O'BRIEN and COMMISSIONER OF STATE REVENUE
[2012] WASAT 18
•2 FEBRUARY 2012
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: DEVELOPMENT & RESOURCES
ACT: TAXATION ADMINISTRATION ACT 2003 (WA)
CITATION: O'BRIEN and COMMISSIONER OF STATE REVENUE [2012] WASAT 18
MEMBER: JUDGE T SHARP (DEPUTY PRESIDENT)
HEARD: 23 JANUARY 2012
DELIVERED : 2 FEBRUARY 2012
FILE NO/S: DR 385 of 2011
BETWEEN: THOMAS FRANCIS O'BRIEN
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Land tax - Exemption - Primary residence - Any estate of freehold in possession - Moving between 2 private residences
Legislation:
Land Tax Assessment Act 2002 (WA), s 5, Pt 3, s 17, s 20, s 21, s 27
Taxation Administration Act 2003 (WA), s 40
Result:
Decision of the Commissioner of State Revenue affirmed
Application dismissed
Category: B
Representation:
Counsel:
Applicant: Self-represented
Respondent: Ms R Panetta
Solicitors:
Applicant: N/A
Respondent: State Solicitor's Office
Case(s) referred to in decision(s):
Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicant, Mr O'Brien, and his wife made a decision to sell their home in Claremont and to purchase a unit in the St Louis Estate Retirement Village, also in Claremont. They moved into the unit in May 2010, but they still owned their original home on 30 June 2011. Because it was no longer their primary residence, that property was assessed for land tax for the 2011/2012 financial year.
Mr O'Brien applied to the Tribunal for a review of the Commissioner's land tax assessment, on the basis that under the Land Tax Assessment Act 2002 (WA) an exemption applies when a person moves home and temporarily owns both the new and the old property.
The Tribunal considered the assessment and agreed with the Commissioner that not all the criteria for that exemption were satisfied. For the exemption to apply, Mr and Mrs O'Brien needed to own both properties, but they did not actually own the new unit, but instead merely held a licence to occupy it for their respective lifetimes. In any event, Mr and Mrs O'Brien had owned both properties for more than a year, albeit for reasons beyond their control, and this also meant that the exemption did not apply.
The Tribunal concluded that the Commissioner's assessment was correct and dismissed Mr O'Brien's application.
Background
The applicant and his wife (Mr and Mrs O'Brien) had lived in their home at 64 Mayfair Street, Mount Claremont (Mayfair Street property) for over 50 years.
Following a decision which they made to move into accommodation more suited to their current needs, Mr and Mrs O'Brien purchased (as they saw it) Unit 90/B, 4 Albert Street, Claremont (Albert Street unit), part of the St Louis Estate Retirement Village, which includes independent units specifically designed for the needs of older people.
What they actually received, in exchange for a loan of $1,295,000.00 to the owners, was a licence to occupy and use the Albert Street unit. According to the terms of the licence, the rights granted in favour of Mr and Mrs O'Brien 'are contractual only and … personal to you. They do not create or grant any lease or tenancy or any estate or interest in or to the Unit. Your rights under this Licence are those of a licensee only subject always to the conditions set out in this Licence and do not compromise, or include, any other rights regarding occupation of the Unit'.
The registered proprietor of the Albert Street unit is CHC (St Louis) Pty Ltd.
Mr and Mrs O'Brien moved into the Albert Street unit on 6 May 2010, and their intention was to sell the Mayfair Street property. However, the Mayfair Street property remained vacant until September 2011.
The reason for the delay in selling the Mayfair Street property was that, after moving into the Albert Street unit, Mr and Mrs O'Brien had asked their daughter to assist them in clearing the Mayfair Street property to prepare it for sale, as they were physically unable to do so themselves. However, because other time pressures, it took her over 12 months to do so. The result was that, on 30 June 2011, Mr and Mrs O'Brien were still the registered proprietors of the Mayfair Street property. The previously applicable land tax 'Private residential property' exemption which is provided for under s 21 of the Land Tax Assessment Act 2002 (WA) (LTA Act) no longer applied in relation to Mayfair Street property, because the property was not, on 30 June 2011, their primary residence.
On 29 August 2011, a Certificate of Land Tax Charges for the 2011/2012 assessment period in relation to the Mayfair Street property was issued in the amount of $2,390.05 to the applicant's and the purchaser's settlement agents and Mr and Mrs O'Brien paid this amount in satisfaction of their 2011/2012 land tax assessment.
The Mayfair Street property was finally sold with settlement occurring on 14 September 2011.
On 16 September 2011, Mr and Mrs O'Brien, through their settlement agent, advised the respondent that they had moved into a retirement village approximately one year previously, due to illness, and that the Mayfair Street property had remained vacant until its sale. They confirmed that they had not derived any income from the Mayfair Street property during that time. They requested that the 2011/2012 land tax assessment be reconsidered.
