Payne v Chief Commissioner of State Revenue - [2013] NSWADT 88

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation: Payne v Chief Commissioner of State Revenue [2013] NSWADT 88
Hearing dates: 11 and 12 March 2013
Decision date: 26 April 2013
Jurisdiction: Revenue Division
Before: N Isenberg, Judicial Member
Decision:
The Chief Commissioner's decision to assess the Applicant for land tax for the 2006-2009 land tax years inclusive in respect of the Woronora property is set aside and a decision substituted that the Applicant is entitled to the principal place of residence exemption in respect of the property for each of the 2006-2009 land tax years.

Catchwords: Land tax - principal place of residence exemption - meaning of "use and occupation of ...buildings designed, constructed or adapted for residential purposes".
Legislation Cited: Administrative Decisions Tribunal Act 1997
Building Act 1970 (Sth Aust)
Building Regulations 1973 (Sth Aust)
City of Sydney Planning Scheme Ordinance
Interpretation Act 1987
Land Tax Management Act 1956
Taxation Administration Act 1996
Cases Cited: Chief Commissioner of State Revenue v Aldridge and Another [2003] NSWADTAP 50
Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21
De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86
Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68
Masters v Padley (1984) 53 LGRA 417 (Sth Aust)
Saboune v Chief Commissioner of State Revenue [2011] NSWADT 8
South Sydney Municipal Council v James and Another (1977) 35 LGRA 432
Yen-Cheng Chuan and Another v Chief Commissioner of State Revenue [2009] NSWADT 160
Category: Principal judgment
Parties: Ross Trevor Payne (Applicant)
Chief Commissioner of State Revenue (Respondent)
Representation: Counsel
LJ Byrne (Respondent)
J Weller, solicitor (Applicant)

File Number(s): 126035

reasons for decision

Introduction

The Applicant, Ross Trevor Payne, owns land at Woronora ("the Land") on which he was, throughout the period, 1 July 2005 to 31 December 2009, ("the relevant period") constructing a house in which he intended to live. The Respondent, the Chief Commissioner of State Revenue ("Chief Commissioner") issued land tax assessments on 23 August 2010 for each of the 2006 to 2010 tax years. The Applicant claimed that he should have been afforded an exemption from land tax as the Land was his principal place of residence for each of those tax years. He objected to the assessments. The Chief Commissioner informed him that in respect of the 2010 tax year a principal place of residence exemption was allowed and issued a re-assessment effectively confirming the original assessments in respect of the 2006, 2007, 2008 and 2009 tax years ("the tax years") and imposing interest on unpaid tax.

Further communications ensued between the Applicant and the Chief Commissioner. On 10 February 2012 the Chief Commissioner informed the Applicant that "we consider your assessments issued on 23 August 2010 in respect to your 2006 to 2009 land tax assessments correct" and "If you are dissatisfied with our determination you may request the Administrative Decisions Tribunal or the Supreme Court to review our decision. Your application for review must be made within sixty (60) days of the date of this letter."

The Applicant seeks a review of the 10 February 2012 decision of the Chief Commissioner.

Issues

The issue to be determined is whether or not the Land was the Applicant's principal place of residence throughout the relevant period.

Relevant legislation

The Applicant has the onus of proving his case: s 100(3) of the Tax Administration Act 1996 ("the TA Act").

Part 3 of the Land Tax Management Act 1956 ("the LTM Act") provides that land tax is payable by the owner of all land in New South Wales other than land which is exempt from taxation under the LTM Act. The tax year is each period of 12 months commencing on the first day of January and land tax is charged on land owned as at midnight on 31 December immediately preceding the tax year. (Sections 7-9).

The "principal place of residence" of a person is defined in s 3(1) of the LTM Act to mean "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". In accordance with s 10(1)(r) of the LTM Act land is "exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1A."

Schedule 1A relevantly provides 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 1 January 2005 or any succeeding year, if the land is:

(a) a parcel of residential land, or

(b) ...

(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)...

(4) The exemption conferred by this clause is referred to as the principal place of residence exemption.

(5)...

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 strata lots or residential units, or

(b) containing... 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."

Accordingly, if the Land was not both a parcel of residential land and the principal place of residence of the Applicant for any relevant tax year, land tax applies for that year. If the Land was a parcel of residential land and the principal place of residence of the Applicant for a tax year the land is exempt from land tax for that year

The Applicant's Evidence

The Applicant relied on witness statements by himself and six other persons. All 7 witnesses, other than Freda Payne the Applicant's mother, gave evidence before the Tribunal and were cross-examined. The Tribunal was informed that Mrs Payne was unwell. The Chief Commissioner expressed a wish to cross-examine Mrs Payne but did not require production of a medical certificate and did not object to the admission of her statement. Mrs Payne's statement was admitted to evidence but the Tribunal has given limited weight to her statement as she was unavailable for cross examination and the statement was not made under oath or affirmation.

The evidence of the Applicant is:

1) He acquired the Land before 2001 and has throughout the relevant period owned, and continues to own, the Land.

2) For part of the relevant period his mother lived three doors from the Land on a property she had owned for many years ("Mrs Payne's property" or "his mother's property"). He lived at his mother's property from the time he was a child until he moved into a garage he built on the Land.

3) When he acquired the Land an old residence was situated on it. He decided to demolish the old residence and replace it with a new home and garage ("the development"). He obtained an owner-builder licence for the development.

4) The garage was purpose-built in 2002 or 2003 to enable him to reside on the Land and more easily oversee the development.

5) The garage included a mezzanine level which he used throughout the relevant period as personal space and a bedroom.

6) He lived in the garage for a short period after its erection until he decided it was too "rough" for him. From about July 2003 he lived at rented accommodation in Caringbah under a two year lease. When the Caringbah lease ended in July 2005 the Applicant returned to live in the garage.

Although he resided on the Land from 2002 to mid-2003 and has resided on the Land since July 2005 he did not have a letterbox there during the relevant period and did not notify certain statutory authorities of his changed residential address from his former residence, his mother's property. Accordingly his address for the electoral roll, his driver's licence and the address he gave on Incoming Passenger Cards when returning to Australia in February 2006 and May 2009 was that of his mother's property, not the Land at which, he stated in paragraph 39 of his witness statement, he slept for more than 90% of the relevant period.

He erected a temporary mailbox on the Land in 2005 however it was "blown up". He believed it was more convenient to use his mother's property as his postal address. While she was living at her property his mother collected his mail and delivered it to him several times each week. In 2008 his mother lived for a period at his sister's home and had mail redirected to that address. During that period his mother would contact him if anything in his mail required his urgent attention. Otherwise he would go to his sister's home approximately fortnightly and collect his mail. This arrangement continued until late 2009 or early 2010.

During the relevant period he worked initially for Qantas and then for Amadeus. Both workplaces had showers and a cafeteria. He would often shower at work, taking a change of clothes with him. Qantas provided dry-cleaning facilities for his uniform(s) while he worked there. Amadeus did not provide such a service. He often ate at work and also ate a lot of takeaway food at the garage.

The facilities inside or immediately outside the garage during the relevant period included a bed, cooking facilities (including a two burner gas BBQ outside and a camp stove inside the garage, an electric jug, a toaster and a microwave oven), a table and chairs, lounge chairs, a refrigerator, a TV and music system, floor rugs, a chest of drawers, washing facilities, electric lighting and power points.

He required minimal electric power on the Land. He used one main light, power points for the electrical appliances referred to above and to charge his laptop computer. He used gas for cooking other than for the microwave, toaster and electric jug. He also ran an extension lead up to the house which was in the course of construction.

The house reached lock-up stage in about February 2008 and as at mid-2012 the internal fit out of the house was continuing. Completion of the house is dependent on his finances

A water meter was installed at the Land in November 2009. Prior to that water was connected but no meter was installed.

He installed a temporary toilet and shower on the ground level of the house so as to meet his personal needs and to be accessible to contractors while he was asleep in the garage or absent from the site. At times prior to the installation of the toilet and shower he used bathroom facilities, including a toilet and shower in the backyard of a neighbour, Mr Nick Fylaktidis.

