Rankine v Chief Commissioner of State Revenue

[2003] NSWADT 38

CITATION:	Rankine v Chief Commissioner of State Revenue [2003] NSWADT 38
DIVISION:	Revenue Division
PARTIES:	APPLICANTS Timothy and Leticia Rankine RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	026023
HEARING DATES:	13/02/2003
SUBMISSIONS CLOSED:	02/13/2003
DATE OF DECISION:	03/03/2003
BEFORE:	Block J - Judicial Member
APPLICATION:	Land tax exemption - principal place of residence
MATTER FOR DECISION:	Principal
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Land Tax Management Act 1956
CASES CITED:
REPRESENTATION:	APPLICANT In person RESPONDENT D Martin, agent
ORDERS:	1. The decision under review is affirmed

1 The decision under review is the decision of the Respondent disallowing an objection by the Applicants against the refusal of the Respondent to waive land tax in respect of land situated in Hunters Hill (“Property B”) in relation to the 2002 land tax year (“the relevant year”). The term “Property A” refers to other land, also in Hunters Hill, of which the Applicants were also the owners, in relation to the relevant year. In quoted material, and so as to preserve the privacy of the Applicants, I have edited their references to actual addresses and so as to use these abbreviations.

2 The hearing was set down for 2 p.m. on 13 February 2003. Mrs. Rankine, who is one of the Applicants (and who is referred to henceforth in this decision as “the Applicant”) made an error in respect of the hearing date and did not appear on behalf of the Applicants. She had previously represented the Applicants at a directions hearing before me. The Tribunal telephoned her; she explained that she had thought that the case had been set down for hearing at a later date in February. In the result it was possible (with the approval of the Applicant) to proceed with the hearing on the basis that the Applicant was connected by telephone.

3 Because the Applicants were in effect self-represented, I commenced (with the approval of the Applicant) by asking Mr. Martin to make a brief statement as to the issues. Soon after Mr. Martin commenced his statement, the Applicant began to participate in what rapidly became a debate. Having regard to the facts which emerged from that debate and the written material furnished under section 58 of the Administrative Decisions Tribunal Act 1977, and also the variation return referred to below, there was no significant dispute of fact between the parties. It should be noted though that in Annexure B the Applicants stated that they completed their move to Property B on 27 December 2002 with certain exceptions; (see Annexure B quoted below)

4 However and during the course of the hearing the Applicant said that the move from Property A to Property B took place at a leisurely pace during the period from late December 2001 until 2 January 2002, and when the move was complete. She thought that they might have been in Property B by the New Year the better to view the fireworks display. There was after all no hurry; Property B had been purchased and the purchase completed in 2000. After completion the Applicants arranged for renovations to be carried out to Property B (then and post completion of its purchase unoccupied) and so that they could move into Property B at any time after the renovations were complete up to of course completion of the sale of Property A, when occupation of Property A would have to be given to the purchaser.

5 That the move into Property B was completed on 2 January 2002 is reinforced by the Applicants’ Land Tax Variation Return for the relevant year; the Applicant’s husband signed it on 6 February 2002. It sets out inter alia that Property A was sold on 7 January 2002 and also that Property B became the principal place of residence (“PPR”) of the Applicants on 2 January 2002. In the light of the statements at the hearing and the variation return to which I have referred, I should accept then that 2 January 2002 is correct as the date on which the move was completed and on which Property B became their PPR, and in preference to the date set out in Annexure B.

6 Annexure B also refers to a normal settlement period of six weeks. At the hearing I was told that the sale contract provided for completion on the 21 December 2001. In addition there was no specific mention at the hearing of a delay because the purchaser had not sold his home; I do not think that anything at all turns on this.

7 There is a matter of a preliminary nature, which is best dealt with as such. In seeking the review of the decision under review the Applicants included a number of annexures.

8 Annexure B (“Annexure B”) is a letter by the Applicants to the Respondent dated 18 March 2002. The second and third paragraphs read:

“1. Tim and Leticia Rankine (“TLR”) purchased Property B on 25 September 2000.
2. TLR continued to live at Property A
3.TLR paid land tax on Property B for the 2001 Tax Year. An exemption was claimed for Property A as TLR’s principal residence.
4 TLR entered into a contract to sell Property A dated 9 November 2001.
5 The normal settlement period of 6 weeks would have resulted in settlement occurring on or after 21 December 2001. The purchaser had not sold their house and asked for an extension until after Christmas. As the law firms were closed from Friday 21st December 2001 until Monday 7 January 2002 the earliest day that settlement could occur was 7th January 2002.
6. TLR completed their move into Property B on 27th December 2002 with the exception of possessions being disposed of which were removed from Property A making it available for inspection by the purchasers on 2nd January 2002.
7. Settlement for Property A took place on 7th January 2002 which was the first available date after Christmas.
8. TLR mistakenly understood that as they were moving from one principal residence to another, that an exemption would be available for their new principal residence (Property B)
9. TLR only realised that they may still be liable for land tax on Property B when they phoned the OSR on 11 March to check on the progress of a Variation Return submitted on 6th February as the first Land Tax payment was due.
The net effect of this is that we are being asked to pay Land Tax of $17527 for 2002 on Property B, which has been our principal residence since 27 December 2001. This Land Tax liability only occurred because the settlement of Property A was delayed beyond our control until the first available date in 2002. Because of this we would ask the Commissioner exercise his discretion to waive the land tax on our principal residence at Property B for the 2002 year”

