McIlroy v Chief Commissioner of State Revenue
[2008] NSWADT 90
•19 March 2008
Set aside by Appeal:
CITATION: McIlroy and anor v Chief Commissioner of State Revenue [2008] NSWADT 90 DIVISION: Revenue Division PARTIES: APPLICANTS
RESPONDENT
James Roger McIlroy and Jane Massett Strang
Chief Commissioner of State RevenueFILE NUMBER: 076110 HEARING DATES: 5 March 2008 SUBMISSIONS CLOSED: 5 March 2008
DATE OF DECISION:
19 March 2008BEFORE: Handley R - 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
State Revenue Legislation Further Amendment Act 2003
Taxation Administration Act 1996CASES CITED: Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8
Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41
Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19
Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57
Commissioner of State Revenue v Aldridge [2003] NSWADTAP 50
Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68
McNally & Anor v Chief Commissioner of State Revenue [2003] NSWSC 1118
Prager v Chief Commissioner of State Revenue [2007] NSWADT 23REPRESENTATION: APPLICANTS
RESPONDENT
M Baird, barrister
H El-Hage, solicitorORDERS: The Respondent’s decision to assess the Applicants for Land Tax for the 2002, 2003, 2004, 2005 and 2006 Land Tax years is set aside, and a decision substituted that James Roger McIlroy was entitled to the principal place of residence exemption in respect of his Palm Beach property for these Land Tax years.
REASONS FOR DECISION
1 On 12 September 2007, James Roger McIlroy applied to the Tribunal for a review of the decision of the Chief Commissioner of State Revenue (‘the Respondent’) disallowing Mr McIlroy’s objection to a notice assessing Mr McIlroy and his sister, Jane Massett Strang, as being liable for the payment of Land Tax on their property at 40 Sunrise Road, Palm Beach, New South Wales (‘the Palm Beach property’) on the ground that it was not their principal place of residence. By letter dated 20 November 2007, Ms Strang consented to be joined as a party to this application, although she stated she has no beneficial interest in the property.
Background
2 Mr McIlroy’s family has owned the Palm Beach property since the 1920s. Mr McIlroy and Ms Strang (‘the Applicants’) inherited it on the death of their mother in 1972. They hold the property as tenants in common with Ms Strang holding her share on trust for her brother. Mr McIlroy travels extensively interstate and overseas in the course of his work. His principal office has been in Melbourne for some years and Mr McIlroy owns a half share of a property at 33 Evandale Road, Malvern, Victoria (‘the Malvern property’), where his partner, Nichola Keys, lives with their two children.
3 On 3 April 2006, Mr McIlroy completed a Land Tax Questionnaire stating the Palm Beach property was his “primary residence”. Following an investigation by the Office of State Revenue (‘OSR’), on 11 July 2006 the Applicants were issued with a notice assessing them as being liable for Land Tax for the Land Tax years 2002 to 2006, with the amount due being $161,930. As at 1 July 2005, the valuation of the Palm Beach property for Land Tax purposes was $3,430,000.
4 In a letter to the OSR dated 28 September 2006, Mr McIlroy stated that the Palm Beach property was his principal place of residence. By letter dated 13 November 2006, the OSR invited Mr McIlroy to provide it with further information to support his claim. By letter dated 15 November 2006, the State Revenue Office, Victoria provided the OSR with information regarding Mr McIlroy’s part ownership of the Malvern property.
5 By letter dated 8 January 2006 (it appears that the reference to the year 2006 was in error and the year was, in fact, 2007), Mr McIlroy reaffirmed his assertion that the Palm Beach property was his principal place of residence. On 17 January 2007, the OSR issued the Applicants with a Land Tax notice of assessment for the Palm Beach property for the 2007 Land Tax year in the amount of $47,949.30. The total Land Tax owing as at that date, including interest, was $218,374.00.
