Prasad v Chief Commissioner of State Revenue

[2010] NSWADT 219

CITATION:	Prasad v Chief Commissioner of State Revenue [2010] NSWADT 219
DIVISION:	Revenue Division
PARTIES:	APPLICANT Ravi Kant Prasad RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	096070
HEARING DATES:	25 August 2010
SUBMISSIONS CLOSED:	25 August 2010
DATE OF DECISION:	7 September 2010
BEFORE:	Frost S - Judicial Member
CATCHWORDS:	Principal place of residence – whether land “used and occupied” as a place of residence
LEGISLATION CITED:	Land Tax Management Act 1956
CASES CITED:	Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50 Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19
REPRESENTATION:	APPLICANT In person RESPONDENT A Gerard, Solicitor
ORDERS:	The decision under review is affirmed.

REASONS FOR DECISION

Introduction

1 Ravi Prasad and his wife Archana are the owners of a residential property in Epping.

2 The Chief Commissioner of State Revenue says that they are liable to land tax on the property for the land tax years 2004 to 2008 inclusive. The liability arises because, according to the Chief Commissioner, in respect of those land tax years they are not entitled to the “principal place of residence” (PPR) exemption.

3 That exemption, where it is available, depends on the use to which a property is put during the calendar year immediately preceding the land tax year in question (and in fact, usually during the period 1 July to 31 December in that preceding calendar year). So, for example, exemption in respect of the land tax year 2004 depends on the use of the property during the 2003 calendar year.

4 The Prasads say that the PPR exemption is available to them in respect of the 2004, 2006, 2007 and 2008 land tax years. However, in respect of the 2005 land tax year, they accept that the PPR exemption is not available, since they lived in Canberra for the whole of the 2004 calendar year. They objected to the land tax assessment but the objection was disallowed.

5 On 17 June 2009 an application was made to the Tribunal for a review of the objection decision.

The issue

6 The issue is simply whether the property was the PPR of either of the Prasads in respect of the relevant land tax years. That depends on whether the property was, in the words of clause 2(1) in Schedule 1A to the Land Tax Management Act 1956 (the Act), “land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose …”.

7 The expression “principal place of residence”, in relation to a person, is defined in s 3(1) of the Act as “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”.

The facts

8 Mr Prasad provided some of the factual background to this matter in letters that he sent to the Crown Solicitor on 23 November 2009, 1 March 2010, 24 April 2010 and 9 July 2010. He also swore a brief affidavit and gave oral evidence in the hearing. The following factual findings are based on those letters and affidavit and the various items of documentary material provided to the Tribunal by the parties.

9 From the time they purchased the Epping property in 1997 until March 2003, the Prasads lived in the property together with their children – a daughter, now aged 18, and a son, now aged 13. The son was diagnosed in 1999 with autism. When he reached school age in 2003 it was decided that the family should move from Epping, closer to a particular school to which they had chosen to send the son because of the school’s capacity to cater to his special needs. They took a lease on a house in Glenwood at around the same time that they arranged for the Epping property to be leased to tenants.

10 Mr Prasad claims that, in leasing the Epping property to tenants, it was his desire to retain access to (or rights over) the garage (or at least part of it) and one of the six bedrooms in the house. One version of the tenancy agreement notes on its front page “landlord to retain use of single garage”; an alternative version has the words “and room” added at the end of that notation, but the tenant claims that those last two words were not included in the version of the agreement that he signed.

11 In any event, and no matter which version of the tenancy agreement is the correct one, it seems that some of Mr Prasad’s belongings were left behind in one of the bedrooms and that the tenants, whether reluctantly or not, accepted that arrangement. The “belongings” included some clothes in the built-in wardrobe; a table or desk with some computer equipment on it; and a bookcase with an encyclopaedia set in it. The belongings did not include any other items of furniture.

12 From time to time Mr Prasad visited the Epping property but on his own account, from March 2003 until almost the end of that year, he did not live there. He lived in the rented house in Glenwood, although he explained that he was travelling to Canberra frequently with work and he spent many nights away from home, staying in hotels or apartments in Canberra.

13 I need not deal in any detail with the Prasads’ circumstances in calendar year 2004 because they accept that the Epping property was not used and occupied as the principal place of residence of either of them during that year. They lived for the whole of that year in Canberra (where Mr Prasad’s work had taken him) and they returned to Sydney in early 2005.

14 Mr Prasad says, and I accept, that from some time in January 2005 until late March of that year (that is, after the earlier tenancy agreement had come to an end, and until new tenants were found), he stayed continuously in the Epping property. In fact, the way he described it was: “I lived in that room”. Apart from that one bedroom, he said that he also used the bathroom and the kitchen. But he also said that the rest of the house was empty. That must raise at least a doubt as to whether he was in fact using the house as a “place of residence”, rather than simply a “place to stay”. However, given the entire factual matrix in relation to the property during the relevant period, it is not necessary to express a final conclusion on that point.

15 In late March 2005, after a lukewarm response by the market to the rental marketing campaign undertaken by the Prasads’ leasing agents, a prospective tenant offered to lease the property for a reduced rent, with a four-week rent holiday, and with an offer that the tenant repaint the ground floor accommodation and make other minor cosmetic improvements. Mr Prasad accepted that offer and a new tenancy agreement was entered into with the new tenants. The agreement made no mention of the continued use, by the landlord, of the garage space or any of the bedrooms.

