Matuschka Holdings Pty Ltd v Chief Commissioner of State Revenue

[2007] NSWADT 60

CITATION:	Matuschka Holdings Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 60
DIVISION:	Revenue Division
PARTIES:	APPLICANT Matuschka Holdings Pty Ltd RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	066106
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	8 February 2007
DATE OF DECISION:	21 March 2007
BEFORE:	Verick A - Judicial Member
CATCHWORDS:	Land tax exemption - principal place of residence
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Land Tax Management Act 1956 Trustee Companies Act 1964
REPRESENTATION:	APPLICANT P Matuschka, agent RESPONDENT A Gerard, solicitor
ORDERS:	The decision under review is affirmed.

1 This is an application for review of a decision made by the respondent to disallow the applicant’s objection to an assessment issued under the Land Tax Management Act 1956 (“the Act”) in respect of the 2006 land tax year. The decision that the applicant seeks a review is the refusal by the respondent of a claim for a principal place of residence exemption in relation to properties owned by the applicant.

2 The properties are occupied by shareholders of the applicant with the exception of one, which is occupied by a relative of the shareholders.

3 The parties have given their consent that the hearing in this matter be dispensed with and the matter determined by considering the documents lodged under section 53 of the Administrative Decisions Tribunal Act 1997 (“the ADT Act”) and the written submissions and other material lodged by the parties. The Tribunal is satisfied that this is a matter in which the issues for determination can be adequately determined in the absence of the parties. The Tribunal is allowed to take this course under s 76 of the ADT Act.

Agreed Facts

4 The background facts are not in dispute and the parties have provided the Tribunal with the following agreed statement of the relevant facts:

“1. These proceedings are an Application made by Matuschka Holdings Pty Ltd (“Matuschka Holdings”) on 18 September 2006 for Review of a Decision made by the Chief Commissioner of State Revenue.

2. The Application was originally brought in the name of Paul David Matuschka, a shareholder and Director of Matuschka Holdings. The Application has been amended and is now brought in the name of Matuschka Holdings.

3. The Application seeks review of the Chief Commissioner of State Revenue’s (“the Chief Commissioner”) decision to disallow Matuschka Holdings objection to the Chief Commissioner’s decision to issue a Land Tax Notice of Assessment for the 2006 Land Tax Year, to Matuschka Holdings, for the 2006 Land Tax Year, in the sum of $6,475.00.

4. On 21 March 2006, the Chief Commissioner issued a Land Tax Notice of Assessment (“the assessment”) to Matusckha Holdings, for the 2006 Land Tax Year, in the sum of $6,475.00. The assessment was based on the following land owned by Matuschka Holdings as at 31 December 2005:

366 Townsend Street, Albury, NSW, 2640;

72 Bartholomew Street, Lavington, NSW, 2641;

571 Ebden Street, Albury, 2640; and

12 Callistemon Court, Ulladulla, 2539.

5. On 6 April 2006, Matuschka Holdings objected to the assessment made by the Chief Commissioner.

6. On 2 August 2006, the Chief Commissioner notified Matuschka Holdings that the objection to the assessment had been disallowed.

7. Matuschka Holdings is an Australian Proprietary Limited Company (ACN 090 012 105), limited by shares. Matuschka Holdings was registered in Victoria on 18 October 1999. Mr Paul David Matuschka is a current Director of Matusckha Holdings. Mr Michael John Matuschka is a current Director and the Current Secretary of Matuschka Holdings.

8. Matuschka Holdings has issued 294 shares. Shareholders of Matusckha Holdings and their respective holdings, are as follows:

Michael & Chica Matusckha – 133 Shares Held – (together as Okazaki-Matuschka Family Trust);

Jamie Matusckha – 92 Shares Held;

Dariene Triptree – 10 Shares Held; and

Paul Matusckha – 59 Shares Held.

9. The land at 366 Townsend Street Albury, NSW (“366 Townsend Street”) Folio Identifier: 3/4/758013) is comprised of 4 units, being 1/366, 2/366, 3/366, and 4/366 Townsend Street. 366 Townsend Street was purchased by Matusckha Holdings on 14 May 2002. Matuschka Holdings is the owner of 366 Townsend Street and has been since the purchase of the land on 14 May 2002.

10. 1/366 Townsend Street is the home of Campbell Matuschka, the father of Michael, Jamie and Paul. Units 2/366, 3/366 and 4/366 Townsend Street are rented out to tenants.