6 By letter dated 20 February 2007, Mr McIlroy objected to the assessment and provided copies of telephone and electricity accounts for the Palm Beach property in his name and paid by him. By letter dated 19 June 2007, a delegate of the Respondent disallowed Mr McIlroy’s objection, noting that the Malvern property was claimed by Mr McIlroy as his principal place of residence for the purposes of the Victorian Land Tax legislation. This letter, addressed to the Palm Beach property, was ‘returned to sender’. A second letter, dated 27 June 2007, addressed to the Malvern property, was also ‘returned to sender’. A third letter, dated 19 July 2007, was addressed to Mr McIlroy’s business address at Glenferrie Road, Malvern. It was this letter that Mr McIlroy attached to his application to the Tribunal, filed on 12 September 2007, in which he referred to the date of the decision in respect of which he sought a review as 19 July 2007.
7 The Respondent notes that the application to the Tribunal was filed out of time and neither objects nor consents to an application for an extension of time. The Applicants note that the delegate’s letter dated 19 July 2007 stated that a review by the Tribunal could be requested within 60 days of receipt of the letter, and that the application was filed within 60 days of 19 July 2007.
8 Pursuant to section 55(1)(d) of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’), the time for the filing of an application for review runs from the day following the day on which the internal review is taken to have been finalised, which was 19 June 2007. Thus, the application for review, filed on 12 September 2007, was made more than 60 days later, and, consequently, out of time. However, in my view, the Applicants have given a reasonable explanation for the delay in filing their application for review and, there being no objection from the Respondent, I therefore extend the time for the making of their application up to and including 12 September 2007, pursuant to the power in section 57(1) of the ADT Act.
The Relevant Legislation
9 The principal issue in dispute in this case is whether the Palm Beach property is Mr McIlroy’s ‘principal place of residence’ for the purposes of liability for payment of Land Tax.
10 Pursuant to sections 7, 8 and 9 of the Land Tax Management Act 1956 (‘the LTM Act’), Land Tax was chargeable on the taxable value of the Palm Beach property land based on the ownership of the land as at midnight on the 31 December of each year. Thus, the Applicants were presumed to be liable for Land Tax on their land for the 2002, 2003, 2004, 2005 and 2006 Land Tax years based on their ownership of the land on 31 December 2001, 2002, 2003, 2004 and 2005, respectively, unless the land was exempted from tax.
11 As at 31 December 2001, the taxing date for the 2002 Land Tax year, section 10(1)(r) of the LTM Act provided for an exemption in respect of land, including a parcel of residential land, “that is used and occupied as the principal place of residence of the owner of the land”. There is no dispute that the Palm Beach property is ‘residential land’ within the definition in section 10(1D). ‘Principal place of residence’ is defined in section 3(1):
“ 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.”
Section 3(3) stated:
“For the purposes of this Act, in respect of any year in respect of which taxation is leviable or payable, land or a flat is not used or occupied as the principal place of residence of the person unless:
(a) that land or flat and no other land or flat has, since before the first day of July that last preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for no other purpose, or
(b) in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person’s principal place of residence.”
12 No relevant amendments were made to the LTM Act until 31 December 2003 when the State Revenue Legislation Further Amendment Act 2003 took effect. Amendments to the LTM Act included the transfer of the substantive provisions in sections 3(3) and 10(1)(r) to a new Schedule 1A, which provided relevantly as follows:
“Part 1 Preliminary
1 Definitions
(1) In this Schedule:
(2) For the purposes of this Schedule, a reference to the owner of land includes, if there are joint owners, any one or more of those joint owners.
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:
(2) Land is not used and occupied as the principal place of residence of a person unless:
(a) the land has a land value in respect of the year of less than the premium tax threshold, and a parcel of residential land, or
(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.
(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.
(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.
(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:
(2) Land does not cease to be used and occupied as provided by sub-clause (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.
(a) comprised of lots within a 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.
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 conducted at a different place to be disregarded in certain circumstances.
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 of residence 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:
(7) A person is the "spouse" of another person if:
(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.
(8) ...
(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 (Relationships) Act 1984.
(9) A person who is the child or step-child of another person is a "dependent child" or a "dependent step-child" if:
(10) ...”
(a) the person is under 18 years of age and is not legally married.
13 Pursuant to section 100(3) of the Taxation Administration Act 1996, the onus is on the Applicants to prove their case in an application for review.
