Scott v Chief Commissioner of State Revenue - [2010] NSWADT 14

No judgment structure available for this case.

CITATION: Scott v Chief Commissioner of State Revenue [2010] NSWADT 14

DIVISION: Revenue Division

PARTIES:
APPLICANTS
Vanessa Pauline Scott and Darren Robert Scott
RESPONDENT
Chief Commissioner of State Revenue

FILE NUMBER: 086084

HEARING DATES: 21 July 2009

SUBMISSIONS CLOSED: 11 September 2009

DATE OF DECISION:
15 January 2010

BEFORE: Hole M - Judicial Member

CATCHWORDS: Principal place of residence - exemptions - Clause 8 Schedule 1A LTMA

LEGISLATION CITED: Land Tax Management Act 1956

CASES CITED: Yen-Cheng Chuang & Anor v Chief Commissioner of State Revenue [2009] NSWADTAP 160
Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41
Holcombe v Chief Commissioner of State Revenue [2009[ NSWADT 82
Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50
Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68
Beashel v Chief Commissioner of State Revenue [2008] NSWADT 103

REPRESENTATION:
APPLICANT
In person –Darren Robert Scott
RESPONDENT
S Kaur-Bains, barrister

ORDERS: 1.The decision of the Chief Commissioner of State Revenue dated 21 January 2008 is confirmed.

REASONS FOR DECISION

1 The applicants have brought this application in respect of a decision made by the respondent dated 21 January 2008 being assessments for land tax for the years 2004, 2005, 2006, 2007 and 2008 and forwarded to the applicants on that date. These assessments related to a property in Batemans Bay (“the subject property”). The applicants sought a review of the decision by letter dated 25 January 2008. On 7 July 2008 the respondent notified the applicants that their objections had been disallowed. Following upon this notification the applicants have made this application to the Tribunal. The application was amended on 25 July 2009.

2 The application related to the subject property and a review of the respondent’s decision is applied for on the basis that this property was (prior to its sale) the applicants’ principal place of residence.

Facts

3 The applicants supplied the following historical sequence concerning the purchase of various properties:

4 The applicants relied in their submission to the respondent dated 9 August 2008 on the basis that the property at Batemans Bay was their principal place of residence and that there was an exemption allowed for a maximum period of six years for them to be absent from their former residence where they had moved into another residence that they did not own in particular circumstances. That they had used and occupied the property at Batemans Bay as their principal place of residence for a continuous period of at least six months. That they did not own and occupy another principal place of residence worldwide and that within six years after moving out sold the subject property. That they did not receive income from leasing or renting out the property for more than six months in a calendar year. That any income derived from people occupying the property during their absence provided no more than reasonably required to cover rates, water, electricity charges and similar outgoings. In relation to the foregoing requirements the applicants stated that the property was not rented out for more than 30% of any of the years and it was rented out for 40% in the last financial year being July 2007 to June 2008 financial year. The rental that the applicants received covered the maintenance and cleaning expenses and some repayments although it operated at a loss. Further that the applicants had to sell quickly as they were becoming financially stressed due to the mortgage repayments and that they believed they did not move out of the property until May 2007.

5 The initial assessment was reviewed and the exemption claimed by the applicants disallowed, this was intimated to the applicants by email on 26 March 2008. The objection was disallowed on the basis that the respondent had information that the applicants were not residing at the subject property.

6 The application for exemption set out in the letter dated 9 August 2008 from the applicants to the Tribunal expressed the view of the applicants that they were entitled to an exemption as they were absent from their former residence pursuant to the criteria shown on the OSR website. This exemption is apparently that as referred to in Clause 8 Schedule 1A Land Tax Management Act 1956 (“LTMA”).

7 The history was exemplified by evidence given and clarified in cross examination of the applicants and expanded in submissions by the applicant representative. This included:

(a) during the period from June 2001 to September 2001 the applicants were employed overseas and did not require residence in New South Wales;

(b) during the period after purchase of the subject property from 6 December 2001 to 8 December 2001 the applicants attended to the connection of electricity to the subject property and joined Video Ezy in Batemans Bay;

(c) in December 2001 the applicants decided to live at the subject property. They retained commitments in Sydney for work purposes;

(d) statements of the applicants’ bank account for the period 15 May 2002 to 16 June 2002 addressed to a post office at Rozelle disclose transactions where purchases were made in the Batehaven area, Batemans Bay area, Nowra area and other country areas;

(e) as of December 2002 the applicants were primarily living in the second property referred to in paragraph 3 hereof at Auburn;

(f) a property at Rozelle was owned on behalf the applicant representatives’ brother and sister-in-law and this was retained as a stable posting address;

(g) the applicants operated a business sewing curtains in the various places they lived, there were no employees of this business, the name of the business was “Spring Cresta – Vandiar”;

(h) during the period from September 2001 to December 2001 the applicants stored their furnishings and were provided with free board and lodging with an organisation of which they are a member;

