Poullos v Chief Commissioner of State Revenue

[2003] NSWADT 32

CITATION:	Poullos -v- Chief Commissioner of State Revenue [2003] NSWADT 32
DIVISION:	Revenue Division
PARTIES:	APPLICANT Theo Poulos and Koula Poullos RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	026031
HEARING DATES:	12/02/03
SUBMISSIONS CLOSED:	02/12/2003
DATE OF DECISION:	02/28/2003
BEFORE:	Block J - Judicial Member
APPLICATION:	Land tax exemption - principal place of residence
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Land Tax Management Act 1956 Duties Act 1997
CASES CITED:	Crea & Another v Chief Commissioner of State Revenue [2002} NSWADT 125 Wilks v Chief Commissioner of State Revenue [2002] NSWADT 248 FCT v Wade (1951) 84 CLR 105 Commissioner of Taxation v Ryan (2000) 201 CLR 109 Remuneration Planning Corporation Pty Limited v Federal Commissioner of Taxation (2001) 201 46 ATR 400 Hoffmann v Chief Commissioner of State Revenue [2002] NSWADT 194
REPRESENTATION:	APPLICANT In person RESPONDENT D Martin, agent
ORDERS:	1. Excepting only that the interest component of the relevant assessment is remitted to the Respondent for reconsideration, the decision under review is affirmed.

1 The decision under review in this matter is the disallowance (by notice dated 12 June 2002) by the Respondent of an objection by the Applicants against a land tax assessment in respect of the 2001 year (“relevant year”) referable to a residence situated at Croydon (“the Croydon property”)

2 At the commencement of the hearing, and because Mr Poullos, who is one of the Applicants (and who is referred to henceforth as “the Applicant”) appeared on behalf of himself and his wife, and should thus be treated as self-represented, I invited Mr. Martin (with the consent and approval of the Applicant) to furnish a brief statement setting out the issues. That address soon developed into a debate, and to which the Applicant contributed at some length. The Tribunal had before it the written material furnished pursuant to section 58 of the Administrative Decisions Tribunal Act. It had in addition a lengthy and comprehensive statement by the Applicant dated 30 December 2002 (“the A statement”) and a letter by the Applicant to the Respondent dated 13 May 2002 (“the May letter”). Having regard to that debate and all of the written material there did not appeaser to be any dispute of fact between the parties.

3 The facts, as to which there was no dispute, were as follows:

(a) For a number of years prior to the relevant year, (and since 1990) the Applicants and their three children (two daughters and a son) resided at a home owned by the Applicants jointly and situated at Kenthurst (“the Kenthurst property”).
(b) The Croydon property was acquired by the Applicants as joint tenants in August 2000 pursuant to a contract of sale, which is Annexure A to the A statement. The contract of sale indicates that the purchase consideration was $423000.
(c) Annexure B to the A statement is a residential tenancy agreement dated 13 November 1999 and pursuant to which four named persons (“the tenants”) were entitled to occupation of the Croydon property until 18 November 2000.
(d) Annexure D to the A statement is a copy of a letter dated 13 November 2000 by the Applicant to the tenants allowing them to continue in occupation of the Croydon property until 9 December 2000.
(e) The tenants having vacated the Croydon property, the Applicant and his son moved in to it. The precise date in December 2000, on which they did so, was according to the Applicant soon after 13 December 2000 bearing in mind that services were connected on that date.
(f) Mrs Poullos and the two daughters remained in the Kenthurst property in particular to enable the two girls to complete their respective school years. The distance between the two properties is about 40 km and the time taken to drive from one to the other would be about 45 minutes depending on and apparently assuming favourable traffic conditions. One of the reasons for the purchase of the Croydon property was the fact that the Poullos son is an apprentice mechanic at Sydney City Toyota, Camperdown.
(g) The Applicant and his son moved into the Croydon property in what he described as “very basic fashion” in order to paint and perform other necessary repairs. They brought for this purpose basic furniture such as beds and the like. They could of necessity work on the repairs only at weekends and at nights because each of them had a full-time day job. The Applicant said that they ate out “quite a lot”. I refer in particular in this context to the fourth paragraph of the May letter which reads as follows:
“As there had been a great deal of work to be done with only a small window of opportunity available to move house, my son and I decided to move into our new house in Croydon in early December 2000.Ths house was closer to our work, saving valuable time on travelling, and it also allowed us to spend more time renovating the house that would soon become our new residence .”(Emphasis added by the Tribunal)
(h) The Applicant said that he took leave from his firm from 10 January 2001 to 25 January 2001. (This is confirmed by Annexure F to the A statement.) He did so in order to organise the move from Kenthurst to Croydon. This required considerable effort given that the Poullos family were moving the contents of the Kenthurst property into the Croydon property and that to do so required that those contents be first packed into boxes; the Applicant (who owns a trailer) did not use a professional mover.
(i) The Applicant said that he and his son moved into the Croydon property in “very basic fashion” in order to bring it into a condition suitable for residence by the Poullos family, and that to do this took about a month.
(j) It is relevant to note that in the short period during which the Applicants were apart from each other (in the sense that they slept in different houses,) there was no question of an estrangement of any kind. In January 2001 the Applicant went back to the Kenthurst property in order to organise and manage the packing and the move. .