The Applicants’ Evidence
14 The Applicants provided a statement from Ms Keys dated 4 December 2007 and statements from Mr McIlroy dated 4 December 2007 and 5 March 2008, together with miscellaneous utility bills for the Malvern property for the period May 2004 to June 2006. Mr McIlroy also gave oral evidence at the hearing.
15 In her statement, Ms Keys said:
“2. I own a half-share of a house in Malvern, Victoria where I live with my partner and children.
3. To the best of my knowledge and recollection, I have never made an election to claim the principal place of residence for me or my family as Malvern.”
16 Mr McIlroy said the Palm Beach property has been owned by his family since the 1920s and is part of his family heritage. His family photographs are kept there and his furniture, clothes and personal possessions. He and his sister, Ms Strang, inherited the Palm Beach property from their mother in 1972. His sister holds her share in trust from him. She lives in the next door property. Mr McIlroy said he regards the Palm Beach property as his home and he lives there whenever he is in Sydney. He has never owned any other property in NSW. He has many friends living in the same road. The surf club there has been a part of his life. The property has never been rented out and is not available for use except by his family. Mr McIlroy pays the utility bills for the property, including the telephone, and he owns a car registered in New South Wales. Bills for the property are forwarded to his business address in Melbourne as a matter of convenience because he is often away.
17 Mr McIlroy said he is an art consultant. From 1977, he was employed by Christie’s in London, returning to Australia in 1989 as Managing Director and Deputy Chairman of Christie’s Australia. From that time, he was also Deputy Chairman of other associated Christie’s companies operating in Asia, including Christie’s Thailand, Christie’s Singapore, Christie’s Hong Kong and Christie’s Japan. Christie’s Australia was incorporated in New South Wales and had an office in Edgecliff, but the head office of the business was in Melbourne because Melbourne is the centre of the art market in Australia. Christie’s used to conduct two seasons of art auctions a year in Melbourne and one in Sydney. His work therefore drew him to Melbourne. Christie’s Australia ceased operations in June 2006 and Mr McIlroy was retrenched.
18 In the years 2002 to 2006 while he was working for Christie’s, Mr McIlroy estimated that he spent about one third of his time in Sydney, living at the Palm Beach property, about one third of his time in Melbourne, living at the Malvern property, and about one third of his time travelling interstate and overseas. While he was working for Christie’s, his personal mail would be sent to Christie’s head office at Darling Street, South Yarra. Since being retrenched, Mr McIlroy has established his own fine art business, which is headquartered in the UK, and maintains a mailing address at a business centre in Glenferrie Road, Malvern, to which all his personal mail is also sent. It is convenient to use one address for all his mail because he is often away travelling and his mail may need to be dealt with in his absence.
19 Mr McIlroy said he has two children from his first marriage, aged 18 and 20. This marriage ended in divorce in 1994, with his ceding to his ex-wife his half share in the property they owned in Camberwell, Victoria. Mr McIlroy’s 18 year son old lives with his mother; the 20 year old has been living at the Malvern property, paying rent, but is about to go overseas. Mr McIlroy and Ms Keys, who are not legally married, have two children, aged six and eight, who live at the Malvern property except when on holiday with Mr McIlroy in Sydney. Ms Keys also has a 17 year old daughter from a previous relationship.
20 Mr McIlroy said that although he and Ms Keys each own a half share of the Malvern property, the utility bills for the property are the responsibility of Ms Keys and paid by her. To the best of his knowledge and recollection, he has never made an election to claim the Malvern property as the principal place of residence for either him or his family. Mr McIlroy acknowledged that he is enrolled to vote in Victorian and Federal elections at the Malvern property. Since his mailing address has been in Melbourne, it has also been convenient to have his electoral registration there.
21 In cross-examination, Mr McIlroy was asked about the telephone usage shown by his telephone bills for the Palm Beach property. He said he uses his mobile phone and Blackberry for personal and business communications wherever he is, and so his landline bill is more indicative of when his children are with him at Palm Beach.
22 Mr McIlroy said he has never sought to hide the fact that he has personal and business connections in Victoria. He only became aware of liability for Land Tax in New South Wales when he received a letter from the OSR in 2006. He was completely ignorant of the fact that liability might arise as a result of the Malvern property, which has an improved land value of $950,000. He acknowledged that he has never approached the Victorian tax authorities to tell them he was not claiming the Malvern property as his principal place of residence. He has only been required to make an election since being approached by the OSR. Mr McIlroy accepts that a favourable Tribunal decision will lead to a Land Tax liability for the Malvern property.