11. The land at 72 Bartholomew Street, Lavington, NSW, 2642 (“72 Bartholomew Street”) (Folio Identifier: 317/1011072) was purchased by Matuschka Holdings on 23 June 2004. Matuschka Holdings is the registered owner of 72 Bartholomew Street and has been so since its purchase of the land on 23 June 2004. The land at 72 Bartholomew Street is vacant land.

12 The land at 571 Ebden Street, Albury, NSW 2640 (“571 Ebden Street”) (Folio Identifier 3/37978) was purchased by Matuschka Holdings on 10 December 2004. Matuschka Holdings is the registered owner of 571 Ebden Street and has been so since the purchase of the land on 10 December 2004. 571 Ebden Street was the home of Jamie Matuschka and Darlene Triptree and is now the home of Jamie Matuschka.

13 The land at 12 Callistemon Court, Ulladulla, NSW, 2539 (“12 Callistemon Court”) (Folio Identifier: 65/1076351) was purchased by Matuschka Holdings on 12 May 2005. Matuschka Holdings is the registered owner of 12 Callistemon Court and has been so since its purchase of the land on 12 May 2005. 12 Callistemon Court is the home of Michael and Chica Matuschka.”

5 Pursuant to sections 7 and 8 of the Act, land tax is charged on land owned as at midnight on 31 December immediately preceding the year for which the land tax is levied. Under s 9(1) of the Act land tax is payable by the owner of the land on the taxable value of all land owned by the owner which is not exempt from taxation under the Act.

6 Section 10 of the Act sets out various categories of land that are exempt from land tax under the Act. Section 10 in relation to the “principal place of residence exemption” provides as follows:

“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,”

7 The legislation dealing with the principal place of residence exemption is contained mainly in Schedule 1A of the Act. The provisions relevant to this matter in Schedule 1A were, in the 2006 land tax year, as follows:

Schedule 1A Principal place of residence exemption

Part 1 Preliminary

1 Definitions

(1) In this Schedule:

principal place of residence exemption – see clause 2.

residential land – see clause 3.

taxing date – means midnight on the thirty-first day of December

Part 2 Principal place of residence exemption

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 on 1 January 2004 or any succeeding year, if:

(a) the land has a land value in respect of the year of less than the premium tax threshold, and

(b) the land is:

(i) a parcel of residential land, or

(ii) 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.

3 Residential land - meaning
(1) In this Schedule, residential land means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes, other than a building or buildings:
(a) comprised of lots within s strata plan or residential units, or

(b) containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner, or

(c) from any part of which income is derived.

(2) Land does not cease to be used and occupied as provided by subclause (1) by reason of there being on that land any building or improvement that is used or occupied for a purpose ancillary to the purposes for which the building is, or the buildings are, designed, constructed or adapted.

Note. Clause 4 allows one residential occupancy to be disregarded in applying the principal place of residence exemption. Clause 5 allows the use of land for purposes ancillary to a business at a different place to be disregarded in certain circumstances

…

Part 4 Restrictions

11 Exemption does not apply to land owned by companies and trustees

(1) Land is not exempt from taxation under the principal place of residence exemption if:

(a) the land is owned by a company, unless the land is owned by a trustee company acting in its representative capacity or a company acting in its capacity as trustee of a concessional trust, or

(b) the owner of the land, or each of the joint owners, who use and occupy the land as a principal place of residence is an owner only by reason of being a trustee, or

(c) the land is owned, or jointly owned, by a person who is a trustee acting in the person’s capacity as trustee of a special trust.

Note. The expression trustee company (as referred to in subclause (1) (a)) is defined in section 3 (1).

(2) For the purposes of the principal place of residence exemption, land that is owned by a company acting in its capacity as trustee of a concessional trust is taken to be used and occupied as the principal place of residence of the owner of the land only if the person, or one of the persons, who so uses and occupies the land is a person who is a beneficiary of the trust.

(3) For the purposes of this clause, land that is a parcel of residential land or a lot under the Strata Schemes (Freehold Development) Act 1973 is owned by a company if:

(a) the land is owned by a company, or

(b) the land is owned on behalf of a company and is land of which a mortgagee or a person (by way of security for money) is in possession, or

(c) the land is owned by a trustee for or on behalf of a company. or

(d) a company is a joint owner of the land with any other person.

(4) For the purposes of this clause, land that is a lot under the Strata Schemes (Leasehold Development) Act 1986 is owned by a company if:
(a) the lot is leased by a company, or

(b) the lot is leased on behalf of a company and is land of which a mortgagee or person (by way of security for money) is in possession, or

(c) the lot is leased by a trustee for or on behalf of a company, or

(d) a company is jointly assessable in respect of the lot with any other person.