4 The Applicant contended that:

(a) the principal place of residence (“PPR”) exemption provided by section 10 (1) (r) of the Land Tax Management Act 1956 (“the Act”), which was allowed to the Applicants for the relevant year in respect of the Kenthurst property, should also and in addition have been allowed in respect of the Croydon property because he, as one of the joint owners of the Croydon property, resided in it for a brief period and for roughly half of December 2000;
(b) According to the Applicant the Respondent is taking the view that the Applicants should be treated for this purpose, because they are married, as one person and in fact they are, notwithstanding that they are married, two separate persons, each of whom is entitled to the PPR exemption. Clause 2 of the A statement reads as follows:
“2. The Chief Commissioner has taken the view that because two properties are jointly owned, the owners are held to be one ’person and are thus not entitled to actually reside in the separate residences if the need arises (as occurred in this instance for a relatively short period)”
(c) Although the Applicant conceded that the Applicants could not qualify for the exemption under clause 3 (3) (a) of the Act, he contended that the Respondent should exercise his discretion in favour of the Applicants under section 3 (3) (b) of the Act; the Applicant referred in the connection to ruling LT020.

5 It is convenient at this juncture to set out the relevant statutory provisions and also an extract from the ruling;

(a) The definition of PPR which is contained in section 3 (1) of the Act; reads as follows;
: "Principal place of residence" of a person means the one place of residence that is, among the one or more places of residences of the person within and outside Australia, the principal place of residence of the person."
(b) Section 10 (1) (r) of the Act provides (relevantly) for an exemption in respect of the principal place of residence in the following terms
"(r) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1998 or any succeeding year, land that has a land value in respect of the year of less than the premium tax threshold and that is used and occupied as the principal place of residence of the owner of the land (or, if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose ..................(remainder of section not relevant)"
(c) Section 3 (3) of the Act reads as follows:
“(3) For the purposes of this Act, in respect of any year in respect of which taxation is leviable or payable, land or a flat is not used or occupied as the principal place of residence of a person unless:
(a) that land or flat and no other land or flat has, since before the first day of July that last preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for no other purpose, or
(b) in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person’s principal place of residence” (Emphasis added by the Tribunal)
(d) Revenue Ruling LT 020 deals in clause 12 with the Respondent’s discretion; it commences by making it clear that each case will be considered on its merits and then goes to consider examples where the discretion might be exercised; Clause 12 (a) (which is the only relevant example) provides:
“(a) The owner did not take up residence until after the preceding 30 June, particularly where the owner purchased the land after 30 June.”