A water heater was added to the temporary shower in December 2009.

His friend, Mr Ronald Doolan, visited him socially about six times during the relevant period and ate and drank at the garage. Sometimes they would have a barbecue and hot and cold drinks. At other times they had takeaway food. Mr Doolan worked as labourer on the Land for no pay to assist him. During the relevant period Mr Doolan visited the Land about 10 times in each year.

Sometimes he would still be in bed in the garage when Mr Doolan arrived on the site. On some occasions when Mr Doolan visited the site Kimberley Jones, the Applicant's son's mother ("Ms Jones")was present.

When the Applicant was not at work he spent most of his time at home at the Land either asleep or doing housework.

Attached to the Applicant's witness statement are 12 colour photographs ("the photographs"). The photographs are referred to in the statement as follows:

"35. I annex 12 photos of the garage as it was at all relevant times.

36. These photo (sic) represent the condition of the interior of the garage during the relevant years.

37. What isn't shown is the small bar type fridge, that has since ceased working and been thrown away.

38. The only thing that was not actually there is the TV."

The s 58 documents included, at pages 62-64, a letter from the Applicant to the Chief Commissioner dated 17 November 2010. That letter included the following:

"4. Services connected to the property include:

Sewerage - previous house ran on septic, sewerage connected 2004.

Water - has always been connected

Gas - Connected November 2009...

5. Furnishings in Garage included a lofted area with a bed, microwave, mini fridge, lounge, TV, air conditioning unit. Main house comprises of fully functional kitchen (installed November 2006), 1 showers + 1 toilet (both functional from 2005), 2nd shower functional from 2008, washing machine functional from 2005 and dryer functional from 2009. Bookcase, lounge and 2 sun lounges, dining table and chairs, 4 bar stools, but Fay, TV Cabinet, 2 TV's, 3 built in wardrobes, built in linen closet and built-in pantry, 2 chests of drawers.

6. I have resided only at (the Land) and no other address since 2005.

...

I inherited a house at (the Land) when my father passed away, not an unoccupied block of land. Due only to the fact that the house was in need of major renovations, I made the decision to knock down and rebuild. Had I chosen to renovate I believed this to be problematic due to old footings, plumbing etc, not to mention costly, yet I would not be faced with such a tax.

Instead, with the best intentions to improve the area, and provide a pleasant updated home for my family, I chose to rebuild the old house.."

During cross examination the Applicant's evidence included the following:

(1) an acknowledgement that the photographs of the toilet, laundry and shower annexed to his statement were not in the interior of the garage;

(2) an acknowledgement that the Land was not metered for water from 2006 to 2009 and that a reason for properties to be metered for water is to ensure that payment is made for water used;

(3) the Land had not been rented out nor used for any purpose other than his residence during the relevant period;

(4) a washing machine was installed in 2005 in the main house and was connected by a 60 m power cord from the garage;

(5) he understood that Mr Fylaktidis who assisted him in the development was a qualified builder. It was put to him that Mr Fylaktidis carried out the main task of the development - he denied this and stated that he worked as an owner builder; and

(6) he performed shift work throughout the whole of the relevant period and up to March 2013.

The Applicant was shown Mr Doolan's witness statement and asked to explain why part of Mr Doolan's statement was identical to his own statement. He said that he had no explanation and he had not previously seen Mr Doolan's statement.

In re-examination the Applicant stated:

(1) his mail address was left at his mother's property as a convenience;

(2) the use of his mother's address in Incoming Passenger Cards during the relevant period is because that was his contact address at the time. When completing the Cards his main concern was what had to be declared for customs;

(3) he did not at any time during the relevant period reside at his mother's address

Mr Doolan gave evidence that:

(1) he was a friend of the Applicant and had known Ms Jones for about a decade;

(2) he visited the Land about 10 times each year during the relevant period and assisted the building work as a labourer for no pay in order to help the Applicant;

(3) the Applicant lived in the garage. Sometimes when he arrived at the Land the Applicant was not there, sometimes the Applicant was in bed and sometimes Ms Jones was at the Land;

(4) he often went inside the garage and had a beer or cup of coffee with the Applicant. Often they had takeaway food together. Sometimes he (Mr Doolan) boiled water using the electric jug in the garage;

(5) he had seen the photographs which were annexed to the Applicant's affidavit and the "scenes depicted in the photos appear to closely represent my recollection to what I observed on the interior of the garage" other than that "the small bar fridge, is not there";

(6) he visited the Applicant's home in the garage about six times for a social drink during the relevant period. At those times the Applicant would cook on the barbecue and the Applicant and Mr Doolan drank beer. On some occasions Ms Jones was there but not on others. After the meat was cooked those present "would go inside the garage and sit down on chairs, eat the food, and drink more beer."

In cross examination Mr Doolan stated that he had not been in the garage since the Applicant moved into the house; on occasions he had gone upstairs in the garage and saw the bed there; the shower, toilet, washing machine and dryer in the photos were in the house not the garage; and Mr Doolan denied seeing Mr Payne's statement before making his own statement.

Mr Doolan acknowledged that his evidence was given in order to support his friend. He said there had been no collusion and his statement was true.

Mr Garry Jones gave evidence that:

(1) he was the father of Kimberley Jones, the Applicant's partner. He knew the Applicant and Mrs Payne well. Sometime before 2001 the Applicant told him he would build a house on the Land.

(2) He visited the Land several times each year during the relevant period. On one occasion the Applicant was still in bed when Mr Jones arrived. Mr Jones stated that the Applicant "appeared to be living in the garage on the property" and that occasionally he went into the garage "and had a cup of tea or coffee with" the Applicant. Mr Jones described some of the furniture in the garage and said that he had been to the loft in the garage which he accessed with a ladder.

(3) The Applicant had stayed at Mr Jones' home on 6 to 10 occasions.

(4) The scenes depicted in the photographs closely represented his recollection of the interior of the garage other than that a small bar fridge was not in the photographs.

In cross-examination Mr Jones said:

(1) on one occasion the Applicant had to get up in the middle of the night to intercept a burglar on the Land.

(2) A washing machine, shower and toilet in the photographs were not located inside the garage. Later he said they were in the house on the Land.

(3) Some of the photographs were of the interior of the garage and some were of the exterior.

(4) He thought he had visited the Land some three or four times. Later he said he was unsure of the exact number of times he visited the Land.

(5) Throughout 2006-2009 the Land appeared to be a typical building site with material over the ground and a chain link fence across the front of the Land with a swinging panel to allow access.

(6) He had accessed the bedroom loft in the garage using a ladder.

(7) He was unaware as to when the washing machine and dryer became operational.

Ms Kimberley Jones gave evidence to the effect that:

(1) she was the Applicant's partner and they had a child. She had known the Applicant for some 20 years.

(2) The Applicant's mother lived a few doors from the Land and she had visited the Applicant's mother's home on many occasions.

(3) She only stayed in the garage with her child sporadically because of the rough nature of the accommodation.

(4) She saw the Applicant living in the garage.

(5) There was no letterbox on the Land in the relevant period.

(6) For much of the relevant period she was separated from the Applicant.

(7) In about 2001 or 2002 the Applicant informed her that he was going to have a house built on the land and would live in the garage while the house was being built.

(8) At times, particularly during 2006-2007 she saw Mrs Payne bring mail to the Applicant and sometimes she saw Mrs Payne visit the garage without mail.

(9) Facilities at the garage included a bed, cooking facilities, a table and seating, electric power, TV and a music system.

(10) Power points were used for some cooking utensils, the Applicant's laptop computer and a bar fridge.

(11) Some cooking was done on a 2 burner gas BBQ outside the garage or on a camp stove.

(12) The majority of the time she attended the garage with the Applicant they would eat takeaway food.

(13) A toilet and shower were located at the bottom level of the main house.

(14) She has seen photographs of the interior of the garage annexed to the Applicant's affidavit. During the relevant period, the garage interior was substantially the same as represented in the photographs except that the Applicant's bar fridge is not in the photographs.