The Respondent’s Evidence
23 The Respondent provided statements from Gerardus Emmerick dated 21 February 2008 and Jamal Maroon dated 19 February 2008. Mr Emmerick, an officer employed with the OSR, stated that he had contacted the State Revenue Office, Victoria, which confirmed that Mr McIlroy has had a principal place of residence Land Tax exemption applied in respect of the Malvern property since 18 August 1997. Ms Maroon’s statement concerns the result of a land title search conducted in respect of the Malvern property, which confirms Mr McIlroy’s and Ms Keys’ joint ownership of the Malvern property.
The Applicants’ Submissions
24 Mr Baird, for the Applicants, said they accept that clause 12 of Schedule 1A of the LTM Act is an anti-avoidance provision, and that only one exemption from Land Tax can be claimed by each family, although different members of the family may have different principal places of residence. During the relevant period, Mr McIlroy has always treated the Palm Beach property as his principal place of residence. Ms Keys and her children’s principal place of residence is clearly the Malvern property, although there has never been any formal election to treat the property as such. No Land Tax has been paid on the Malvern property because the Victorian tax authorities incorrectly treated the property as exempt. Neither Mr McIlroy nor Ms Keys have ever elected to make the Malvern property their principal place of residence. A result of a successful outcome in these proceedings will be a Land Tax liability in respect of the Malvern property under the Victorian legislation.
25 Mr Baird said the nature of Mr McIlroy’s business is that it involves extensive travel. The evidence shows that Mr McIlroy has continually used the Palm Beach property as a place of residence for many years. It has never been available for any other purpose and, for example, has never been let. Mr McIlroy’s time in Victoria has been dictated by his business. While in Victoria, he uses the Malvern property. Neither property is used exclusively. The LTM Act recognises that a person may have two or more places of residence. In this case, the Tribunal, taking into account the factual matrix, must determine which of the two properties is Mr McIlroy’s principal place of residence.
26 Mr Baird noted that clause 12(5) of Schedule 1A is a default provision that provides that where no election is made, the Respondent is to treat the residence that has the highest land value for Land Tax purposes as the principal place of residence for all members of the family. Mr Baird submitted that Mr McIlroy’s inaction in relation to the Malvern property should not prejudice him in relation to Land Tax liability for the Palm Beach property. The Palm Beach property, having a higher land value for Land Tax purposes than the Malvern property, should be treated as Mr McIlroy’s principal place of residence by default.
27 Despite his registration for voting in Victoria, Mr McIlroy has the most connections with his Palm Beach property, there is evidence of the permanency of his continuing residence there, he has called it his home for an extensive time and has intended that it be his principal place of residence. Despite his using a mobile phone and Blackberry for his personal and business communications, Mr McIlroy has always maintained his landline for the property. The Telstra telephone bills for the landline suggest that his children and others visit him there. Mr McIlroy has not provided his mobile phone and Blackberry bills because they would not establish the place from which the communication was made. His telephone and electricity bills for the Palm Beach property have been sent to his business address in Melbourne throughout this period, which supports his contention that he did not treat the Malvern property as his principal place of residence, as does the fact the bills for the Malvern property were in Ms Keys’ name.
28 Mr Baird referred the Tribunal to the decision of Gzell J in Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 (‘Flaracos’), where His Honour said, at paragraph 29, that “continuous physical presence on the land is not required to constitute continuous occupation ... So long as the person retains the right to possession and controls possession, that person remains in occupation”. Thus, despite Mr McIlroy’s trips interstate and overseas, he retained possession and control of the Palm Beach property, and should be treated as being in ‘continuous occupation’.
29 Mr Baird referred to the decision in Prager v Chief Commissioner of State Revenue [2007] NSWADT 23, at paragraph 41, where Block ADCJ referred to the discussion of what is meant by the term ‘principal place of residence’ by the Appeal Panel in Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41 (‘Ferrington’), at paragraph 42. While a person’s intentions in relation to a property are not determinative of whether it is the person’s principal place of residence, they are nevertheless relevant. Mr Baird also referred to the decision in Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57 (‘Mesiti’), where the Appeal Panel discussed the requirement for continuous use and occupation, and found, as an objective fact, that the respondent had stronger ties of connection to one property than the other.