9 Annexure C is a letter dated 4 July 2002 addressed by the Respondent to the Applicants; the second and fourth paraphs read (relevantly) as follows:

“The land does not qualify for exemption for the 2002 tax year as it was not used and occupied as the owners’ principal place f of residence as at the taxing date 31 December 2001. Accordingly the objection is disallowed. It is noted that you have already received the exemption in respect of Property A for the 2002 tax year. However the land at Property B would qualify for exemption effective from 2003 land tax year provided……….(remainder not relevant for these purposes)

We note that your letter requested that the Chief Commissioner of State Revenue exercise discretion to exclude the land at Property B from the assessment because of the unusual circumstances surrounding the sale of Property B. There is no discretion provided in the legislation for the Chief Commissioner to exclude land from an assessment where the land is not exempt……. (remainder not relevant for these purposes). (Emphasis added by the Tribunal)”

10 Annexure D is a letter dated 8 August 2002 addressed by the Applicants to this Tribunal; the first paragraph reads;

“In rejecting our objection to the level of land tax payable on Property B the Chief Commissioner stated that he had no discretion to exclude land from assessment, We do, however, understand that the Commissioner does have the discretion to waive or compromise the level of tax payable in unusual circumstances. It is on this basis that we requested the Commissioner to use his discretion.”

11 It will be noted that then that the Applicants seek a waiver or compromise of the land tax payable in respect of Property B on the basis that the Respondent is vested with a discretion which entitles him to do so. The Respondent contends (correctly as a matter of law) that he does not have such a discretion under the Act (referred to below). This being so, the Respondent might have raised as a jurisdictional question the question of whether if he has no discretion, this Tribunal standing in his shoes similarly does not have such a discretion. This aspect was not raised; the Respondent has clearly acceded to the review of the decision, and accordingly and as a matter of natural justice I allowed the objection to proceed and be reviewed in the ordinary course. I mention this aspect only for the sake of completeness

12 It is convenient at this juncture to set out the relevant statutory provisions and also an extract from Revenue Ruling LT020 (“the ruling”).

13 The definition of PPR which is contained in section 3 (1) of the Land Tax Management Act 1956 (“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." (Emphasis added by the Tribunal)

14 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)"

15 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 ”

16 Revenue Ruling LT 020 deals in clause 12 with the Respondent’s discretion as set out in section 3 (3) (b) of the Act; 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.”

17 It may be noted that clause 12 (a) of the ruling is somewhat inexact; it must be considered subject to and in accordance with section 3 (3) of the Act. Subsection 3 (3) (a) refers in its terms to a statutory requirement of 6 months going back to the preceding 1 July whereas the ruling refers to 30 June; moreover section 3 (3) (b) requires that the residence be occupied as a PPR whereas the ruling refers only to residence; it is plain enough however, having regard to the Act, that the PPR exemption requires residence for the preceding 6 months and section 3 (3) (b), which may operate where subsection (a) does not, requires the existence of a PPR.

18 Land tax is calculated in respect of each calendar year by reference to land owned as at the immediately preceding 31 December. Thus in respect of the relevant year the relevant date (“relevant date”) is 31 December 2001. It is for this reason that in relation to the PPR exemption provided by section 10 (1) (r) of the Act, it is necessary to have regard to a period prior to the relevant date in accordance with section 3(3) of the Act and, to the extent relevant, the ruling.

19 Under section 3 (3) (a) of the Act it is necessary that the PPR was occupied as such for the period of 6 months (“statutory period”) dating back to the preceding 1 July.

20 Section 3 (3) (b) of the Act allows the Respondent nevertheless to allow the PPR exemption if he is satisfied that strict compliance with the provisions of subsection (a) as to statutory period need not be complied with in full. When read with the ruling (and notwithstanding that the ruling is neither a binding ruling nor altogether precise) it is clear that it allows the Respondent to grant the PPR exemption when the land was acquired after the preceding 1 July and used as a PPR, but having regard to the significance in the legislative scheme of the relevant date, it must have been acquired and used as such prior to the relevant date.

21 Mr. Martin explained that in practical terms, the Respondent once having allowed the PPR exemption for a given residence, continues to do so in subsequent years unless advised to the contrary and that it no longer qualifies as such.