(15) Water was connected to the garage. Hot water was first available in the garage in about November 2009.

In cross examination Ms Jones stated:

(1) she was aware that her witness statement was prepared as evidence for the Applicant in relation to a tax dispute.

(2) Some of the photographs were not of the garage, for example the washing machine and the shower.

(3) She confirmed she slept with her son in the loft bedroom. At times she carried her son up to the loft. From the time that her son was about 15 months he could climb to the bedroom and she would be with him.

(4) She acknowledged that there was no balustrade at the open edge of the loft and that there was an access hole in the floor of the loft. She denied that her son sleeping in the loft was highly dangerous as he slept in bed between two adults. There was no risk of him getting up and falling because she was very closely attuned to her child.

(5) She did not recall getting out of bed during the night to go to the toilet.

Mr Nick Fylaktidis, provided a witness statement in which he stated:

(1) He was a builder who agreed in about August 2002 to assist the Applicant, as owner builder, to build a house on the Land.

(2) Construction of the garage commenced in about February 2003. The Applicant informed him that the garage was to be the Applicant's residence until the house was completed.

(3) During the relevant period he saw the Applicant living in the garage.

(4) He allowed the Applicant to use bathroom facilities in his back yard during the relevant period. He saw the Applicant go to those facilities on several occasions during that period.

(5) At times during the relevant period when he arrived at the Land he observed that the Applicant was either in bed in the garage or absent at what he understood to be the Applicant's work. If the Applicant was in bed when he arrived on the Land he would sometimes come out of the garage during the day and speak to him. If the Applicant was away from the garage when he arrived then the Applicant would often return to the garage later in the day.

(6) He did not see a letterbox on the Land.

(7) On some occasions, particularly during the first half of the relevant period, he saw Mrs Payne attend the Land and see the Applicant, often with mail in her hand.

(8) He often saw Ms Jones and her son visit the Applicant at the Land.

In cross examination Mr Fylaktidis stated:

(1) his witness statement was correct except that he was not a licensed builder.

(2) He was paid by the Applicant to work on the Land.

(3) Bathroom facilities used by the Applicant with his permission were in his backyard. The last time the Applicant used those facilities was some years ago, before the house on the Land was at lock-up stage in about February 2008.

(4) He saw Mrs Payne visit the land, at times daily, and hand over mail.

(5) He saw Mr Doolan at the Land from time to time possibly weekly.

(6) Mrs Payne knew him by name. He saw her from time to time. The local area is a small suburb and everyone knows everyone.

(7) A toilet and shower were installed after lock-up by the plumber.

In re-examination Mr Fylaktidis stated he did not help install the shower. The plumber started some work before the lock-up stage and ended after the lock-up stage. He was not sure of the details of the work or the timing.

Mr Brett Sussmilch, a plumber, gave evidence. He removed a water meter from the Land in about September 2004 and installed a water meter in about November 2009. He fitted a number of plumbing items to the Land during the relevant period and was not aware of any other plumber carrying out work on the Land during that period. Mr Sussmilch installed an external tap on the side of the Land between the garage and the street. He could not recall installing a tap in the garage. He was uncertain of relevant dates and could not confirm them without checking his records which he had not done.

Mrs Payne provided a witness statement dated 20 June 2012 in support of the Applicant but, as noted above, did not give oral evidence. Her witness statement includes the following:

(1) she lives a few doors from the Land.

(2) In about October 2001 the Applicant informed her that he was going to build a house on the Land but he would build a garage first, then move into the garage while the house was being built.

(3) She was the person who habitually emptied the letterbox at her home. She saw correspondence come to her house for the Applicant from various authorities. During the relevant period there was no letterbox at the Land. The house was nearly finished in early 2010 and a letterbox was erected on the Land at about that time. When she was ill during the relevant period, mail was redirected from her home to her daughter's address. She would call the Applicant to collect his mail and let him know if there was anything urgent he needed to attend to. Otherwise the Applicant would collect a bundle of mail every fortnight or so. This arrangement continued until late 2009 or early 2010.

(4) Construction on the Land started in late 2001 or early 2002. She often saw Mr Fylaktidis, a builder and neighbour, working on the construction and would say hello to him.

(5) She would go to the garage on the Land several times a week during most of the relevant period to deliver the Applicant's mail and see how he was getting on.

(6) She knew that the Applicant worked shift work with Qantas and usually knew what shift he was working. Usually when she went to the Land she would find the Applicant in the garage. Often he was still in bed.

(7) The Applicant showed her around the garage when he first moved in in about 2002. She was aware that the garage had a shower, bed, cooking facilities, a table and seating and had electricity connected.

(8) She saw the photographs annexed to the Applicant's witness statement. The photographs are essentially identical with what she saw of the inside of the garage during the relevant period.

(9) Sometimes when she entered the garage Ms Jones was there with her child.

The Respondent's Evidence

Documents produced by the Chief Commissioner pursuant to s 58 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act") included:

(1) Office of State Revenue ("OSR") External Data Search Results sourced from:

(a) the Electoral Roll Commission showing the Applicant's address as Mrs Payne's property as at August 2008, confirmed in February 2010 (page 45 of the s 58 documents);

(b) Energy Australia at May 2006 showing the postal address for the Land was Mrs Payne's property, confirmed in September 2008

(d) Sydney Water Corporation at May 2010 showing the postal address for the Land was Mrs Payne's property (page 48).

(2) A facsimile from Sutherland Shire Council to the OSR disclosed that the postal address of the Land at October 2010 was Mrs Payne's property (page 52).

(3) A Sydney Water account for the Land showing (at page 80) that a water meter on the Land was read on 12 November 2008. The account, issued 24 February 2009, was addressed to the Applicant at Mrs Payne's property. Sydney Water accounts bearing later dates also formed part of the s 58 documents. Each account up to and including one issued 11 August 2010 (page 91) was addressed to the Applicant at Mrs Payne's property. An account issued 10 November 2010 was addressed to Mr Payne at the Land (page 93).

The Chief Commissioner also provided:

(1) electricity consumption history enquiry documents showing certain information in relation to electricity consumption for each of the Land and Mrs Payne's property from June 2005 to September 2012; and

(2) Australian Incoming Passenger Cards signed by the Applicant in February 2006, May 2009 and June 2010.

Amongst the documents produced by the Chief Commissioner in accordance with s 58 of the ADT Act was an OSR document prepared for internal use described as "Objection submissions" dated 19 January 2011. That document included at pages 101-103 the following paragraphs:

"9. Mr Payne has advised that in 2005 he installed in the main house a functional shower and toilet. In November 2006, a functional kitchen was installed and a further shower was installed in 2008. Once the Bathroom and Kitchen were installed, the house would fall within the definition of residential land. Accordingly, for the 2007 to 2010 tax years inclusive, the subject property can properly be characterised as residential land under the meaning provided by Schedule 1A, Clause 3 of the Act. In respect of the 2006 tax year, as only a bathroom and toilet were installed it is difficult to argue that the subject property meets the criteria in Schedule 1A, Clause 3 of the Act.

10. However, even if the subject property could be considered residential land for the 2006 tax year, Mr Payne still needs to demonstrate that the subject property was his principal place of residence as at Midnight 31 December 2005 as required by Schedule 1A, Clause 2 of the Act.

.....

15. ... Mr Payne has submitted that for all of the relevant tax years, he has been using and occupying the subject property. My Payne (sic) has advised that in 2005, electricity was connected to the property and a shower and toilet were installed. In 2006 a fully functional kitchen was installed. This then brought the property within the meaning of residential land required by Schedule 1A, Clause 3. In respect of where Mr Payne eats, sleeps and drinks, he has advised that he has made use of facilities at his place of employment and at his mother's house, which is three doors down at... However he has not stated exactly at what period this occurred....

16. ... The trends in utility usage is not what is ordinarily shown from a principal place of residence, having appliances such as fridges, washing machines vacuums and other necessary electrical items used in an ordinary principal place of residence. Although it is conceivable that a person may choose not to have such items in their home and the absence of such should not defeat a person's claim to a principal place of residence exemption, the absence of such appliance (sic) should be considered in light of other available evidence.