30 Mr Baird noted that before 31 December 2003, there was no specific limitation on a family claiming only one exemption from Land Tax. However, the facts in this case remained unchanged over the years 2002 to 2006. The Applicants submit that the operation of the LTM Act and clause 12 of Schedule 1A provide an appropriate basis for a principal place of residence exemption for the Applicants in respect of the Palm Beach property. Mr Baird made no submission on the imposition of interest by the Chief Commissioner.
The Respondent’s Submissions
31 Mr El-Hage, for the Respondent, emphasised that a person can only have one principal place of residence under the LTM Act: Aronstan v Chief Commissioner of State Revenue [2008] NSWADT 8 (‘Aronstan’), at paragraph 36. He noted, however, that this decision is under appeal. Mr McIlroy received the principal place of residence exemption under the relevant Victorian legislation for the Land Tax years 2002 to 2006 in respect of the Malvern property. Thus, the principal place of residence exemption under the LTM Act could not apply to the Palm Beach property for those same years.
32 From the 2004 Land Tax year, clause 12 of Schedule 1A has applied so that where members of the same family occupy two or more properties as their respective principal places of residence, only one exemption can be claimed. In such a situation, a family can elect which of the properties should be treated as their principal place of residence. In default of an election, clause 12(5) applies, requiring the Chief Commissioner to treat the property with the highest land value for Land Tax purposes as the principal place of residence of all members of the family.
33 However, for clause 12 to operate, the objective facts must establish that different members of the same family use and occupy more than one residence as their principal place of residence. Clause 12 does not permit a person to simply nominate one of the two or more places of residence for the principal place of residence exemption: Aronstan at paragraph 57. The Respondent submits that clause 12 is not enlivened in Mr McIlroy’s case and has no application, because the facts do not establish that the Palm Beach property was being used and occupied as the principal place of residence of a member of his family. In respect of the Land Tax years before clause 12 commenced operation in the 2004 Land Tax year, the exemption still does not apply because, in the same way, the facts do not establish that the Palm Beach property was being used and occupied as the principal place of residence of a member of Mr McIlroy’s family.
34 Mr El-Hage said it is not sufficient for Mr McIlroy and his family to have intended to use the Palm Beach property as their principal place of residence: Chief Commissioner of State Revenue v Aldridge [2003] NSWADTAP 50 (‘Aldridge’), at paragraph 14. Whether they used and occupied the property as their principal place of residence is a question of fact to be determined objectively. Mr El-Hage noted that in her statement dated 4 December 2007, Ms Keys referred to the Malvern property as “where I live with my partner and children”. Mr McIlroy’s evidence is that the children only stay at the Palm Beach property during their holidays. Moreover, during the Land Tax years 2002 to 2006, Mr McIlroy worked for a company based in Melbourne, requiring him to spend considerable time there when not travelling, his personal address was in Melbourne, he was registered to vote in Melbourne, and his telephone bills for the Palm Beach property, addressed to his business address in Victoria, indicate only limited stays there.
35 Mr El-Hage referred to the decision of Gzell J in McNally & Anor v Chief Commissioner of State Revenue [2003] NSWSC 1118 (‘McNally’), where the appellants owned and occupied two residences. His Honour held, at paragraph 47, that the first issue to be decided was whether one of the premises in question constituted the principal place of residence of the owner or one or more of the joint owners of the land. Mr El-Hage said there is no dispute that the Palm Beach property is Mr McIlroy’s residence and that he stays there some of the time. But the evidence does not establish that it is his principal place of residence. The onus is on the Applicants to establish the exemption and their evidence does not support this. Mr El-Hage submitted that the bills for the Malvern property do not assist in the determination.
36 With regard to the market rate interest imposed by the Respondent, Mr El-Hage referred to the principles governing the imposition and remission of interest considered in the Appeal Panel decision in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19. He submitted the Respondent’s decision to impose market rate interest was correct and there are no exceptional circumstances justifying remission of the market rate interest imposed.