6 The manner in which clause 12 (a) of the ruling is expressed and the context in which it appears indicates that the Respondent can be satisfied in such manner that he can dispense with the strict requirements of section 3 (3) (a) of the Act and where the exemption may be allowed, where the land is purchased after 30 June but only where the land is acquired as a PPR after the relevant 30 June and before the next succeeding 31 December. So much is obvious from a consideration of LT 020 in conjunction with section 3 (3) (b) of the Act which in its terms refers to land occupied as a PPR. Put in other words a consideration of these provisions indicates that mere residence is not sufficient and that a precondition for the operation of the subsection (and the ruling must be read subject to it) is that it be occupied, as a PPR, prior to the relevant 31 December.

7 As Mr. Martin contended, the scheme of the Act is to impose land tax on land and not on a person or persons. So much is clear from the legislation. There is, in other words, no question of the Applicants being treated, as the Applicant contended, as if they were one person.

8 It is clear then that since section 3 (3) (a) of the Act cannot apply simply because the Applicants did not occupy the Croydon property in any manner going back to the preceding 1 July, the only question before me is as to whether the discretion contained in section 3 (3) (b) of the Act should be exercised in favour of the Applicants. Neither the Applicant nor Mr Martin cited any cases as to the manner in which the discretion should be exercised. The Applicant cited two decisions, Crea & Another v Chief Commissioner of State Revenue [2002} NSWADT 125 (M. Hole; judicial member) and my decision in Wilks v Chief Commissioner of State Revenue [2002] NSWADT 248, neither of which appeared to me to be in point.

9 (a) Before proceeding to a consideration of the discretion proper I might note that the Applicant said that in November 2002 (after this appeal had been brought) he attended a discussion group of which he is a member and which was addressed by two education officers (Hurst and Ramsbottom) in the employ of the Respondent. According to the Applicant Mr. Ramsbottom indicated that in his view an exemption for a second property might be obtainable. The Applicant did not inform Mr Ramsbottom that the matter was already under review by this Tribunal. Nor is the Tribunal aware of the facts presented to Mr Ramsbottom and on which his opinion may have been sought. It is conceivable that it was put in the context of a divorce situation; I refer in this context to the penultimate paragraph of the A statement reading as follows:

“Furthermore, a recent presentation to an accountants discussion group by officers of the OSR’s Education Unit (specialising in land tax) also confirmed that an exemption is usually granted by the Chief Commission in a situation (such as our case) where two properties owned in joint names has one of the owners residing in the one property and the other owner residing in the other property. The above Section of the Act takes into account the fact that divorced couples are usually granted an exemption from land tax by the chief (sic) Commissioner when they reside in separate properties owned in joint names. It is evident that there is either a lack of knowledge or a misunderstanding of the legislation being administered by certain officers within the OSR and this contributed to my decision to seek a review of the Chief Commissioner’s ruling.”

It is relevant to note in this context that the Applicants sought review before this Tribunal long before the discussion group to which the Applicant refers, and so that the discussion group could not have contributed to the decision to seek review.

(b) The Applicant said also that he had spoken to a person in the employ of the Respondent named Anthea, that she had said that she would see what could be done about reversing the assessment but would have to refer to her superiors, and that she reverted to him thereafter after consulting her superiors to say that nothing could be done about reversing the relevant assessment.
(c) In this case there is no basis upon which the Applicant is entitled to claim the benefit of an estoppel. (I note that he did not employ such a term but the import of his statements as contained in this clause 9 of this decision might suggest an intention to claim relief of this nature. and I deal with the point for the sake of completeness.) Leaving aside the fact that an estoppel cannot arise after the event (after the appeal has been brought) no conduct of the Respondent can operate against the operation of the Act.: FCT v Wade (1951) 84 CLR 105 at 117 per Kitto J; Commissioner of Taxation v Ryan (2000) 201 CLR 109 at 124; Remuneration Planning Corporation Pty Limited v Federal Commissioner of Taxation (2001) 201 46 ATR 400 at 405. Estoppel is not available to release a party from an obligation to obey a statute or from an obligation to pay tax at a particular rate.