.....

18. ... The information available to this office indicates that for the duration of the construction time, Mr Payne was residing at his mother's property at..."

The Respondent's Submissions

The Chief Commissioner submitted that the following issues arise:

(1) whether the Land was, at the relevant time in respect of each or any of the tax years a "parcel of residential land" within the statutory meaning. That will only be so if:

(a) the Land was used and occupied by the Applicant for residential purposes and for no other purpose during the relevant period in respect of the relevant tax year;

(b) that use and occupation was of a building or buildings designed, constructed or adapted for residential purposes (in the sense of cl 3 of schedule 1A); and

(2) if so, whether:

(a) the Land, and no other land, was continuously used and occupied by the Applicant for residential purposes (and for no other purpose) during the 18 month period between 1 July in the year preceding each relevant tax year and the last day (i.e. 31 December) of that tax year (in accordance with the decision of Gzell J in Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 at [5], [28] and [31]) ; or

(b) the Chief Commissioner is satisfied that the Land was used and occupied by the Applicant as his principal place of residence throughout the relevant tax year.

The Chief Commissioner submitted that the Applicant is unable to establish that during the relevant period in respect of any of the 2006, 2007, 2008 or 2009 tax years: the Applicant used and occupied, on the Land, a building designed, constructed or adapted for residential purposes; and he used and occupied the Land as his principal place of residence; and he continuously used and occupied the Land (and no other land) for residential purposes.

The Chief Commissioner made the following additional submissions:

(1) The mere occupation of land by a taxpayer, even as his or her exclusive place of residence, is insufficient to secure the principal place of residence exemption. It is also necessary that such occupation be of a building or buildings "designed, constructed or adapted for residential purposes".

(2) In determining whether a building is "designed constructed or adapted for" particular purposes regard is to be had not to the subjective intention of the owner or use of the building but to its architectural design and physical character. The Applicant must establish that the architectural design and physical character of the garage, at the relevant times, were appropriate for residential purposes. The Chief Commissioner relies on the Court of Appeal in South Sydney Municipal Council v James and Another (1977) 35 LGRA 432 ("James' case") and the Full Court of the Supreme Court of South Australia in Masters v Padley (1984) 53 LGRA 417.

(3) Notwithstanding that James' case related to the interpretation of a land planning instrument that interpretation applies to the subject hearing as the same wording is used in both the LTM Act and the land planning instrument.

(4) The use of a building "for residential purposes" means more than mere existence but requires "At a bare minimum...settled, safe, hygienic occupation and the provision of facilities necessary for at least the basics of such occupation. These include facilities for sleeping, preparing and consuming food, physical hygiene (including personal washing and toilet facilities) and storage. A mere sleeping place in the absence of those other elements is not "residential" in the relevant sense."

(5) The relevant "residential purposes" are "purposes of residence to a standard that is expected and accepted in New South Wales at the relevant time. Such an interpretation is the only one which is consistent with the objective of encouraging appropriate development of land which underpins the LTM Act." (Chief Commissioner's submission dated 26 September 2012 paragraph 13) The Chief Commissioner relies on the Second Reading Speech - Land Tax Management Bill (NSW) 1956, pages 2806-2807 and the Second Reading Speech - Land Tax Assessment Bill (Cth) 1910 at page 4596.

(6) The underlying principle behind the interpretation of legislation is that the objectives of legislation are promoted. In accordance with s 34(1)(a) or (b) of the Interpretation Act 1987 extrinsic materials may be used to assist this interpretation. These materials are not limited to a second reading speech or explanatory memorandum of a particular Act where there is a reference to the objects of a prior Act. The second reading speech in support of the Land Tax Management Bill in 1956 refers to and draws support from Commonwealth land tax legislation. Accordingly the 1910 second reading speech in support of the Land Tax Assessment Bill (Cth) promotes the objectives of the current LTM Act and remains relevant.

(7) If the Tribunal does not accept the Chief Commissioner's submissions to the effect that the evidence available is insufficient to establish that during each or any of the tax years any building or buildings occupied by the Applicant on the Land were "designed, constructed or adapted for residential purposes" for the purposes of the LTM Act then the Chief Commissioner submits:

(a) the evidence is insufficient to establish that the Applicant used and occupied the Land as his principal place of residence throughout each or any of the tax years; and

(b) the Chief Commissioner is not satisfied (as contemplated by cl 2.2 (a) of schedule 1A) that the Land alone has been continuously used and occupied by the Applicant as his principal place of residence throughout each or any of the tax years.

(8) The Chief Commissioner explains his lack of satisfaction by referring to tests as to the extent of his discretion in Chief Commissioner of State Revenue v Aldridge and Another [2003] NSWADTAP 50 and Saboune v Chief Commissioner of State Revenue [2011] NSWADT 8. He submits that the evidence does not support the Applicant's contention that the Land was used and occupied over the relevant period as the Applicant's principal place of residence on the basis of either test. Accordingly the Chief Commissioner is not satisfied and has not exercised his discretion in favour at the Applicant.

(9) The Applicant has admitted that he resided in rental accommodation in Caringbah in July 2005 and therefore cannot satisfy cl 2(2)(a) of schedule 1A with respect to the 2006 tax year.

(10) Notwithstanding that several witness statements in support of the Applicant were to the effect that a toilet was contained in the garage these statements were reversed in cross examination. Accordingly there were no toilet facilities in the garage.

(11) There is no positive evidence in relation to the availability on the Land of toilet and shower facilities. Witnesses who stated that such facilities were available lack credit because of acknowledged errors in their statements. Until 2008 there were no usable and used toilet or shower facilities on the Land.

(12) The evidence is that there was no internal power in the house until 2008-2009. On the balance of probability the occupation of the site commenced at the end of 2009 when a substantial increase in electricity consumption occurred.

(13) The Chief Commissioner accepts that there were sleeping and some cooking facilities in the garage but, on the evidence at its highest point in favour of the Applicant, until February 2008 the Applicant could not wash himself in the garage.

(14) The Applicant had no legal right to occupy the garage as a residence.

(15) Although under cross-examination the witnesses for the Applicant maintained that they had seen the Applicant reside at and occupy the Land the documentary evidence is against occupation. The mailing address of the Applicant for relevant statutory purposes is Mrs Payne's property.

(16) Credit and weight of evidence by the Applicant and his witnesses:

(a) The "intended address" of the Applicant in 2006 and 2009, when he completed Incoming Passenger Cards on returning to Australia, was his mother's property not the Land. The Applicant's explanation is that this is his mailing address. However the Passenger Cards provide for a contact address separate to the intended address.

(b) A water meter should have been installed at the Land at all relevant times. No meter was installed in order to avoid payment for water usage.

(c) The Applicant's statement was in many respects identical to the statement by Mr Doolan. Either both statements were a concoction or the Applicant and Mr Doolan were working together in preparing their statements.

(d) Ms Jones is a caring mother who would not have permitted her child to sleep in a bed on the mezzanine floor in the garage while it was not balustraded and had at least one hole in the flooring to permit access through a ladder.

(e) Witness statements by Mr Doolan, Mr Jones, Ms Jones and Mrs Payne, were to the effect that the photographs attached to the Applicant's witness statement were taken inside the garage. However each witness who was cross-examined admitted that certain of the photographs were not taken inside the garage.

The Applicant's Submissions

In summary the submissions for the Applicant were that:

(1) Throughout the relevant period the Applicant owned the Land and it was his principal place of residence. Accordingly the principal place of residence exemption applies.

(2) The Applicant did not own, control or occupy any other place which was his or anyone else's residence and there is no evidence which suggests that there is another place which was the Applicant's residence during the relevant period.

(3) Indicia of "residence" cited in Yen-Cheng Chuan and Another v Chief Commissioner of State Revenue [2009] NSWADT 160 ("Yen-Cheng's case"), which judgment was referred to by the Chief Commissioner in the decision under review, include :

(a) "the place where a person eats, drinks and sleeps,

(b) the presence of furniture and fittings and other matters such as entertainment of friends,

(d) the subjective intention of a person."

