McKinney and Ors and Commisioner Of State Revenue - [2006] WASAT 216

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: DEVELOPMENT & RESOURCES

ACT: TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION: MCKINNEY & ORS and COMMISIONER OF STATE REVENUE [2006] WASAT 216

MEMBER: JUSTICE M L BARKER (PRESIDENT)

HEARD: DETERMINED ON THE PAPERS

DELIVERED : 1 AUGUST 2006

FILE NO/S: DR 42 of 2006

BETWEEN: JENNIFER JANE MCKINNEY
BRIAN W MCKINNEY
DAVID J O'NEILL
JANE A O'NEILL
Applicants
AND
COMMISIONER OF STATE REVENUE
Respondent

Catchwords:

Land tax - Land Tax Assessment Act 2002 (WA) - Strata plan prepared but not lodged or approved or registered as at midnight, 30 June of relevant year - Meaning of lot depicted on strata plan - Ownership of subject land - Use of land as at midnight 30 June in relevant year

Legislation:

Land Tax Assessment Act 1976 (WA)
Land Tax Assessment Act 2002 (WA), s 11(1), s 12, s 12(a), s 12(b), s 17, s 18, s 21
Strata Titles Act 1985 (WA), s 3(1), s 4(1), s 5
Strata Titles General Regulations 1996 (WA)

Valuation of Land Act (WA), s 4, s 23, s 23(5), s 26

Result:

The Commissioner's assessment of land tax is set aside
The matter is sent back to the Commissioner for assessment in accordance with the correct and preferable decision stated by the Tribunal in the reasons for decision published with this order

Category: B

Representation:

Counsel:

Applicants: Self-represented
Respondent: Ms KH Loh

Solicitors:

Applicants: Self-represented
Respondent: State Solicitor

Case(s) referred to in decision(s):

Crisp v City of Mandurah (2002) 29 SR(WA) 135

Case(s) also cited:

Nil

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The Tribunal decided that land proposed to be subdivided into two strata lots under the Strata Titles Act 1985 (WA) but, as at 30 June 2005, was not the subject of a strata plan lodged by the applicants for approval under that Act, or approved or registered under that Act, and was not constituted of separate "lots" for the purposes of the Land Tax Assessment Act 2002 (WA) as at 30 June 2005.
As a result, as at 30 June 2005, the subject land comprised one unsubdivided lot in respect of which the exemption from land tax of private residential property owned by individuals created by s 21 of the Land Tax Assessment Act 2002 applied.
The Tribunal allowed the review application, set aside the decision of the Commissioner of State Revenue that land tax was payable in respect of the subject land and sent back the matter to the Commissioner for determination in accordance with the finding of the Tribunal.

Issues

The issue to be determined by the Tribunal is whether the respondent was correct in granting a 50% partial exemption to land tax on Lot 1 of strata plan 46381, being the Certificate of Title Volume 2597 Folio 378, and Lot 2 of strata plan 46381, being the Certificate of Title Volume 2597 Folio 379, both lots having formerly comprised Lot 876 on Plan 7448, being Certificate of Title Volume 41 Folio 357A (subject land).