Discussion
37 As stated above, the principal issue to be decided is whether Mr McIlroy’s Palm Beach property was his ‘principal place of residence’. For the Land Tax years 2002 and 2003, section 10(1)(r) of the LTM Act provided an exemption where the land was “used and occupied as the principal place of residence of the owner of the land”. Relevantly, section 3(3)(a) required that the land had been “continuously used and occupied for residential purposes and for no other purpose”. For the Land Tax years 2004, 2005 and 2006, Schedule 1A, clause 2 provides an exemption for land “used and occupied as the principal place of residence of the owner of the land, and for no other purpose”. Clause 2(2)(a) requires that the land has been “continuously used and occupied for residential purposes and for no other purpose”. Clause 12(1) limits each family to one principal place of residence exemption.
38 The applicable definition of ‘principal place of residence’ in section 3(1) of the LTM Act, set out above, is the same for all the Land Tax years in issue, and applies where a person has one or more places of residence within and outside Australia.
39 I note that in Flaracos, at paragraph 29, Gzell J said that, in his opinion, “continuous physical presence on the land is not required to constitute continuous occupation”. In Mr McIlroy’s case, the evidence is, in my view, clear that the Palm Beach property has only ever been used for residential purposes, and Mr McIlroy has at all times retained possession and control. However, as Gzell J said in McNally, at paragraph 46, the first issue to determine is whether the property in question is the person’s principal place of residence.
40 This must be determined as an objective fact: Mesiti, paragraph 59. The basic principles used in determining whether a person has used land as their principal place of residence were discussed in Ferrington, at paragraph 42. The Appeal Panel said:
“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 his or 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 the occupation that 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 ... Sixthly, the reasons for a person’s departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances ... ”
41 In relation to the third point, I note that the Appeal Panel has emphasised that a subjective intention to occupy is not enough sufficient to satisfy the principal place of residence requirement: Aldridge, at paragraph 14.
42 Mr McIlroy owned both the Palm Beach property and a half share in the Malvern property during the period in question. The question is which property was his principal place of residence? Mr McIlroy’s evidence is that members of his family have owned the Palm Beach property since the 1920s, and he has owned the property since 1972, when he inherited it on the death of his mother. He has never owned any other property in New South Wales.
43 I have no doubt that Mr McIlroy has strong ties with the Palm Beach property - it would seem since his childhood, and regards it as his family home. His family photographs, his furniture, personal effects and clothing are there, and he maintains a car registered in New South Wales. Mr McIlroy’s sister, Ms Strang, lives next door, and Mr McIlroy’s evidence is that he has many friends in the locality and strong connections with the local community. Mr McIlroy retains the property for his and his family’s exclusive use, and the house has never been let or used for other purposes. He resides there whenever he is in Sydney, which he estimated is about one third of the year. Mr McIroy maintains a Telstra landline for the property. The Respondent submitted that the evidence of usage indicates that Mr McIroy is in residence for relatively little of the year except during December and January. However, Mr McIlroy gave evidence that he uses his mobile phone and Blackberry for his business and personal communications.
44 Mr McIlroy and Ms Keys purchased the Malvern property in 1997. Mr McIlroy had previously owned a half share in a property in Camberwell, Victoria, which he ceded to his former wife on their divorce in 1994, his part ownership of the property ending on 29 June 1995. Mr McIlroy had returned from London to work in Australia in 1989 on his appointment as Managing Director and Deputy Chairman of Christie’s Australia. Mr McIlroy was also appointed Deputy Chairman of a number of associated Christie’s companies operating in Asia. Although Christie’s Australia was registered and had an office in New South Wales, because the art market is centred in Melbourne, Christie’s Australia’s head office was also in Melbourne, and this is where Mr McIlroy’s work in Australia was based. However, he also travelled extensively overseas, spending up to a third of the year out of the country. Mr McIlroy’s evidence is that he spends about a third of the year in Melbourne.
45 I accept Mr McIlroy’s evidence that he was ignorant of his potential liability for Land Tax in New South Wales, and only became aware of this on receiving a letter from the OSR in 2006. He is also aware that a favourable decision in this matter will lead to a Land Tax liability in Victoria for the Malvern property. There is no evidence of either he or Ms Keys electing to claim a principal place of residence exemption under the Victorian legislation in respect of the Malvern property.