(4) The Tribunal in Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21 formed the view that "the words "principal place of residence" should be given their ordinary meaning in the context in which they appear... The evidence shows that in the ordinary meaning of the phrase "principal place of residence" the Applicant's land was his primary place of residence.

(5) The Chief Commissioner asserted that the "address" of the Applicant was Mrs Payne's property because the latter was used by the Applicant as a postal address. The Land had no letterbox at relevant times and as the Applicant's mother's house was only a few doors away it is convenient and reasonable for the Applicant to nominate his mother's property as an address for the purpose of registration with various authorities. There is evidence that the Applicant's mother brought the Applicant's mail to him regularly. Evidence as to his postal address is not evidence of his residence.

(6) Mr Jones gave evidence of a chain link fence located on the street frontage of the Land and neither Mr Filaktydis nor Mr Sussmilch saw a letterbox on the Land.

(7) The implication that the Applicant wrote his mother's address as his "intended address" on Incoming Passenger Cards so as to refer to his residential address at the relevant times is contrary to the Applicant's sworn evidence.

(8) No water meter was installed until the end of 2009. The lack of a record of water usage does not indicate that the Applicant was not in residence at the Land.

(9) It was conceded that the shower was not located in the garage. It was located approximately 10 m away in the main building on the Land. This does not mean that the Applicant did not reside at the Land.

(10) The availability of a toilet facility depends on whether water was connected. Questions were not asked of relevant witnesses in relation to when water was connected to the toilet. Accordingly it is unfair to imply that no toilet was available.

(11) The Applicant's evidence in relation to his ability to shower and eat at work and his use of toilet facilities of a neighbour is consistent with lower electricity usage on the Land but this does not mean that the Land was not his residence.

Photographs in evidence show items usually found in a dwelling used as a residence. These include a bed, lighting, electric power and power points, a refrigerator, electric kettle, a toaster, furniture for the Applicant and his visitors (including chairs and table at which to eat, a chest of drawers, lounge chairs), microwave oven, gas stove, external barbecue, television set, radio and music appliances, washing and drying machines, external water tap, shower, toilet.

(12) The "totality of the Applicant's evidence identifies a dwelling that had the facilities for a person to have shelter, prepare food, entertain themselves and visitors, sleep, shower and use a toilet. In short, the basic requirements for residence; living a life, day to day." (Applicant's submissions paragraph 29).

(13) Conditions at the Land may not suit everyone. However the Applicant is a young man who was willing to live a relatively Spartan existence while building his home. The facilities on the Land meet the legislative principal place of residence criteria for the purpose of the land tax exemption. The Chief Commissioner referred to a Commonwealth Parliament second reading speech of 1910 in order to assist the interpretation of the LTM Act. Whatever was said in that speech does not need to be taken into account as there is no obscurity in the wording in the relevant sections of the LTM Act. If extrinsic evidence is required it is not appropriate to rely on a much earlier Act of another Parliament. Neither s 34(1)(a) or (b) of the Interpretation Act apply to this matter as they are only relevant if there is an ambiguity or obscurity in the words used in the LTM Act. The LTM Act provides a clear definition of principal place of residence and it is that definition which should be used.

(14) James' case is not relevant. That case involved interpreting a planning instrument not a revenue act. The two pieces of legislation have different objects. In any event the judgement in James' case does not relate to the Chief Commissioner's argument. The LTM Act uses the words "designed" or "adapted" not only "designed".

(15) The s 58 documents contain irrelevant information. Dealing with issues such as water usage is not appropriate. The evidence of Mr Sussmilch (the plumber) is that there was no water meter on the land at relevant times. This evidence is uncontradicted. The Applicant acknowledged that he knew that there should have been a water meter installed on the Land. That is not relevant to this hearing. There are taps on the Land and a toilet and shower.

(16) The Applicant was employed during the relevant period by Qantas and then Amadeus. He has given evidence that he was engaged in shift work and that at times he used his employers' facilities to shower and eat at work. This does not diminish his claim that he resided at the Land.

(17) There is a limited range of words that can be used to describe particular events and the Tribunal should not draw any adverse inference from similarities in words used in the Applicant's statement and words used in Mr Doolan's statement.

Consideration

It is common ground that the Land was owned by the Applicant at all relevant times and that the onus lies on the Applicant to prove that he is entitled to the principal place of residence exemption.

The Applicant's case is that the exemption applies because the Applicant owned and used the Land as his principal and only residence throughout the relevant period. He lived in buildings on the Land which, with one exception, had adequate facilities for his chosen lifestyle throughout the period. The exception is that he arranged for the use of temporary showering and toilet facilities at a nearby property for part of the relevant period while those facilities were being installed on the Land.

The Chief Commissioner's case is that the evidence does not support the Applicant's contention. The Applicant admitted that in July 2005 he did not reside at the Land; even if the Applicant lived for a time at the garage, it was not designed constructed or adapted for residential purposes; the land must be "residential land" as defined and there is no positive evidence in relation to the availability on the Land of toilet and shower facilities nor was there any internal power in the house until 2008-2009; and documentary evidence shows the Applicant's address is not at the Land.

Having regard to s 100(3) of the TA Act and the above extracts from the LTM Act, the Applicant is not exempt from land tax for the Land in respect of the tax years unless he proves that:

(1) he continuously used and occupied the Land (which he owned) for residential purposes as his principal place of residence and for no other purpose throughout the relevant period, or the Chief Commissioner is satisfied that the Land was used and occupied by the Applicant as his principal place of residence for that period (cl 2(1) and (2) of schedule 1A of the LTM Act); and

(2) he did not use and occupy any other land for residential purposes during the relevant period (cl 2(2)(a) of schedule 1A); and

(3) his use and occupation of the Land was of a building or buildings which were designed constructed or adapted for residential purposes (cl 3(1) of schedule 1A); and

(4) no income was derived from any part of the Land (cl 3(1)(c) of schedule 1A); and

(5) the Land was, throughout the relevant period, a parcel of "residential land" (cl 3(1) of schedule 1A).

The Chief Commissioner has submitted that limited weight should be given to the evidence of the Applicant and his witnesses.

I note that although paragraph 10 of the Applicant's witness statement dated 13 June 2012 is "The land had previously had no house or other structure on it." this is contradicted by the letter of 17 November 2010 from the Applicant to the Chief Commissioner (at page 64 of the s 58 documents) "I inherited a house at (the Land) when my father passed away, not an unoccupied block of land." I do not regard this as material.

Witness statements by the Applicant, Mr Doolan, Mr Jones, Ms Jones and Mrs Payne somewhat ambiguously state that photographs attached to the Applicant's witness statement represent the inside of the garage at relevant times. Under cross-examination, each of these witnesses (other than Mrs Payne who was not available for cross examination) readily acknowledged that the photographs of the toilet, laundry and shower were taken inside the house.

The words in several paragraphs of Mr Doolan's statement are identical or almost identical to words in the Applicant's statement. Other similarities in wording appear in statements by several of the Applicant's witnesses. No evidence was produced as to any collusion between witnesses in relation to the preparation of their respective statement and each witness who was cross-examined on this point strongly denied any collusion. It is also noted that the solicitor for the Applicant informed the Tribunal that the statements had been prepared in his office. I accept his explanation as to the similarities in the wording of the statements.

The Chief Commissioner submitted that the Applicant's evidence could not be relied on (to prove that he resided on the Land) because the address he provided to statutory authorities on several occasions as his address was Mrs Payne's property rather than the Land.

The evidence is that there was no mailbox at the Land. The Applicant explained that this was because a cyclone wire fence divided the Land from the road and, as he had previously lived at Mrs Payne's property three doors away, it was more convenient for him to use that property rather than the Land as his postal address. The Applicant also gave evidence to the effect that he tried installing a temporary mailbox at the Land in about 2005 but the mailbox was "blown up". I note the concession by the Applicant's solicitor as to the undesirability of notifying certain statutory authorities of a postal rather than a residential address. I accept that the use by the Applicant of his mother's address as his postal address and as his 'contact address' when returning to Australia, were matters of convenience rather than evidence of his residence.