10 (a) The concept of separation or estrangement was put to Mr. Martin by the Tribunal. He was asked to assume that a couple who jointly own land separate and that one buys further land and as his or her PPR and resides in it as such prior to the commencement of a particular land tax year. Mr Martin replied that the terms of section 3 (3) (b) and LT 020 make it clear that each case is an individual case to be considered in relation to its own facts but that he thought that the circumstances hypothecated might lead to the favourable exercise of the discretion.

(b) I should also note at this juncture that I have formed the view, on reflection, that the concept of spouses having separate PPRs as at a given 31 December would not necessarily be confined to an estrangement situation. I recollect reading that a well-known English writer and his equally well-known writer wife (to the best of my recollection, Michael Holroyd and Margaret Drabble) as a matter of choice and to facilitate their writing careers have separate homes in the London area to which they invite each other by arrangement. On the basis that each home is owned by the spouses individually, I can see no reason why in a similar fact situation in New South Wales, each should not be entitled to the PRR exemption. Such a situation will no doubt be rare. Apart from other considerations it is only the wealthy and successful who could contemplate such an unusual arrangement.

(c) It is perhaps also possible to imagine a situation where spouses move from one home to another and where the move of one is preceded by an earlier move by the other. Postulate for example spouses living in the country in a house owned by them jointly. They decide to move to the city. The husband moves to the city in July to buy a new home to be owned by them jointly, while the wife remains behind in their country home in order to organise the move of their belongings and to make other necessary arrangements. Assume further that the wife moves into the city home only in the next succeeding January. If the husband moves into the city home on the basis that it is his PPR, and where he has no intention of going back to the country home, then provided the Respondent is satisfied under section 3 (3) (b) of the Act, the husband may be entitled to the PPR exemption in respect of the city home. It is conceivable depending on the facts, that the wife may be entitled to the PPR exemption in relation to the country home. This assumes of course ownership of both homes at the relevant 31 December. I again emphasise that each case depend on its own individual facts, and that I do not seek to make any statement which could be construed as one of general principle or application. .

(d) Where on a given 31 December there are two PPRs each of which is owned by the spouses jointly, there may be land tax consequences in that each spouse will have an interest in a home which is not his or her PPR. As to whether and how much land tax will be payable will depend on the land values involved and the applicable threshold. It is not necessary for me to deal with this aspect further.

11 A statutory discretion must of course be exercised reasonably. Section 3 (3) (b) uses the words “is satisfied” but this is no more than another way of specifying a statutory discretion. I must, standing in the shoes of the Respondent Commissioner formulate the “correct and preferable decision.” I refer in this context to clauses 25 to 27 of my decision in Hoffmann v Chief Commissioner of State Revenue [2002] NSWADT 194 (presently on appeal) in which I said (in the context of the Duties Act and where the principles would be no different):

“25 Mr. Richmond referred me to authorities concerning the nature of the discretion which I must exercise. It is of course clear enough that it is a discretion which must be exercised by me standing in the shoes of the Respondent Commissioner and that I must formulate the "correct and preferable" decision. It is also clear enough that the onus is on the Applicants to establish that I should exercise the discretion in their favour.
26 In FC of T v Swift 89 ATC 5101 French J said at 5112:
In the absence of any statutory direction, the Tribunal is not bound to apply the administrative policies by which the exercise of the discretion under review is regulated at the primary decision-making level. In particular, it was not bound in this case to apply taxation ruling IT2063 to which reference has already been made. It is generally entitled to take administrative policy into account as a relevant factor in the achievement, inter alia, of a desirable consistency in decision-making - Drake v Minister for Immigration and Ethnic Affairs (supra) at 591. For as Brennan J. said in Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 LD 634 at 639:
"Inconsistency is not merely inelegant: it brings the process of deciding into disrepute, suggesting an arbitrariness which is incompatible with commonly accepted notions of justice."
That observation is subject to the caveat that decision-makers can be consistently wrong or consistently unjust and that consistency is safely sought by reference to policy only when the policy is appropriate and acceptable - Nevistic v Minister for Immigration and Ethnic Affairs (supra) at 646 (Deane J.). This does not involve the Tribunal in reviewing policy or deciding what policy a primary decision-maker should adopt - Re Aston (1985) 4 AAR 65, 76 (Davies J.). And, as in that case, which involved the exercise of a discretion to limit the terms of fishing licences under a national quota scheme, a policy which is developed in the political arena after consultation with the relevant industry ought generally to be given great weight. Taxation ruling IT2063 does not appear to be in that category. Nevertheless, the magnitude of the task involved in carrying out original decision-making and supervising and regulating the exercise of delegated authority under the taxation laws, is a powerful indicator that appropriate guidelines are essential for the avoidance of administrative chaos and for the achievement of reasonable consistency. The need to maintain the perception and reality of equal treatment is an important factor in the administration of all laws and not least in those relating to taxation. But such considerations go to the weight to be attributed to policy and that is ultimately a matter for the Tribunal - Nevistic v Minister for Immigration and Ethnic Affairs (supra) at 647 (Deane J.); Re Aston (supra) at 78 (Davies J.). It is said to be essential that the Tribunal be fully informed of reasons for any policy involved in a decision under review. Otherwise, instead of subjecting it to rational analysis and assisting in the development of principled yet flexible decision-making, the Tribunal may "intervene incongruously to disrupt the due course administration" - Commonwealth of Australia v El Hassan (1985) 62 ALR 305, 316 (Burchett J.). That I take to be an exhortation to the parties seeking to invoke the relevant policy rather than an indication that the Tribunal should initiate its own inquiry into policies affecting the decision under review".