Facts

On 25 August 2003, the applicants became the registered proprietors of the subject land as tenants in common, with:
•J A McKinney and D J O’Neill as joint tenants in half share; and
•B W McKinney and J J McKinney as joint tenants in half share.
At relevant times, there were 2 dwellings on the subject land, known respectively as 17A Duke Street Karrinyup, and 17 Duke Street Karrinyup.
As at midnight 30 June 2005, J A McKinney and D J O’Neill resided at 17A Duke Street Karrinyup, and B W McKinney and J J McKinney resided at 17 Duke Street Karrinyup.
However, earlier - by contract for sale of land or strata title by offer and acceptance, dated 29 May 2005 - the applicants had agreed to sell the property described as 17A Duke Street Karrinyup. This contract did not expressly refer to any lot number on any strata plan. However, condition 9 of the contract provided that settlement was to take place within 14 days of "strata plan number being in order in dealing, no later than 01 August 2005". As a result, the parties to the contract plainly understood that they were dealing with a proposed strata lot in respect of 17A Duke Street.
And by contract the sale of land or strata title by offer and acceptance dated 5 June 2005, the applicants had also agreed to sell property described as 17 Duke Street Karrinyup, being Lot 1 on strata plan 46381 - then only a proposed strata lot. The settlement date specified on or before 22 July 2005 or within five business days of the issue of certificate of title, whichever is the later. An amendment to the contract was signed on 21 June 2005 which included an amendment to the sale price and stating that cl 1, cl 6 and cl 7 had all been complied with.
Plainly at these times in May and June the applicants held an expectation that a strata plan would be later registered in respect of the subject land and separate certificates of title would issue for Lot 1 and Lot 2.
On 15 July 2005, in conformity with the requirements of the Strata Titles Act 1985 (WA) and the Strata Titles General Regulation 1996 (WA) (STG Regulations) the applicants lodged a strata plan in respect of the subject land which included the following forms:
(a) Form 3 – Schedule of Unit Entitlement and Certificate of Licensed Valuer
(b) Form 5 – Certificate of Licensed Valuer;
(c) Form 7 – Certificate of Local Government; and
(d) Form 8 – Annexure of Strata/Survey strata plan No. and Schedule of Encumbrances.
On 28 July 2005, the applicants applied to register the strata plan and on the same date the strata plan was registered, and the subject land then became comprised of Lots 1 and 2 on strata plan 46381.
On 8 August 2005, the applicants -
•transferred Lot 1 on the strata plan to third parties under the contract mentioned; and
•transferred Lot 2 on the strata plan to different third parties under the contract mentioned.
On 2 November 2005, the Commissioner issued an assessment for land tax in the amount of $1120.35 to the applicants for the period 1 July 2005 to 30 June 2006.
On 15 November 2005, the applicants contacted an officer of the Commissioner and advised of the applicants changed residency status following the sales. The officer then advised that they would only be entitled to 50% partial exemption for each lot on the strata plan. The Commissioner issued a re‑assessment for land tax in the amount of $360 to the applicants for the period 1 July 2005 to 30 June 2006.
On 5 December 2005, the applicants wrote to the Commissioner objecting to the assessment issued. On 14 December 2005, the Commissioner wrote to the applicants disallowing the objection. The applicants then filed this application for review before the Tribunal.

Contentions

The applicants renew the objections they made to the Commissioner's revised land tax assessment. In their objection they made the following points:
•17 Duke Street is one half of a duplex, the other has an address of 17A Duke Street.
•In May 2005 BW and JJ McKinney purchased property at 11 Kyle Court Hamersley as a family home. This property settled on or around June 20. In the meantime, they placed 17 Duke Street on the property market. The property subsequently sold but owing to a delay in granting strata title, settlement did not take place until the beginning of August.
•In the interim, BW and JJ McKinney continued to live at 17 Duke Street while renovations were being carried out to the Kyle Court residence.
•DJ O'Neil and JA McKinney resided at 17A Duke Street until this half of the duplex was sold. Settlement was effected the beginning of August 2005.
•At no time were either the Duke Street or Kyle Court properties rented to other parties.
•The applicants object to having to pay land tax on 17 Duke Street owing to the fact that there was an overlap of time between one property being purchased and the other being sold.
•Land tax should not be applicable to 17A Duke Street as settlement did not take place until the 2005/2006 financial year.
The Commissioner's reasoning as to why land tax is payable goes off on a different point from those raised by the applicants. In essence, the Commissioner contends that even though the strata plan was not registered until 28 July 2005 and the application for registration not formally lodged until 28 July 2005, because as at 30 June 2005 the applicants had the intention of seeking registration of a strata plan under the Strata Titles Act 1985 showing the two lots, the subject land should be treated as at 30 June as comprising the two strata lots for land tax assessment purposes.
The Commissioner ultimately contends that this result arises because the term "strata plan" as defined by s 3(1) of the Strata Titles Act 1985 (WA) has the meaning given by s 4(1a) of the Strata Titles Act 1985 which in turn simply refers to a "plan" that "shows the whole or any part of the land comprised in the plan as being divided into two or more lots; and complies with s 5 and includes any amendment duly made to that plan". The Commissioner says s 5 of the Strata Titles Act 1985 which sets out requirements of a strata plan was complied with.
While the Commissioner accepts that the plan so lodged for registration had not been approved or registered as at 30 June 2005, the Commissioner says that nothing in the reference to "strata plan" in the definition requires that the strata plan so described would be "registered under the Strata Titles Act 1985".
Accordingly, the Commissioner contends that, as of 30 June 2005, the strata plan met with all the requirements of a "strata plan" under the Strata Titles Act 1985 and was ready to be lodged for registration. Accordingly, because there were two lots depicted on the unapproved and unregistered strata plan as at 30 June 2005, the applicants were liable to pay land tax on the aggregated unimproved value of each lot. The Commissioner relies on the decision in Crisp v City of Mandurah (2002) 29 SR(WA) 135, as supporting this view.
The Commissioner then points out that land tax is payable on land owned by two or more persons jointly or in common, whether as partners or otherwise and is assessed as if the land were owned by one person: see s 12 of the Land Tax Assessment Act 2002 (WA).
The Commissioner says that in assessing the extent to which each lot depicted on the strata plan is exempt under s 21 of the Land Tax Assessment Act 2002, on the basis it was occupied for residential purposes, the following principles are established:
•Each of the applicants' use of the lot by virtue of which the lot is exempt must be taken into account (whether or not the use is common to any of the other applicants);
•Each of the applicants' interest in the lot by virtue of which the lot is exempt must be taken into account (whether or not the interest is common to any of the other applicants); and
•Where the lot is used or occupied partly by the applicants, the exemption applies to the proportion of the lot that is used or occupied by the applicants as his or her or their primary residence
:see s 12(2a), s 12(b) and s 18 of the Land Tax Assessment Act 2002.
The Commissioner says that as to Lot 17A Duke Street, it was only occupied or used by JA McKinney and DJ O'Neill as at midnight 30 June 2005, and not by all of the applicants, and so the applicants are only entitled to a partial exemption of land tax of 50% in respect of this lot on the basis of a half share of JA McKinney and DJ O'Neill of the lot.
As to 17 Duke Street, the Commissioner says this was only occupied or used by BW McKinney and JJ McKinney as at midnight 30 June 2005, and not all of the applicants, so the applicants are only entitled to a partial exemption to land tax of 50% in respect of this lot, on the basis of the half share of BW McKinney and JJ McKinney to the lot.