The Commissioner submitted that Ms Jones is a caring mother who would not have permitted her child to sleep on the mezzanine floor as it was unsafe. Accordingly her evidence should not be relied on. Under cross-examination Ms Jones repeated several times that she and her child had slept in the garage and she explained the arrangement she made for her child's safety. I accept the evidence of MS Jones that she and her child slept in the loft on occasions.

There are discrepancies in the evidence for the Applicant in relation to the installation of water in the garage, in comparison to the photographs and the evidence of Mr Sussmilch, the plumber. I note that the toilet, shower and laundry facility shown in the photographs were situated in the house, not the garage. Accordingly they were installed in a building on the Land even if it was not the building in which the Applicant slept and ate. I also note that some of the relevant events occurred up to 10 years before the statements were made and that in relation to the installation of a water meter, the s 58 records produced by the Chief Commissioner show at page 80 that the meter was installed at least one year prior to the date Mr Sussmilch recalled effecting the installation. I accept that not everyone has a perfect recollection of the dates on which events occur. I also accept that all witnesses may not meticulously read and analyse their witness statements before signing them.

Did the Applicant own, use and occupy the Land for residential purposes during the relevant period?

The Applicant's evidence (and that of his mother) is that he owned the Land at all relevant dates. This is not disputed by the Chief Commissioner. Accordingly I find that the Applicant was the owner of the Land at all relevant dates.

The Applicant asserted in his evidence and in correspondence with the Chief Commissioner that he resided at the Land from July 2005, with the intent that it be his family's residence (see paragraphs 6 and 8 at page 63 and the penultimate unnumbered paragraph at page 64 in the s 58 documents). The Applicant's evidence and that of all witnesses other than Mr Sussmilch, who did not give evidence on this point, is that the Applicant lived in the garage throughout the relevant period.

The evidence for the Applicant is that the garage was purpose built for his residence and had various facilities including a bed, cooking facilities, lounge chairs and a table and seating. A microwave, kettle, toaster, TV, music system and bar fridge were connected to power points were in the garage. A toilet, shower and washing machine were located in the bottom level of the main house. Water was connected to the Land and a tap was situated outside the garage. Mr Fylaktidis lived near the Land and provided bathroom facilities which were used by the Applicant on occasions. The Applicant used his mother's property three doors away as his mail box.

The submissions of the Chief Commissioner to the effect that the Applicant did not use and occupy the land for residential purposes were supported by the following:

(1) the use by the Applicant of Mrs Payne's property as his mailing address and on two occasions as his "intended address" in Australia on Incoming Passenger Cards in 2006 and 2009;

(2) the lack of a water meter on the Land for part of the relevant period;

(3) electricity consumption history enquiry documents which apparently show a low usage of electricity on the Land for part of the relevant period and the main building on the Land not having an electricity connection for part of the relevant period;

(4) a lack of toilet, shower and laundry facilities and a tap inside the garage; and

(5) a lack of evidence that the Applicant was legally entitled to reside on the Land during the relevant period.

The decision by Verick JM in Yen-Cheng's case was referred to by the Chief Commissioner in his letter of 10 February 2012 which contains the decision under review. The Chief Commissioner noted (at page 154 of the s 58 documents) "merely sleeping in a place does not make that place a principal place of residence" and referred to other relevant indicia including some mentioned by Verick JM. For reasons not provided to the Tribunal, Yen-Cheng's case was not referred to in the submissions for the Chief Commissioner nor included in Chief Commissioner's Bundle of Authorities.

Paragraphs 19 to 23 in that decision provide a range of matters to be considered in determining whether a place of residence of a person is the principal residence of that person:

"19 The Act does not provide any technical or legal meaning for the expression "principal place of residence" and accordingly, the expression has its ordinary meaning. A person's place of residence is usually understood as "the place where he eats, drinks and sleeps" (per Ridley J in Stoke-On-Trent Borough Council v Cheshire County Council [1915] 3 KB 699 at 706). The use of the term "principal" in the expression suggests that a person may use and occupy more than one residence but that the exemption is only available for the principal place of residence of the person.

20 In ascertaining whether a particular residence of a person is the principal place of residence of that person it is necessary to use an objective test and the conclusion is determined by considering the extent and quality of use and occupation of the residence in each case (per Fryberg J in Dean v Commissioner of Stamp Duties (Qld)(No 2) [1996] 2 Qd R 557 in considering the meaning of the expression "principal place of residence" found in the Stamps Act 1894 (Qld)).

21 The onus to establish one's principal place of residence is usually discharged on the basis of various matters. It is important to note, as observed by the Victorian Civil and Administrative Tribunal in Re Ziino and Commissioner of State Revenue [2004] VCAT 1707 that:

"... while sleeping by itself in a place can be an indication of a principal place of residence, it is not the sole matter to be taken into account. One needs to look at a whole indicia of matters ...One needs to look as well at where the applicant ate; his use of electricity and the furniture and fittings and other matters such as entertainment of friends in the house... Sleeping in a place does not make a residence. It has got to be the whole indicia of things that are done in a home which are described in the cases..."

22 Other indicia of matters would include evidence of an applicant's use of the address of the property as the residential address for purposes of his or her mail, driving licence, on the electoral roll, in immigration records, income tax returns and telephone bills.

23 In Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 the Appeal Panel of the Tribunal agreed that "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 occupation for any other reason". The Appeal Panel also held that "the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue". (Also see Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26)."

It appears to me that the Chief Commissioner may have accepted each of the indicia which were not satisfied by the Applicant while asserting that each of the indicia which the Applicant put forward were tainted. I note that at paragraph 45 above I referred to an internal document of the OSR which included "18. ... The information available to this office indicates that for the duration of the construction time, Mr Payne was residing at his mother's property at...". Counsel for the Chief Commissioner conceded that there was no evidence to substantiate this statement which was materially detrimental to the Applicant.

The removal of a water meter, notwithstanding the availability and use of water, may well indicate a desire to avoid paying appropriate charges for water. This does not of itself counteract the evidence that the Applicant resided at the Land.

The Chief Commissioner did not produce any evidence as to rates of 'normal' residential electricity consumption nor evidence as to how much electricity might reasonably have been used by the appliances and lighting which the Applicant stated were used on the Land.

The use of the Land as a residence without statutory consent may well be unlawful. However the Chief Commissioner conceded that a failure to obtain statutory approval to reside on land is not relevant to a determination as to whether or not the Applicant in fact used and occupied the Land as his residence.

By majority the Court of Appeal in De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86 recently held that the words "used and occupied" in relevant clauses of schedule 1A did not mean "lawfully used and occupied". Basten JA stated at [73] "It would have been open to Parliament to impose a requirement of lawful use and occupation in respect of the exemption for a principal place of residence." As that had not occurred, His Honour considered whether the "lawful" characteristic should be imposed by way of implication. At [79] His Honour said:

"the legislative scheme does not call for, and therefore does not permit, the introduction of an additional constraint, namely that the use and occupation must be lawful, in the sense of complying with the requirements of the relevant planning legislation ..."

Although His Honour was specifically referring to the principal place of residence exemption from land tax in clause 8 of schedule 1A the principle applies by analogy to the principal place of residence exemption in clause 2 of the schedule.

Gzell J in De Marco stated at [156] and [157]

"

"156 The requirement in cl 6(2)(c) of the Schedule that the intended use and occupation not be unlawful and the absence of that specific requirement in cl 2, cl 3 and cl 8 militates against an implication of that requirement in those clauses.

157 It was submitted on the Chief Commissioner's behalf that it was not necessary to specify the requirement in cl 2, cl 3 and cl 8 of the Schedule as the legislature could be presumed to have assumed that the requirement was implied in those provisions. That is drawing too long a bow."