27 And in Giris Pty Limited v FC of T (1969) 119 CLR365 Windeyer J said at 384:
The Commissioner is to ask himself whether it would be unreasonable that s 99A should apply to any particular trust estate. But the idea of reasonableness seems to be here amorphous. It is, of course, true that, as a measure in fact of time, space, quantity and conduct, reasonableness is a concept deeply rooted in the common law: and so, in such cases, is the power of a court to say whether a particular decision of that fact is or is not within the bounds of reason. But, in cases of that kind, the circumstances in which the question arises provide criteria for its solution. Here the Commissioner's discretion is apparently at large. It does not clearly emerge from the Act in respect of what matter - or whose interest, that of the taxpayer or of the revenue - he is to consider whether it would be reasonable or unreasonable to apply s. 99A in the case of any particular trust estate. He is to have regard to certain stated matters; but what weight or influence each is to have is not made clear. Moreover, the Act requires that he "shall have regard to such other matters, if any, as he thinks fit". However I assume that he is to be guided and controlled by the policy and purpose of the enactment, so far as that is manifest in it. That would exclude from his consideration any matter which it would be unlawful for him to take as a criterion, such as the State of residence of a trustee or of the beneficiaries of a trust. It would also, I think, exclude all merely fanciful and prejudiced tests which were hypothetically suggested in argument, such as vocation, religion, colour of skin or hair. Nevertheless the statute seems to allow great latitude to the Commissioner in forming his opinion. That he has formulated certain considerations by which he is guided, and made them publicly known, may be important as showing that in the exercise of his statutory discretion he acts honestly, consistently, and, as he thinks, in accordance with the legislative purpose. That purpose I take it is to enable the Commissioner to keep s.99A as an instrument to prevent avoidance of taxation by the medium of trusts, but not to use it when to do so would seem to him not in accordance with that purpose. But that the purpose of an enactment is understandable, would not cure its invalidity if it were invalid. (at p384).”

12 (a) As the Applicant sees it, clause 3 (3) (a) of the Act does not apply but section 3 (3) (b) does simply because from about the middle of December 2000 he was in physical possession of the Croydon property. The Applicant appeared, in the hearing before me to be taking the view that the physical move into the Croydon property was sufficient to constitute it his PPR and notwithstanding his return to the Kenthurst property for the purpose of the move.