On 27 September 2011, the respondent advised Mr and Mrs O'Brien that they do not qualify for the exemption under s 21 of the LTA Act for the Mayfair Street property for the 2011/2012 assessment year, due to the fact that they had established another residence. The respondent has a practice (Commissioner's Practice LT 15.0), where an owner moves into a nursing home, of continuing to consider the property as the owner's primary residence. However, this only applies when the owner's possessions remain in the property. In this case, the applicant had removed all of his possessions from the property.
On 29 September 2011, the applicant objected to this decision and on 20 October 2011, the respondent disallowed the objection. The applicant applied to the Tribunal under s 40 of the Taxation Administration Act 2003 (WA) (TA Act) for review of the respondent's decision.
Law
Section 5 of the LTA Act provides that land tax is payable for each financial year for all land in Western Australia except land that is exempt under s 17.
Section 17 of the LTA Act states that land is exempt from land tax if the Commissioner grants an exemption for the assessment year under s 20, or if the land is exempt under another provision of Pt 3 of the LTA Act.
Section 21 of the LTA Act is in Pt 3 and contains the 'Private residential property' exemption. Section 21(1)(b) provides:
Residences owned by individuals, exemptions for
(1)Private residential property (except property held in trust) is exempt for an assessment year if, at midnight on 30 June in the financial year before the assessment year, it is owned
…
(b)by a husband and wife, at least one of whom uses it as his or her primary residence; or
…
Section 27 is also in Pt 3 of the LTA Act. It contains the 'Moving between 2 private residences' exemption.
Section 27(1) of the LTA Act provides:
Private residential property (property A) is exempt for an assessment year if
(a)at midnight on 30 June in the previous financial year, the owner owned property A and another private residential property (property B); and
(b)property B is exempt for the assessment year because of its use by an individual at midnight on 30 June in the previous financial year as the individual's primary residence; and
(c)property A would have been exempt for the assessment year if, at midnight on 30 June in the previous financial year, the individual had used property A as the individual's private residence instead of property B; and
(d)the property the owner acquired second was acquired in the previous financial year; and
(e)the individual used property A as the individual's primary residence
(i)in the previous financial year before using property for that purpose; or
(ii)in the assessment year after using property B for that purpose;
and
(f)during the assessment year, the owner
(i)sold or otherwise disposed of the property the owner acquired first; and
(ii)delivered possession of that property to the new owner.
Section 27(2) of the LTA Act provides that a property is not exempt from land tax even if the criteria in s 27(1) of the LTA Act is satisfied if, while the owner owned both properties, the owner or any other person derived income from the property that was not being used as the individual's primary residence.
The respondent's assessment
The respondent proceeded on the basis that, because an exemption under s 20 of the LTA Act in relation to the Mayfair Street property had not been granted, land tax is payable in respect of that property unless the property is exempt under a provision of Pt 3 of the LTA Act.
The respondent then considered the exemptions in Pt 3 of the LTA Act.
First, it concluded that the exemption in s 21 of the LTA Act does not apply. Although the respondent accepts that the Mayfair Street property and the Albert Street unit are both 'private residential property' as defined in the LTA Act, the Mayfair Street property, despite the fact that it is owned by Mr and Mrs O'Brien, was not being used as their 'primary residence', again within the meaning of the LTA Act.
Second, the respondent considered the exemption contained in s 27(1) of the LTA Act.
For the purposes of s 27(1) of the LTA Act, the 'assessment year' in the present case is the 2011/2012 assessment year, 'property A' is the Mayfair Street property, and 'property B' is the Albert Street unit. The phrase '30 June in the previous financial year' for the purposes of s 27(1) of the LTA Act in the present case refers to the date 30 June 2011.
The respondent's conclusions were as follows:
(a)The condition specified in para (a) of s 27(1) was not satisfied because, at midnight on 30 June 2011, Mr and Mrs O'Brien were not 'owners' within the meaning of that term in the LT Act of the Mayfair Street property and the Albert Street unit.
The word 'owner' is relevantly defined in cl 1 of the Glossary of the LTA Act to mean, in relation to land, a person who is entitled to the land for any estate of freehold in possession.
This definition includes persons who hold an equitable estate of freehold in possession as well as persons who hold a legal estate.
The phrase 'estate of freehold in possession' requires that the owner has a present right of beneficial enjoyment of the land. A right of present enjoyment does not simply mean the right to occupy the land (which is in fact not a necessary prerequisite) but also includes the right to rents and profits from the land; see Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490.
Mr and Mrs O'Brien are not entitled to the Albert Street unit for any estate of freehold in possession within the meaning of those terms in the LTA Act. They merely hold a licence in relation to the Albert Street unit.