The Chief Commissioner submitted that using land "for residential purposes" requires certain standards of occupation and the provision of particular facilities. He submits that "such an interpretation is the only one which is consistent with the objective of encouraging appropriate development of land which underpins the LTM Act". The Chief Commissioner supports his submissions by referring to the Second Reading Speech - Land Tax Management Bill (NSW) 1956, pages 2806-2807 and the Second Reading Speech - Land Tax Assessment Bill (Cth) 1910 at page 4596.

Counsel for the Chief Commissioner conceded that the second reading speeches referred to in the immediately preceding paragraph made no reference to use of land for residential purposes nor to the principal place of residence exemption. I find that the references referred to by the Chief Commissioner are not relevant and do not assist the Tribunal in these proceedings.

Counsel for the Chief Commissioner conceded that toilet and shower facilities were available to the Applicant on the Land in the house from at least lock-up stage, no later than early 2008.

Although parts of witness statements by the Applicant and his witnesses were admitted by those persons to be incorrect in relation to a toilet, shower, washing machine and dryer being situated in the garage, I accept the substance of their evidence in relation to the Applicant using and occupying the Land as his residence and that those facilities were available in the house. I also accept that the Applicant's residential use of the Land may have been somewhat Spartan and that for part of the relevant period he used showering and toilet facilities near the Land rather than on the Land.

The Applicant was, throughout the relevant period, building his home on the Land and increasingly using that building for his residential purposes. The relevant construction work was ancillary to the Applicant's general residential use as contemplated by cl 3(2) of schedule 1A.

There is no evidence that the Land was used for any purpose other than development and use by the Applicant as his residence.

Accordingly I find that the Applicant did use and occupy the Land for residential purposes, with the intent that it be a permanent residence for himself and his family, and for no other purpose.

Did the Applicant use and occupy any land other than the Land for residential purposes during the relevant period?

The evidence is that for an unknown period during July 2005 the Applicant resided at Caringbah towards the end of a two year lease and during the relevant period the Applicant, on occasions, slept at Mr Jones' house, possibly on 6 to 10 occasions.

Documentary evidence produced by the Chief Commissioner is that the Applicant travelled overseas in February 2006 and May 2009. The period of absence from Australia was not in evidence.

The Applicant gave evidence that he owned no property other than the Land and had no other residence.

Counsel for the Chief Commissioner conceded that notwithstanding paragraph 18 at page 103 of the s 58 documents (see paragraph 64 above) there is no evidence that the Applicant's residence was anywhere other than at the Land during the relevant period. Having regard to the concession, there must be doubt as to the validity of the reasoning supporting the conclusion at paragraph 19 on page 103 of the s 58 documents, namely:

"It is therefore not established that the client gave up residence at his mother's property in favour of residence at the subject property until around November 2009. Accordingly, for the 2006 to 2009 tax years, Mr Payne was not using and occupying the subject property as his principal place of residence."

I find that the Applicant slept away from the Land for part of the relevant period but, having regard to the transient nature of both his overseas travel and sleeping at Mr Jones' home, he did not use or occupy any land, other than the Land, for residential purposes during the relevant period.

Was the use and occupation of the Land continuous from 1 July 2005 to 31 December 2009

The Chief Commissioner submitted that in order to qualify for the principal place of residence exemption it is necessary for use and occupation of land (as a principal place of residence) to be continuous from 1 July of the calendar year immediately preceding each tax year until 31 December of the tax year, that is a period of 18 months. The Chief Commissioner relies on the decision of Gzell J in Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 at [5], [28] and [31] ("Flaracos"). At [28] His Honour stated:

"The continuous use and occupation required by (the relevant section of the LTM Act at that time) must remain constant throughout each relevant 18 month period."

However His Honour also stated at [28]:

"if portion of a residence is converted into a shop, the land no longer answers the description of continuous use for residential and no other purpose. The plaintiff's land having at all times been used as a dwelling, it satisfied this requirement."

Accordingly continuous use of a property requires there be no substantive change in use of the property.

His Honour further stated at [29] and [30]:

"In my opinion continuous physical presence on the land is not required to constitute continuous occupation. If a person leaves his or her premises for a holiday it would defeat the purpose of the Act to conclude that occupation had ceased to be continuous. So long as the person retains the right to possession and controls possession, that person remains in occupation, in my view...

In the instant circumstances, there were extended periods of 2 to 3 months during which the plaintiff was absent from his Peakhurst home and during which various tenants were in possession..."

Notwithstanding these breaks in physical possession His Honour found that the plaintiff was in occupation of the premises and that the premises were used for residential purposes.

There is no suggestion by the Chief Commissioner that the Land was used for any purposes other than those contended by the Applicant.

The Chief Commissioner submitted that the Applicant admitted that he lived in rental accommodation in Caringbah as of July 2005 and accordingly could not satisfy the 18 month continuous use and occupation requirement in respect to the 2006 tax year.

The relevant admission by the Applicant is found in paragraphs 13 and 14 of his written statement. These are:

".. From about July 2003 to July 2005, I was living at a rented accommodation in a home unit at... Caringbah, where I had a two year lease.

When this lease ended in July 2005, I moved back to the garage to save money."

There is no evidence as to whether the return to the garage was on 1 July 2005, 31 July 2005 or in between. This issue was not put to the Applicant in cross examination.

The Chief Commissioner acknowledges that even if there is no continuous use and occupation for the relevant 18 month period then in accordance with cl 2(2)(a) of schedule 1A there is a deemed relevant use and occupation if "the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence".

The Chief Commissioner referred to Aldridge's case in which it was held that he had no true discretion unless the evidence supported that the land was used and occupied by the person as the person's principal place of residence at the relevant time in which event the Chief Commissioner must be so "satisfied". He also referred to Saboune's case in which it was held that the Chief Commissioner did, in the words of his submission "have a true, albeit limited, discretion".

The Chief Commissioner submitted at paragraph 17 of his written submissions that he was not satisfied in respect of any of the tax years in relation to the test as expressed in either of the said cases.

It is common ground that the 18 month period for any tax year commences on 1 July in the immediately preceding year. It is also common ground that the onus lies on the Applicant to prove his case. The applicant has not provided evidence as to when in July 2005 he resumed residential use of the garage on the Land although it is possible that it was on 1 July.

In reviewing a reviewable decision by an administrator (including the Chief Commissioner) this Tribunal is empowered by s 63 of the Administrative Decisions Tribunal Act 1997. Similarly in reviewing an assessment by the Chief Commissioner, s 101 of the Taxation Administration Act 1996 provides relevant powers:

"101 Powers of court or tribunal on review

(1) The court or tribunal dealing with the application for review may do any one or more of the following:

(a) confirm or revoke the assessment or other decision to which the application relates,

(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,

(c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid,

(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,

(e) make any further order as to costs or otherwise as it thinks fit.

(2) Nothing in this section limits the application of the following provisions of the Administrative Decisions Tribunal Act 1997 in respect of an application for review before the Administrative Decisions Tribunal:

(a) Division 3 of Part 3 of Chapter 5,

(b) section 88."

The "satisfaction" of the Chief Commissioner falls to be determined "in any other case" (cl 2(2)(b) of schedule 1A). In Saboune's case Judicial Member Verick outlined the nature of the Chief Commissioner's discretion in some detail including at paragraphs 38 to 43. The Judicial Member's analysis included:

"38 ... The discretion is broadly worded without any limitation. In the absence of any express direction in the relevant legislation as to how the discretion is to be exercised in a particular case, the decision-maker must be guided by the underlying purpose and policy "... so far that is manifested" in the relevant Acts: see Giris v Federal Commissioner of Taxation (1969) 119 CLR 365, Windeyer J at page 384. In Federal Commissioner of Taxation v G M Swift and Others 89 ATC 5101, French J (at page 5116) in considering a discretion of a similar nature stated that the "dispensing power is incidental and ancillary to the primary object of the legislation" and that its exercise must not "undermine the primary purpose" of "the scope and objects of the Act".

39 In Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1985-86] 162 CLR 24, Mason J (at 40) stated the approach to be to be taken when exercising a discretion of this nature as follows:

"... this court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard."