Findings

Land tax is payable for all land except land that is exempt under s 17 of the Land Tax Assessment Act 2002: s 5. Section 17 says land is exempt if the Commissioner grants an exemption under s 20 or another provision of the Land Tax Assessment Act 2002 applies.
Section 21 of the Land Tax Assessment Act 2002 provides for an exemption for private residential property owned by individuals for an assessment year if, at midnight on 30 June in the financial year before the assessment year, it is used as his or her primary residence.
In this case, the Commissioner contends that because the applicants had prepared a strata plan, even though it had not been approved or registered under the Strata Titles Act 1985 as at 30 June 2005, land tax was properly assessed in respect of each of the then proposed strata lots.
I am not persuaded by this contention. If a strata plan is prepared, but never lodged, approved or registered under the Strata Titles Act 1985, the strata lots will never come into existence. On what basis then, can land tax be assessed against a lot that does not exist?
While counsel for the Commissioner suggests that the decision of Crisp v City of Mandurah (2002) 29 SR(WA) 135 supports the Commissioner's case; I cannot see that it does. In Crisp's case, the appellant lodged strata plan 24086 with the Registrar of Titles, to effect the strata subdivision of land into two lots. Registration of the strata plan did not occur until 31 March 1998. In the meantime the respondent City assessed rates and service charges in respect of each of the proposed strata lots for the periods 1995-1996 and 1996-1997. The applicant refused to pay the rates and charges on the basis that the strata plan was still to be registered and there was accordingly only one property to be assessed.
In the District Court, Blaxell DCJ (as he then was) held that s 4(1) of the Strata Titles Act 1985 provides that subdivision of the land into two lots cannot occur until registration of the strata plan, so that for the purposes of the Strata Titles Act 1985 the land remained a single lot at all material times. However, His Honour held that the effect of sections 4, 23(5) and 26 of the Valuation of Land Act 1978 (WA) was such that the local authority, as a matter of law, was obliged to impose rates and levy service charges in accordance with the valuations as provided by the Valuer General. Blaxell DCJ then expressly found that the valuations were valid. Blaxell DCJ, at 140, stated:
"I have nevertheless come to the view that the valuations were validly made. This is essentially because the definition of 'rateable land' in the Valuation of Land Act brings into play the operation of other rating and taxing Acts. One of these Acts is the Land Tax Assessment Act 1976 (WA) which provides for land tax to be assessed on the aggregated value of, inter alia, each taxable 'lot' owned by a taxpayer. Lot has a comprehensive definition in that Act and it includes a:
'…defined portion of land … which … a separate of Certificate of Title has been or can be issued … and includes … a lot depicted on a strata plan …' (emphasis added).
In the present instance, the appellant was entitled at all material times to apply for registration of the strata plan, which had been lodged and approved by the Registrar of Titles. It follows that each of the proposed Lots 1 and 2 were land for which a Certificate of Title could be issued and were thereby 'lots' within the meaning of the Land Tax Assessment Act. Because each lot was liable to land tax, it was also 'rateable land' within the meaning of the Valuation of Land Act.
Accordingly, and as soon as the Valuer‑General became aware that the strata title plan lodged by the appellant with the Registrar of Titles was ready for registration, it became necessary to prepare a separate valuation for each of the proposed lots. The valuations required under the Land Tax Assessment Act were of the unimproved value of each lot. However, the Valuer‑General also effected valuations of gross rental value (being the valuations relevant for the respondent's rating purposes).
These valuations were all interim valuations pursuant to s 23 of the Valuation of Land Act. Under that provision, the Valuer‑General has a discretion to make a valuation when he is of the opinion that it is necessary or expedient to do so."
The circumstances in Crisp's case are however quite different from the circumstances of the case presently before the Tribunal. The most notable difference is that, unlike the position in Crisp's case, the applicants here had not lodged or had approved, or had registered a strata plan under the Strata Titles Act 1985 as at the relevant date.