(b)The condition specified in para (b) of s 27(1) was not satisfied because the Albert Street unit was not subject to land tax as against Mr and Mrs Brien but rather against the 'owner' of the second property, being CHC (St Louis) Pty Ltd. CHC (St Louis) Pty Ltd is exempt from liability to land tax under s 39 of the LTA Act because the Albert Street unit is on land used for a retirement village.
(c)The condition specified in para (c) of s 27(1) was satisfied because the Mayfair Street property would have been exempt under s 21 of the LTA Act.
(d)The condition specified in para (d) of s 27(1) was not satisfied because the 'owner' of the Albert Street unit, CHC (St Louis) Pty Ltd, did not acquire it in the previous financial year (ie. 1 July 2010 to 30 June 2011). In any event, Mr and Mrs O'Brien did not acquire it in the previous financial year either.
(e)The condition specified in para (e) of s 27(1) was not satisfied because Mr and Mrs O'Brien did not use the first property as their primary resident in the previous financial year (ie. 1 July 2010 to 30 June 2011) having moved out on 6 May 2010. Further, Mr and Mrs O'Brien did not use the Mayfair Street property as their primary residence in the 2011/2012 assessment year at all.
(f)The condition specified in para (f) of s 27(1) was satisfied because the sale of the Mayfair Street property was settled on 14 September 2011.
Because not all of the criteria specified in s 27 of the LTA Act were satisfied in this case, the respondent considered that the exemption did not apply.
The respondent finally concluded that there is no other exemption outlined in the LTA Act that is applicable to the first property for the 2011/2012 assessment year and accordingly, land tax is payable by Mr and Mrs O'Brien in respect of the Mayfair Street property for the 2011/2012 assessment year.
Applicant's submissions and the Tribunal's findings
The applicant submits that, were it not for the delay in selling the Mayfair Street property, which he regards as entirely due to his and his wife's personal circumstances arising from his and her age and his medical condition, then he would not have owned the Mayfair Street property on 30 June 2011 and therefore land tax would not have been payable in respect of that property for the 2011/2012 assessment year.
The Tribunal finds that, while these circumstances are unfortunate, there is no provision in the LTA Act to allow the respondent to take those circumstances into account when the respondent assessed the Mayfair Street property for land tax purposes.
Alternatively, the applicant submits that the intent of the exemption in s 27(1) of the LTA Act is to allow him to acquire a new primary residence and to give him time to dispose of his previous residence and that the respondent should have applied that exemption in his favour.
The difficulty with that argument is twofold. First, Mr and Mrs O'Brien as at 30 June 2011 were not the owners of both properties for the purposes of the LTA Act. They were the owners of the Mayfair Street property, but, as the respondent points out, they had a mere licence to occupy the Albert Street unit. Thus one of the criteria in s 27(1) is not satisfied and for the exemption to apply, all of the criteria must be satisfied.
The applicant on the ownership point argues that the licence in respect of the Albert Street unit is for the lifetime of Mr and Mrs O'Brien and the survivor of them and that therefore Mr and Mrs O'Brien are, to all intents and purposes, the owners of the Albert Street unit. Certainly, were it not for the second difficulty set out below, the Tribunal would have had some sympathy with that argument, even though it would ultimately fail because of the definition of 'owner' in the LTA Act. The intent of the legislation is presumably to allow some latitude when a person is moving from his or her primary residence to another home and it is unfortunate that the applicant is deprived of the benefit of that exemption merely because of the 'ownership' structure of the units in the St Louis estate.
However, even if Mr and Mrs O'Brien were regarded as owners of the Albert Street unit for the purposes of the LTA Act, there is a second difficulty and that is that they did not acquire the Albert Street unit in the previous financial year, another criterion for the exemption in s 27(1) to apply.
Accordingly, the Tribunal does not consider that the exemption in s 27(1) of the LTA Act can apply.
The Tribunal has reviewed the other provisions of Pt 3 of the LTA Act and agrees with the respondent that there is no other exemption in the LTA Act which applies to the Mayfair Street property for the 2011/2012 assessment year.
Finally, the applicant argues that, if land tax is payable, it should only be the applicable portion from 1 July 2011 until the date of settlement of the sale of the Mayfair Street property, 14 September 2011.
The Tribunal's finding on this point is that neither the LTA Act nor the TA Act provides for pro rata payments or apportionment of land tax where a property is sold during a financial year and therefore this argument must fail.
Conclusion
The Tribunal concludes that the provisions of the LTA Act have been properly applied by the respondent and that the assessment should be upheld.
Orders
1.The decision by the respondent dated 20 October 2011 to disallow the applicant's objection is affirmed.
2.The application dated 27 October 2011 for a review of the respondent's decision is dismissed.
I certify that this and the preceding [40] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUDGE T SHARP, DEPUTY PRESIDENT
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