46 During the third of the year that he spends in Melbourne, Mr McIlroy resides with his partner, Ms Keys, and their two children at their Malvern property. He also keeps clothes there. Since 1998, Mr McIlroy’s residential address for the purposes of Victorian and Federal electoral registration has been that of the Malvern property, although he has always maintained his postal address for electoral registration as that of his business. Mr McIlroy’s evidence, which is supported by the utility bills for the Malvern property produced at the hearing, is that Ms Keys is responsible for paying these bills. While employed by Christie’s Australia, Mr McIlroy’s mail, including that relating to his Palm Beach property, was sent to Christie’s head office address in South Yarra. Since being retrenched by Christie’s in 2006, Mr McIlroy has established his own fine art business, headquartered in London, and maintains a mailing address for all correspondence at a business centre in Malvern. Mr McIlroy continues to travel extensively overseas in the course of his business.
47 The evidence clearly establishes that Mr McIlroy has two places of residence – the Palm Beach property and the Malvern property, and indicates that the Malvern property is the principal place of residence of Ms Keys and their two children. In terms of the principles identified by the Appeal Panel in Ferrington, the evidence establishes that Mr McIlroy’s connection to the Palm Beach property is an enduring, long term one, rooted in his family and personal history. Subjectively, I accept that he has a strong emotional attachment to the property. The fact that his actual residence in the property constitutes only about one third of the year, does not, in my view detract from the permanence of that connection.
48 As stated above, Mr McIlroy has never let the Palm Beach property and has retained it for his and his family’s exclusive use. He has at all relevant times maintained possession and control of the property. In my view, Mr McIlroy’s explanation for needing to reside in Melbourne for about one third of the year, and overseas for about one third of the year, because of his business during the period in question, is a reasonable one. Given that Ms Keys and their children reside at the Malvern property, maintaining his electoral registration with that property seems reasonable. The fact that he travels overseas for long periods explains Mr McIlroy’s need for a separate mailing address, and I note that he has for many years used that of his business.
49 I am therefore satisfied that the evidence supports a finding that, viewed objectively, Mr McIlroy’s principal place of residence during the period in question was the Palm Beach property and, therefore, different from that of Ms Keys. In my view, the Applicants’ evidence as to Mr McIlroy’s connection with the Palm Beach property outweighs the evidence in relation to his connection with the Malvern property, including Ms Keys’ statement that she lives at the Malvern property with Mr McIlroy and their children. I suspect she was unaware of the legal connotation that might flow from this statement.
50 I am also satisfied that Mr McIlroy continuously used and occupied the Palm Beach property for residential purposes and for no other purpose during the period in question. As noted, although he was physically present only about one third of the year, he retained possession and control of the property throughout: Flaracos, at paragraph 29, cited above. Thus, Mr McIlroy is entitled to the principal place of residence exemption for the Palm Beach property for the 2002 and 2003 Land Tax years.
51 In relation to the Land Tax years 2003, 2004 and 2005, pursuant to Schedule 1A, clause 12(1) of the LTM Act, Mr McIlroy and Ms Keys can only claim one principal place of residence exemption. I accept that Mr McIlroy was not aware of potential liability for Land Tax under either the NSW or Victorian tax legislation until alerted to the fact by the OSR’s letter in 2006. Thus, no election was made to treat either the Palm Beach property or the Malvern property as the family’s principal place of residence for the purpose of claiming a principal place of residence exemption under the LTM Act. Where no such election is made, clause 12(5) provides that the Respondent “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”. In the case of Mr McIlroy’s family, this was the Palm Beach property.
Order
In conclusion, I am satisfied that a principal place of residence exemption applied to the Palm Beach property throughout the Land Tax years in question. The Respondent’s decision to assess the Applicants for Land Tax for the 2002, 2003, 2004, 2005 and 2006 Land Tax years is therefore set aside, and a decision substituted that Mr McIlroy was entitled to the principal place of residence exemption in respect of the Palm Beach property for these Land Tax years.
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