The position here, is that under s 11(1) of the Land Tax Assessment Act 2002, if a person owes two or more lots or parcels of taxable land, land tax is payable on the aggregated unimproved value of all the taxable land owned by the person. The Commissioner takes the view that the applicants owned two lots, being the two strata lots created after 30 June 2005 and so the land tax payable on the former strata lot should be divided between the two proposed lots.
The definition of a "lot" is contained in cl 1 of the Glossary to the Land Tax Assessment Act 2002 and has the meaning given in cl 2. Clause 2(1) provides that a reference to a "lot of land" is a reference to a "defined portion of land" –
"(a)that is depicted on a plan or diagram publicly exhibited in the public office of the Department of Land Administration, or deposited in the Department within the meaning of the Transfer of Land Act 1893 or Registry of Deeds and for which a separate Crown grant, certificate of Crown land title, qualified certificate of Crown land title, or certificate of title has been or can be issued, registered or depicted on a subdivisional plan or diagram, whether so exhibited or deposited or not;"
I take the view that this particular definition, upon which counsel for the Commissioner requires not only that the defined portion of the land be depicted on a plan or diagram publicly exhibited or deposited in the manner suggested, but also that the defined portion is one for which, relevantly, a certificate of title "has been or can be issued".
In this case, it seems to me that, as at 30 June 2005, there was no "defined portion of land" which was "depicted on a plan or diagram" that was "publicly exhibited or deposited" within the meaning of the definition contained in cl 2(1)(a) of the Glossary of the Land Tax Assessment Act 2002.
Even if it were possible to argue that there was only a requirement that there be a "defined portion of land" that is "depicted on a plan", then it is still difficult to see how the unlodged, unapproved and unregistered proposed strata plan of the applicants, as at 30 June 2005, was one in respect of which a "certificate of title has been or can be issued".
In Crisp's case, Blaxell DCJ accepted that the appellant was entitled to at all material times to apply for registration of the strata plan, but that was on the basis that it had already been lodged and approved by the Registrar of Titles. In this case there is no such lodgement or approval by the Registrar of Titles that precedes registration.
Further, I cannot see how a broad definition of a "strata plan" in the Strata Titles Act 1985, can assist in this exercise of statutory interpretation under the Land Tax Assessment Act 2002.
As at 30 June 2005, notwithstanding the contractual obligations that the applicants had entered into, the applicants may have, for one reason or another, decided not to proceed with their plans of strata subdivision and so have decided not to lodge the strata plan for approval and registration under the Act. As 30 June 2005, whether or not the lots depicted on the strata plan document held by the applications (if they held it) would come into existence was entirely speculative.
All in all, I cannot see how the decision in Crisp v City of Mandurah lends any support to the resolution of this case. Rather, I take the view that, as at 30 June 2005, the subject land did not comprise two separate, defined portions of land, but comprised only one unsubdivided portion of land, being lot 876 on plan 7448.

In those circumstances, the only land subject to land tax under the Land Tax Assessment Act 2002 was lot 876 in respect of which the applicants plainly satisfied the residential occupation exemption contained in s 21 of the Land Tax Assessment Act 2002.
In my view, the correct and preferable decision in this case is that as at 30 June 2005, the subject land that was subject to land tax under the Land Tax Assessment Act 2002 comprised only lot 876 on plan 7448 being Certificate of Title Volume 41 folio 357A and that, as at that date, the subject land constituted private residential property that was owned and used in circumstances that made that property exempt for assessment purposes as at 30 June 2005.

Conclusion and Order

For the reasons given above, the Tribunal orders:
1.The Commissioner's assessment of land tax in respect of the subject property the subject of these review proceedings, is set aside.
2.The Tribunal sends the matter back to the Commissioner for assessment in accordance with the correct and preferable decision stated by the Tribunal in the reasons for decision published with this order, so that the subject land is, as at 30 June 2005, exempt from land tax under the Land Tax Assessment Act 2002.

I certify that this and the preceding [44] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUSTICE M L BARKER, PRESIDENT