16 Mr Prasad claims that, once again, similarly to the arrangement with the previous tenants, he retained access to one of the six bedrooms in the Epping property. He says that the incoming tenant “was aware” that this was to be the arrangement (although there is no indication of her acceptance of it in the offer conveyed to Mr Prasad). In any event, he raised with the incoming tenant his requirement to have access to this one bedroom, which by this time contained a fold-out sofa-bed in addition to the belongings already referred to. (Mr Prasad appears to have used the availability of the room in the Epping property as something of a safety net: if it became necessary to get away from the stresses he was experiencing at home, he had immediate access to a place to spend the night, or perhaps a few nights at a time.)

17 From late March 2005 (that is, when the new tenants moved in) until the end of that year, he stayed in the Epping property “only on some days”. Under questioning, he elaborated on that statement by indicating that from late March until about July 2005, he did not live in the Epping property at all, and then from July to October 2005 he spent a “handful” of nights in the Epping property. He accepted that the “great majority” of nights between July and November 2005 (and of course it follows from March to November 2005) were spent in the property that the family, having returned from Canberra, was now renting in Gladesville.

18 In November 2005 Mr and Mrs Prasad entered into a new residential tenancy agreement for a property in Marsfield. They held that lease until January 2007, and in relation to that period from November 2005 to January 2007 Mr Prasad accepted that he spent the “great majority” of nights in the Marsfield rental property. He said, once again, that he spent only a “handful” of nights in the Epping property during this period.

19 In January 2007 Mr and Mrs Prasad moved again, this time to rented premises in Castle Hill, and they have kept that lease until now. Although Mr Prasad says that the arrangement with the current tenants of the Epping property continued in relation to that one bedroom, he says that during the 2007 calendar year he spent a far greater proportion of his time at the Castle Hill property than he did in Epping. He said that he spent the “great majority” of nights in 2007 at the Castle Hill property with the rest of his family.

Is the PPR exemption available?

20 On the evidence presented by Mr Prasad, it is clear that at no stage since late March 2003, when the first agreement was entered into with tenants, has he “used and occupied” the Epping property “as [his] principal place of residence, and for no other purpose”.

21 To the extent that Mr Prasad has “used” the property, he has not used it as his principal place of residence; the most that can be said is that he has used it for the purpose of renting it on a commercial basis to tenants and, perhaps, that he has used part of it for storage purposes.

22 Much less has he “occupied” it for the requisite purposes, and it may be doubted, given what was said in Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50 at [17], whether it is even possible for a person who has demised premises by way of lease to another, to “occupy” those premises. I need not take that point any further, since it is clear on any view of the evidence that Mr Prasad has not, since late March 2003, “occupied” the property in any meaningful sense.

23 Spending the odd night at a property, on an irregular and infrequent basis, is not enough to constitute use and occupation of the property as a place of residence. A place of residence is a place where a person resides, and both the words “residence” and “reside” suggest some degree of permanence, rather than a relationship with the property that is transient, or temporary, or of a passing nature – see Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41, in particular at [42].

24 The PPR exemption provision caters for the possibility that a person may have more than one “place of residence” but if that is the case, the exemption is restricted to “the one place of residence that is … the principal place of residence of the person”. I am comfortably satisfied that the Epping property has not been, since late March 2003, a “place of residence” of either Mr or Mrs Prasad, let alone the “principal” one.

25 There is one further comment that I should make in relation to Mr Prasad’s use and occupation of the Epping property, and that is in respect of the brief period from January to late March 2005, when he stayed in the property after his return from Canberra – see [14] above. He did not move any major items of furniture or personal effects into the home, but “lived” – as he put it – in one bedroom of a large, but otherwise empty, six-bedroom house. An arrangement like that bears very few, if any, of the hallmarks of “residence”, suggesting more a temporary or transient living arrangement, but, as mentioned earlier, it is not necessary for me to express a final view on that question.

26 It follows that the PPR exemption is not available for the 2004, 2006, 2007 or 2008 land tax years.

Interest

27 The assessments of land tax included assessment of interest at the “market rate”; the additional interest at the premium level was remitted. As to whether the market rate interest should be levied on Mr Prasad or remitted, an Appeal Panel of this Tribunal said in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19 at [60]:

“In our view the primary interest rate (the market rate component) is intended to compensate the Commissioner (on behalf of the Government of New South Wales) for not having the benefit of the tax payment from the time it was due. So a rate is set which fluctuates, and is connected to an external rate, the Reserve Bank’s Accepted Bill rate. This, as we see it, is a component that could rarely, if ever, be waived as otherwise tax would be paid at a devalued amount thereby discriminating against taxpayers who meet their obligations on time. The Tribunal made the observation at [50] that to justify any remission of the market rate component of interest, it would be necessary to show that in some way the Commissioner contributed to the default. We agree with this observation.”

28 There is, on that basis, no justification for any remission of the market rate component.

Decision

29 In the circumstances the objection decisions in respect of the 2004, 2006, 2007 and 2008 land tax years are affirmed. I note once again that the assessment as it related to the 2005 land tax year was not contested by Mr Prasad.