objective basis of which is his or her principal place of residence.
It is important to note that whether or not a particular relevance is owned by a taxpayer is in fact not relevant at all. In Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57 at [24], the first instance Tribunal member had concluded that s 3(3) (a) of the LTMA (the predecessor to clause 2 of Schedule 1A) applied only where the taxpayer is the owner of two properties which were used for residential purposes. The Chief Commissioner successfully appealed that conclusion of law.
The Appeal Panel in Mesini held at [46] that:
"We agree with the Appellant that Section 3(3) (a) of the Act [the predecessor to cl 2 of Schedule 1A] is not limited to apply only to cases where the taxpayer is the owner of two (or more) properties used for residential purposes. It is possible for land or a flat to have been "continuously used and occupied by a person for residential purposes and for no other purpose" within the meaning of Section 3(3) (a) without the person being the "owner" (as defined in Section 3(1) of the Act). Nothing in the language of Section 3(3) (a) of the Act suggests otherwise."
RS contains in clauses 32 to 51 so admirable and clear a description of the applicable law that I include those clauses in full (and notwithstanding the fact that it involves some minor degree of repetition) as follows:
32The LTMA does not provide any technical or legal meaning for the phrase "use and occupy" and accordingly, the phrase takes its ordinary meaning.
33It is apparent that "use" and "occupation" are separate and cumulative requirements. As Bowen JA (with whom Jacobs P agreed) explained in Commissioner of Land Tax v Christie [1973] 2 NSWLR 526"use" has regard to the purpose to which the land is put.
34"Occupation" refers to the relationship between a person and the land in question. In this sense, "occupation" focuses upon what a person does or may do in relation to those premises. Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57 at [44] although it is not synonymous with legal possession, occupation requires possession and control of possession. "Occupation" need not be permanent but does incorporate an element of permanence, mere transitory use being insufficient. There must be an element of regularity, continuity and permanence "Occupation" thus means something of a continuity of possession and residency for reasonably lengthy periods of time.
35For the purposes of s. 10(1) (r) and cl. 2 of Sch. 1A to the LTMA, the Applicant must establish actual occupation of the Property by himself as the owner. In Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [57] Basten J, with whom Giles and Campbell JJ agreed, held that the nature of the PPR exemption is such that it "can only apply to land used and occupied "by the owner" as his or he principal place of residence'" noting that "The exemption does not identify, expansively, land used and occupied by the owner 'or any member of his or her family'..."
36.Section 3 of the LTMA provides that the "principal place of residence" of a person means 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. Contrary to the Applicant's submission, the definition of "principal place of residence" is not inclusive (providing as it does, "principal place of residence" of a person means ...").
37.Given the scheme of the LTMA, it is implicit that the time at which the Chief Commissioner must be satisfied that the land is used and occupied by the owner as the owner's principal place of residence must be as at midnight on the thirty-first day of December immediately preceding the year for which the land tax is levied.
38.The LTMA does not provide any technical or legal meaning for the expression "principal place of residence" and accordingly, the expression has been held to have its ordinary meaning.
39A person's place of residence has been understood as "the place where he eats, drinks and sleeps".
40The use of the term "principal" in the expression suggests that a person may use and occupy more than one residence but that the exemption is only available for the principal place of residence of the person. In Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21 the Appeal Panel held at [27]:
"It was submitted, correctly in our opinion, that the modifier "principal" indicates that a person may have more than one place of residence, and requires that the one which is exempted from Land Tax is the one which is the one which is their main residence."
41In ascertaining whether a particular residence of a person is the principal place of residence of that person it is necessary to use an objective test and the conclusion is determined by considering the extent and quality of use and occupation of the residence in each case (per Fryberg J in Dean v Commissioner of Stamp Duties (Qld)(No 2) [1996] 2 Qd R 557 in considering the meaning of the expression "principal place of residence" found in the Stamps Act 1894 (Qld)).
42The onus to establish one's principal place of residence is usually discharged on the basis of various matters. It is important to note, as observed by the Victorian Civil and Administrative Tribunal in Re Ziino and Commissioner of State Revenue [2004] VCAT 1707 that:
"... while sleeping by itself in a place can be an indication of a principal place of residence, it is not the sole matter to be taken into account. One needs to look at whole indicia of matters ...One needs to look as well at where the Applicant ate; his use of electricity and the furniture and fittings and other matters such as entertainment of friends in the house... Sleeping in a place does not make a residence. It has got to be the whole indicia of things that are done in a home which are described in the cases..."
43In Chief Commissioner of State Revenue v Farringdon (GD) [2004] NSWADTAP 41 ("Farringdon") the Appeal Panel said at [42] said (removing citations):
"First, the words 'principal place of residence' should be given their ordinary meaning in the context in which they appear.
Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively, in the light of the circumstances relating to the actual occupation of the dwelling.
Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue.
Fourthly, to occupy a home as her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose.
Fifthly, the short length of a person's residence, while relevant, is not determinative of the issue. This is so since a recipient's occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of that occupation which provides the element of permanence. The fact that a period of actual occupation is short, as in the present case, will in practice make it harder for a recipient to show that the occupation was as his or her principal place of residence, but it will not make it impossible."
44As set out above, s 3 of the LTMA provides that the "principal place of residence" of a person means 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.
45There are a number of aspects about this definition to note.
46.First, the definition makes no reference to residences that are owned by an Applicant. Thus, whether a person owns a place that they are resident in is irrelevant when considering whether that place is the persons "principal place of residence".
47Secondly, what must be identified is:
where are the places in the world (ie. "within and outside Australia") where an Applicant has a place of residence;
out of those places (regardless of whether they are owned or not), which one is the 'principal' place of residence?
48.As set out above, this involves a detailed factual inquiry or comparison of the various places of residence to determine which one is the "principal" one.
49.Assuming for the moment (which is denied) that 12 Hopetoun Ave. Mosman could be characterised as a 'place of residence' of Patrick (even though, at most he spent about 4% of his time in Australia during the Tax Years), the factual inquiry for the Tribunal is as follows:
the places in the world where Patrick had a place of residence during the Tax Years are:
in Australia, 12 Hopetoun Ave. Mosman; and
in Hong Kong:
from July 2003 to about May 2009 - Flat G, 10F Block 36 Laguna City, Hong Kong; and
from about May 2009 to Oct 2010 - Flat E, 26/F BLK 28, Laguna City, Hong Kong.
after comparing the Australian place of residence with each Hong Kong place of residence, which one is the "principal" place of residence?
50 In his final submissions, the Applicant seeks to emphasise the connection to the Property and downplay the connection to the residences in Hong Kong.
51 However, the authorities set out above make plain that the correct analysis involves a comparative assessment of the circumstances relating to the actual occupation of each dwelling; namely, the nature, extent and quality of his occupation of each place of residence. Relevant factors include:
where did the Applicant spend the most amount of time?
where did the Applicant mostly eat, sleep and entertain friends?
where did the Applicant's spouse and children primarily reside?
where were the Applicant's personal effects primarily kept - eg. clothes, furniture, books, photographs?
The evidence before the Tribunal indicates in the clearest possible terms that the Applicant and his wife were and regarded themselves during the relevant years as residents of Hong Kong and thus when they came to Australia did so as visitors and not as returning residents. Landing cards and other documents both when arriving in or departing from Australia were completed on this basis. The evidence before the Tribunal indicates moreover that throughout the relevant years the Applicant and his wife resided in an apartment provided by Tektron and which they regarded as their home and in which they kept a substantial proportion of their belongings.
It is conceivable that the Applicant and his wife do have in mind the possibility that they may at some time in the future return to Australia but all of the evidence before the Tribunal leads me to conclude that much will depend on the extent to which the Applicant is able in the light of his precarious health to cope with his job in Hong Kong. The Tribunal was informed that the Applicant obtained suitable employment in Hong Kong because it was not available to him in Australia...
As I have noted this matter has produced a surprising large volume of evidence; I have dealt with it in somewhat cursory fashion simply because I do not think that a more thorough examination of it is necessary.
Part E Conclusion on the merits.
It is clear on the evidence before me that at no time during the relevant years did the Applicant occupy the Property as his principal place of residence. On the contrary he occupied an apartment in Hong Kong as his principal place of residence and the fact that he was not the owner of that apartment is not to the point. In respect of the (subjective) intentions of the Applicant there was as I have noted, evidence before the Tribunal as to the recent purchase of another residence in Sydney by the Applicant. It follows that as regards all of the relevant years the decision under review must be affirmed
Part F Costs
The Chief Commissioner has applied for an order for costs in accordance with section 88 of the Administrative Decisions Tribunal Act;
In a recent letter addressed by Gadens, the Applicant's solicitors, to the judicial member presiding in this matter it was suggested that the question of costs should be considered and dealt with in the light of this decision on the merits. As set out previously the Respondent's solicitors have indicated that they are agreeable to this course of action,
Questions of costs in this jurisdiction and in particular in the light of comparatively recent amendments to the legislation can be complex. In my view the suggestion by the Applicant is in all the circumstances sensible and should be adopted. It follows that I do not make any order as to costs at this stage but the Respondent is entitled, if he so desires, to pursue the application for costs referred to in his final written submissions, and in such event the terms and conditions set out in clause 2 of the decision proper appearing at the commencement of this decision will apply to both parties. This order does not in any way affect a separate costs order made against the Applicant at an earlier time and before the hearing commenced.
Decision last updated: 19 September 2011
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