(b) The first sentence of the third paragraph of the May letter reads:

“Since 1990 up until January 2001 our principal place of residence had been Kenthurst.” (Emphasis added by the Tribunal)

That sentence cannot be interpreted on any basis other than that the PPR of the Applicants was the Kenthurst property until January 2001. The use of the word “our” indicates that it applied to both of the Applicants. It is not possible to construe it so as to refer to one only of them. In particular it cannot be construed so as to mean that Mrs. Poullos had her PPR at the Kenthurst property until she moved to the Croydon property in January 2001, while the Applicant had a different PPR at the Croydon property from December 2000. The wording of the sentence indicates that the Kenthurst property continued to be their PPR until January 2001 and thus including that month or at least part of it. (This is consistent with the fact that the move was completed only towards the end of January 2001). And it is consistent also with the fact that the Applicant and his son moved into the Croydon property in order to repair and paint it and so as to get it ready and so that it could “soon become” their new home. The Applicant did not go back to the Kenthurst property for any perfunctory reason and so as to merely fetch his wife and daughters; on the contrary he went back for a significant period in connection with the packing and move. It seems clear then that the Applicant moved into the Croydon property for a particular temporary purpose.

13 It is in my view relevant and necessary in relation to section 3(3) (b) of the Act and for the purposes of this case to have regard inter alia to the following factors and matters:

(a) The Applicant physically moved into the Croydon property and lived there in “very basic fashion” in order to repair it. He was physically separated from his wife for a brief period in a narrow technical sense in that they were sleeping in different houses for a brief period. He then returned to the Kenthurst property in January 2001 for the purpose of the move. To say that he had previously become resident in the Croydon property in the sense that it became his PPR is (as I have said) contradicted by the May letter.
(b) It is relevant in my view that there is no suggestion of an estrangement as between the Applicants inter se. I agree (as I have said) with Mr. Martin’s view that the position might be different where one spouse following a separation takes up residence in a new property as his or her PPR. I think that there could, as noted in clause 10, be other situations, where without an estrangement, each spouse has his or her own PPR. These other situations are likely to be rare.
(c) It is perhaps relevant, at least to some extent, also that the period involved in the second half of 2000 was brief and would have endured at most for 17 days. This aspect is unlikely to be decisive. Here again I do not intend to express a statement of general principle.
(d) At the risk of labouring the point clause 12 (a) of the ruling must be read in my view as applicable only in circumstances where the land in question is a PPR. Clause 12 (a) of the ruling could in my view be more appropriately worded; at the very least it should conform with section 3 (3) of the Act and so as to refer to PPR rather than “residence”, a somewhat imprecise term, and to 1 July rather than 30 June.)

14 As the Applicant said during the course of the hearing the Act does not operate on the basis that a year can be prorated or divided into periods. Land is, if no exemption applies, taxable if owned at a 31 December in relation to the next succeeding calendar year. An exemption is allowed if the land is used as a PPR, subject to section 3 (3) (a) which requires a period of residence dating back to the preceding 1 July. Where section 3 (3) (a) does not apply discretionary relief may be granted under section 3 (3) (b). It may be that the Respondent would exercise his discretion in favour of a taxpayer where for example residence as a PPR commences in August or September or even later in the year prior the commencement of the relevant land tax year; this will always depend on the circumstances and as has been made clear, each case turns on its own facts. But in my view section 3(3) (b) was not intended to apply in circumstances such as these where a new home is acquired and one of the joint owners takes possession shortly before the commencement of the relevant year merely and only in order to repair it sufficiently and for it to serve as the family home after repair, and at some later time. Moreover and as I have said, the May letter in its terms contradicts any assertion that the Croydon property became the Applicant’s PPR earlier than January 2001.

15 The assessment in question includes an amount in respect of interest. The parties agreed that the matter should be decided by me on the basis that I need only determine whether or not the discretion should be exercised and if not, the matter should be remitted to the Respondent to consider the remission of some part of the interest imposed. Mr Martin said that the Respondent would consider the matter on this basis. I would note that in my view the Applicants had a case which was at least arguable.

16 This is not a case in which in my view it would be proper to exercise the discretion in favour of the Applicants. The Respondent was correct when he could not be satisfied that relief under section 3 (3) (b) of the Act should be granted. In the circumstances, and excepting only that it is remitted to the Respondent to reconsider the amount of interest charged, the decision under review is affirmed.