In Land Tax Ruling 82 version 2 dated 13 March 2012 ("LTR 82.2") the Chief Commissioner states:

"..if the owner has otherwise commenced or resumed occupation after 1 July, the exemption will be allowed if the Chief Commissioner of State Revenue is satisfied that the land is used and occupied as the principal place of residence of the owner on the relevant taxing date."

The taxing date for a tax year is midnight 31 December immediately before the commencement of that tax year.

Having regard to my above findings, the Chief Commissioner's ruling LTR 82.2 and the principles outlined in Flaracos, I am satisfied and I find that there is continuous use and occupation by the Applicant of the Land for residential purposes and for no other purposes for each of the 2006-2009 tax years inclusive.

Was the use and occupation of the Land of a building or buildings designed, constructed or adapted for residential purposes?

In order to gain the principal place of residence exemption under cl 2(1)(a) of schedule 1A the relevant land must be "a parcel of residential land" the meaning of which is set out in cl 3 of the schedule, This clause requires use and occupation of "a building or buildings designed constructed or adapted for residential purposes", see paragraph 8 above.

The Chief Commissioner submits that in determining whether a building is "designed constructed or adapted for" particular purposes regard is to be had not to the subjective intention of the owner or use of the building but to its architectural design and physical character. The Applicant must establish that the architectural design and physical character of the garage, at the relevant times, were appropriate for residential purposes. The Chief Commissioner relies on James' case and Masters v Padley.

I have found that throughout the relevant period the Applicant resided at the Land. He slept and generally lived in the garage, which had been designed and constructed with a mezzanine floor for use as his bedroom until he could live in the house.

The Applicant submits that neither of James' case nor Masters v Padley are relevant as they involved interpretation of planning instruments, not tax legislation and as the two types of legislation have different objects their wording should not necessarily have the same interpretation.

James' case was a decision by the Court of Appeal in respect of questions as to planning consent and approval to a proposed change of use in respect of a building covered by the City of Sydney Planning Scheme Ordinance. The change related to two different classes of residential use of a building

One issue related to the relevant classification of a building in an area in which the zoning permitted buildings to be erected or used without consent to the extent that they were "dwelling-houses". The definition of "dwelling-house" pointed "to a type of building rather than to its use or intended use." In the opinion of Reynolds JA at page 439 the definition "does not make good sense but nevertheless the clause must be made to work according to its spirit and intendment."

The relevant zoning ordinance classified buildings and portions of buildings into various classes depending on the nature of the residential use of all or part of the buildings. Clause 6.1 (4) of the Ordinance stated:

"For the purposes of this clause the classification of a building or portion of a building is determined by the purpose for which it is designed, constructed, or adapted to be used."

The Chief Commissioner also referred to the decision of Samuels JA at page 444. Counsel for the Chief Commissioner placed some emphasis on the use of the word "designed". In support of the Chief Commissioner's argument, that it is the structure of the building which is relevant not the use to which it is put, at page 444 Samuels JA stated "Once the correct meaning of "designed" is applied, it follows that "dwelling-house" is defined not in terms of use or intended use, but by reference to the character or structure of the building. The definition points to a building of a particular physical identity, rather than to the use to which it may, or must, be put." However in the same paragraph His Honour went on to state "Once that requirement (the particular physical character) is satisfied its function is complete and its influence exhausted; it cannot then be made to determine the manner in which such a building must be used."

Masters v Padley was an appeal against convictions for breaching the South Australian Building Act 1970 and Building Regulations 1973. James' case was referred to, followed in part and distinguished in part. The factual background again related to differing types of residential use of a building or parts of a building and particular classification classes. In the event the appeals were allowed.

I do not find James' case or Masters v Padley, both of which related to a comparison of zoning classifications, of any particular assistance in interpreting the words "designed, constructed or adapted for residential purposes" in the context of schedule 1A of the LTM Act, an exemption provision in a taxing statute.

The evidence in this matter is, and I find, that the garage and house were designed, constructed and adapted to be used for residential purposes. In making this finding I note that in the letter of 17 November 2010 (paragraph 24 above) the Applicant asserted that in addition to the ongoing connection of water to the Land and the facilities in the garage, the house included a shower and toilet functional from 2005 and a kitchen installed in November 2006. The Chief Commissioner did not produce any evidence to counter the Applicant's evidence on this point.

Evidence was given as to the use of an electric extension cord providing power to the house. This may not be an ideal or even a usual manner of arranging a source of electricity but it was the method chosen by the Applicant and, according to the evidence, used by him for a period. The Chief Commissioner did not provide any evidence to the contrary.

In this matter it is the combination of all buildings on the Land which is relevant in determining whether land is 'residential land' rather than considering the design, construction or adaptation of a single building such as the garage. I find that although there is no evidence of hot running water available until late 2009 and the electricity connection to the house was initially of a temporary nature, these do not materially detract from the buildings on the land being "designed, constructed or adapted" for residential purposes throughout the relevant period.

The fact that the buildings may not have complied with zoning ordinances in relation to their residential status is not relevant in interpreting the LTM Act in these proceedings. See Basten JA at [79] and Gzell J at [156] and [157] in De Marco cited at paragraph 69 above.

Was income derived from any part of the Land?

The evidence of the Applicant under cross-examination is that the Land has never been rented out. By implication no income was derived from the Land. The Chief Commissioner provided no evidence to the contrary nor did he make any submissions on this point.

I find that no income was derived from the Land.

Was the Land 'residential land' throughout the relevant period?

The meaning of "residential land" for the purpose of these proceedings is, set out in cl 3 of schedule 1A:

"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..." and no income is derived from any part of the land.

Having regard to my above findings I also find that the Land was throughout the relevant period "a parcel of residential land".

Decision

Having regard to the cumulative effect of the above findings, I find that for the purpose of the principal place of residence exemption, the Applicant used and occupied the Land as his principal place of residence in respect of each of the 2006 to 2009 tax years.

The Chief Commissioner's decision to assess the Applicant for land tax for the 2006-2009 land tax years inclusive in respect of the Woronora property is set aside and a decision substituted that the Applicant is entitled to the principal place of residence exemption in respect of the property for each of the 2006-2009 land tax years.

Decision last updated: 26 April 2013

Medium Neutral Citation:	Payne v Chief Commissioner of State Revenue [2013] NSWADT 88
Hearing dates:	11 and 12 March 2013
Decision date:	26 April 2013
Jurisdiction:	Revenue Division
Before:	N Isenberg, Judicial Member
Decision:	The Chief Commissioner's decision to assess the Applicant for land tax for the 2006-2009 land tax years inclusive in respect of the Woronora property is set aside and a decision substituted that the Applicant is entitled to the principal place of residence exemption in respect of the property for each of the 2006-2009 land tax years.
Catchwords:	Land tax - principal place of residence exemption - meaning of "use and occupation of ...buildings designed, constructed or adapted for residential purposes".
Legislation Cited:	Administrative Decisions Tribunal Act 1997 Building Act 1970 (Sth Aust) Building Regulations 1973 (Sth Aust) City of Sydney Planning Scheme Ordinance Interpretation Act 1987 Land Tax Management Act 1956 Taxation Administration Act 1996
Cases Cited:	Chief Commissioner of State Revenue v Aldridge and Another [2003] NSWADTAP 50 Chief Commissioner of State Revenue v McIlroy [2009] NSWADTAP 21 De Marco v Chief Commissioner of State Revenue [2013] NSWCA 86 Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 Masters v Padley (1984) 53 LGRA 417 (Sth Aust) Saboune v Chief Commissioner of State Revenue [2011] NSWADT 8 South Sydney Municipal Council v James and Another (1977) 35 LGRA 432 Yen-Cheng Chuan and Another v Chief Commissioner of State Revenue [2009] NSWADT 160
Category:	Principal judgment
Parties:	Ross Trevor Payne (Applicant) Chief Commissioner of State Revenue (Respondent)
Representation:	Counsel LJ Byrne (Respondent) J Weller, solicitor (Applicant)
File Number(s):	126035