(5) For the purposes of this clause, a person is a beneficiary of a trust if the person is a person, or a member of a class of persons:
(a) in whose favour, by the terms of the trust, capital or income the subject of the trust may be applied:

(i) in the event of the exercise of a power or discretion in favour of the person, or

(ii) in the event that a discretion conferred under the trust is not exercised, or

(b) entitled or permitted, under the terms of the trust, to use and occupy land that is the subject of the trust.

8 Definitions of terms relevant to this review are found in s 3 of the Act. A “company” is defined to include “all bodies or associations corporate or incorporate” and a “trustee company” is defined to mean “a trustee within the meaning of the Trustee Companies Act 1964 or the Public Trustee”.

Discussion

9 The issue for determination by the Tribunal is whether the respondent’s decision to disallow the applicant’s objection to the assessment for the 2006 land tax year is the correct and preferable decision. For that purpose it is necessary to determine whether the applicant is entitled to an exemption from land tax in respect of land owned by the applicant at 1/366 Townsend Street, Albury, 571 Ebden Street, Albury and 12 Callistemon Court, Ulladulla on the basis of the principal place of residence exemption contained in Clause 2 of Schedule 1A of the Act.

10 The applicant’s case for exemption is quite simply expressed by Paul Matuschka, a director of the applicant, as follows:

“Largely the company was formed as a family company to enable us to support each other in our lives and our parents lives. Primarily the company owns homes that each of the share holders reside as our principal place of residences.

I argue that the NSW land tax should not be applied to principal place of residences for it’s share holders.”

11 The applicant has not referred to any particular provision of the Act or any case law to support the above submission.

12 The respondent’s case is essentially based on Clause 11(1)(a) which provides that land is not exempt from taxation under the principal place of residence exemption if the land is owned by a company, unless the land is owned by a trustee company acting in its representative capacity or a company acting in its capacity as a trustee of a concessional trust. The respondent also submits, “that this is not a case, which could fall within s 21A of the Act”.

13 There is no dispute in this matter that the applicant is an Australian registered proprietary limited company, limited by shares. It is also not disputed that in terms of Clause 11(3) (a) of Part 4 of Schedule the applicant owned the properties in question in the 2006 land tax year.

14 A relative of the principal shareholders occupied unit 1/366, Townsend Street, whilst shareholders and their families occupied the other two properties in the relevant land tax year. The properties were used and occupied for residential purposes and in each case as a principal place of residence.

15 The principal place of residence exemption is unfortunately denied under Clause 11(1)(a) to land owned by a company, notwithstanding the occupation and use by its shareholders as residential land. The exemption is, however, allowed if a trustee company acting in its representative capacity or a company acting in its capacity as a trustee of a concessional trust owns the land.

16 In the present matter, there is no evidence or any suggestion by the applicant that it owns the properties as a trustee company acting in its representative capacity or as a company acting in its capacity as a trustee of a concessional trust.

17 A “trustee company” is defined in s 3(1) of the Act to be a trustee company within the meaning of the Trustee Companies Act 1964. Section 3 of the Trustee Companies Act 1964 provides that a trustee company means any company listed in the First Part of the Third Schedule of the Trustee Companies Act 1964. On the relevant date, 31 December 2005, the applicant was not listed in the First Part of the Third Schedule.

18 Under s 3B of the Act, a trust is a “concessional trust” If:

(a) the trust property includes land, and

(b) each person who is a beneficiary of the trust is:

(i) a person under the age of 18 years, or

(ii) a person in respect of whom a guardianship order is in force under the Guardianship Act 1987, or

(iii) a person in the target group within the meaning of the Disability Services Act 1993.

19 In this matter, no claim was made by the applicant, nor was there any evidence, that the applicant was a trustee of a concessional trust in terms of s 3B of the Act.

20 Section 21A of the Act was brought to the attention of the Tribunal by the respondent although no reliance has been placed on the section by the applicant. Section 21A was inserted in the Act in 1990 to simplify the assessment of land tax on Company Titled Land by deeming owners of shares in Company Titled Units, because of their exclusive right to occupy a part of the building, to be owners under the Strata Titles Act 1973. The owners are allowed the principal place of residence exemption if they occupy and use the relevant unit as their principal place of residence.

21 Section 21A has, however, no relevance in relation to the properties owned by the applicant and subject of this review. The applicant owned the properties and Clause 11 (1) (a) clearly denied the applicant the principal place of residence exemption.

Decision

22 Accordingly, the decision of the respondent to disallow the applicant’s objection against the respondent’s refusal to exempt the relevant properties from land tax was the correct and preferable decision in the circumstances of this case. For these reasons, the Tribunal affirms the decision under review.