22 The facts, and as to which as I have said, there is no real dispute, are set out in the succeeding clauses.

23 The Applicants had lived in Property A (as their PPR) for a number of years. They have three children, but by 2000 only their daughter was still at school and at home, and so that Property A had become too large. As set out in Annexure B they acquired Property B in 2000. In respect of the 2001 land tax year the Applicants were the owners of both residences. They therefore paid land tax on Property B on the basis that they were entitled to the PPR exemption for Property A for that year.

24 Although the Applicant did not recollect the difference in land values between Property B and Property A, she thought that there was no significant difference. (The residences are only 500 metres apart).

25 The Applicants did not want to be obliged to pay land tax in the relevant year, and thus took steps to sell Property A prior to the relevant date. The Applicant said that when Property A was sold in November 2001 this was not an ideal time for sale. A contract of sale was exchanged with one Swan (‘the purchaser”) on 9 November 2001 on the basis that in accordance with the contract completion would take place on 21 December 2001. I was not furnished with the contract of sale but, as will be seen, this does not matter. It presumably provided for a 10% deposit on exchange with the balance payable on completion and for possession to be given on completion. It may or may not have included a “time is of the essence” clause in relation to completion but probably not, given that the Applicants when asked for an extension (and see Annexure B) granted an extension until 7 January 2002 (“completion date”) According to Annexure B the extension was granted at the purchaser’s request because he had not sold his home and there was no mention of this latter factor at the hearing; however it was made clear that the extension to the completion date was granted because the extended completion date coincided with the reopening of legal offices.

26 The parties informed me at the hearing that they were agreed that at the relevant date the Applicants were the owners of both properties. This is in view correct as a matter of law, even though the purchaser would have had an equitable interest in Property A from the time of exchange until the completion date on which he paid the balance of the purchase price and obtained possession.

27 Accordingly the Applicants were for the relevant year assessed for land tax on Property B but not Property A on the basis that they were again entitled to the PPR exemption for Property A for the relevant year. That assessment was clearly correct; the Applicants could not have successfully claimed the PPR exemption for the relevant year in respect of Property B because it did not become their PPR until the 2 January 2002, thus precluding them from compliance with either subsection of section 3 (3).

28 It was put to the Applicant that once it was accepted that the Applicants owned both residences at the relevant date and since the PPR exemption can be granted, where (usually) a married couple is not estranged (having regard to the definition of PPR) only in respect of one of them, land tax would be payable on one or the other, and so that the grant of the exemption on one (say Property B) would lead to the loss of the exemption on the other (on this basis Property A) (The Tribunal considers that it is possible that there are other rare fact situations where a separation which is not an estrangement, in respect of spouses, can result in the exemption being available for two residences but it is not necessary to go into detail in this decision.)

29 The Applicant explained that the case for the Applicants is simply that if the purchaser had completed his purchase of Property A on 21 December 2001, in accordance with the contract of sale, the Applicants would have been the owner only of Property B on the relevant date, and would have been entitled to the PPR exemption for it since they would have had to move in to Property B (then vacant) on (or prior to) 21 December 2001 and which could easily have been managed.

30 The contention contained in the preceding clause rests on one aspect, which may not have been fully appreciated by the Applicants. They would not have been entitled to the PPR exemption under Section 3 (3) (a) because they would not have occupied Property B since the preceding 1 July. They might however have hoped for a favourable exercise of the Respondent’s discretion under section 3 (3) (b). It is not necessary for me to speculate at length on what might have been simply because it did not happen.

31 However it does seem to me that under this entirely notional scenario the Applicants may have had a reasonable prospect of success under section 3(3) (b). Of course the fact that they would have occupied Property B only from 21 December 2002 to the relevant date (a small part only of the statutory period) might have been against them, but the surrounding circumstances and in particular the fact that they had owned Property B since 2000, had renovated it for use as their family home and could move into it when they pleased, might well have persuaded the Respondent that he should be satisfied under section 3 (3) (b) of the Act.

32 It is clear enough that the decision under review was correct and in fact the Applicants did not seriously contend otherwise. On the relevant date the Applicants owned Property B and they did not occupy it as their PPR .The Applicants were in effect doing no more than seek a waiver or compromise on what they perceived (if not stated in these terms) as grounds of fairness. As appears from the correspondence from which I have quoted they have consistently refused to accept the Respondent’s assertion to them that he has no statutory power to waive or compromise tax.

33 As I have said, I agree that the Respondent does not have a statutory discretion to waive or compromise land tax. However it does seem reasonable to note that this state of affairs arose through no fault on the part of the Applicants and that affairs might have turned out differently if the purchaser had completed as planned (and as contracted) only a matter of something over 2 weeks previously. That delay had consequences for the Applicants in that arguably that delay resulted in a land tax impost, which might perhaps have been avoided. I have no knowledge of whether there is any fund, whether administered by the Respondent and/or officers of the state government, out of which a refund of the tax or part of could be made. If there is such a fund, then I would respectfully suggest (and this is of course a suggestion only) that this is a case, which is deserving of sympathetic consideration.

34 The decision under review must however be affirmed.