(i) from 7 December 2001 onwards the applicants attended at the subject property which had been purchased unfurnished and was four years old having been used as the display unit. The applicants took various items of furniture down to the subject property including a bed and they purchased other furniture. The subject property has three bedrooms;

(j) the subject property was not available for rental as holiday rental until after 31 December 2001;

(k) the applicants’ tax returns disclose various addresses as their home address. The individual tax return for the tax year 2007 of Mrs Vanessa Scott discloses a postal address at Ingleburn and the subject property as the home address;

(l) the subject property was listed with a real estate agent for holiday lettings available for the 3 weeks from mid December 2001 over into January 2002, the applicants advised the real estate agent that the subject property would not be available for letting out or rental during the period from January 2002 as they were living there. Despite this instruction the real estate agent rented out the property during Easter 2002 for 1 week;

(m) the business name of the holiday house is Sandcastle Holiday House;

(n) the tax return for Mrs Vanessa Scott for the tax year 2002 discloses that the subject property was first available for rental on 7 December 2001, there is a typographical error in the tax return showing ‘2002’ rather than ‘2001’. The applicant representative’s tax return for 2002 also discloses the same typographical error;

(o) the subject property was the subject of an advertisement on the internet as from 2004;

(p) in 2005 the applicants received the first land tax bill for the subject property and that bill was paid on 24 January 2005;

(q) the applicants managed the subject property for rental during the period from 2004 to September 2007 by way of the internet;

(r) the applicants retained some personal belongings at the subject property during the period from December 2001 through to August 2006 when all those belongings were removed from the subject property into storage with an organisation of which they are a member;’

(s) the applicants have been married for 16 years and have always lived together;

(t) the applicants are enrolled with the Australian Electoral Commission at the subject property as from 9 March 2005 to 8 December 2008. Prior to 9 March 2005 they were enrolled at three separate addresses;

(u) the subject property was sold by the applicants in April 2008.

8 The applicants were cross examined. Mrs Scott in cross examination described removal of furniture to rental addresses in 2003. She described the subject property as a display unit when purchased and that it was unfurnished. She and her husband took various items to the subject property including a bed and they bought some items of furniture for the subject property to furnish it. Those items of furniture were bought to rent the house out as a holiday house and it was not ready to rent out until mid December 2001. Mrs Scott attested that they bought it with the intention of it being a holiday house and personal items were kept in two cupboards when the subject property was rented out. She and her husband then moved into the subject property in January 2002 and it was no longer available for renting out. The business name was “Sandcastle Holiday House” registered on 1 January 2002. Mrs Scott also attested that the mortgage obtained was a residential investment loan.

Legislation

9 Section 10 LTMA provides various categories of land which are exempt from land tax, the relevant provision is:

“10 Land exempted from tax
(1) Except where otherwise expressly provided in this Act the following lands shall, subject to sections 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act:
...
(r) land that is exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1A,
...”

10 Clause 8 Schedule 1A LTMA (for the period from 31 December 2003 to 29 February 2004) provides that:

“ 8 Concession for absences from former residence

(1) If the Chief Commissioner is satisfied that:
(a) a person is the owner of land ( "the former residence") that has been used and occupied by the person as his or her principal place of residence for a continuous period of at least 6 months, and
(b) the person uses and occupies other land (whether or not in New South Wales), that is not owned by the person, as his or her principal place of residence,
the person is taken, for the purpose of the principal place of residence exemption, to continue to use and occupy the former residence as his or her principal place of residence.
(2) The maximum period for which a person may be taken, under this clause, to continue to use and occupy a former residence as a principal place of residence is 6 years starting at the end of the last period (of at least 6 months) during which the former residence was used and occupied by the person as a principal place of residence (not including any period for which the person may be taken, under clause 7 or this clause, to have used and occupied the former residence as a principal place of residence).
(3) If the principal place of residence exemption applies to the former residence of a person by operation of this clause, the exemption ceases to have effect if the person is the owner of the former residence at the end of the 6-year period referred to in subclause (2) and fails:
(a) to resume actual use and occupation of the residence as a principal place of residence by the end of that period, and
(b) to continue that use and occupation for at least 6 months.
(4) Any period during which a person is in full time care is not to be counted toward the maximum period referred to in subclause (2). Accordingly, a person who is in full time care may continue to be taken to use and occupy his or her former residence as his or her principal place of residence during any period in which he or she is in full time care.
(5) For the purposes of this clause, a person is in "full time care" during any period in which the person:
(a) resides at a hospital or mental hospital as a patient of the hospital, or
(b) resides at an aged care establishment (within the meaning of section 10R) while being provided with residential care, or respite care, or
(c) resides with another person (a "carer") who is eligible for a carer payment under the Social Security Act 1991 of the Commonwealth because the carer provides care to the person.
(6) This clause applies in respect of the assessment of a person’s ownership of land in a tax year only if the Chief Commissioner is satisfied that no income has been derived from the use or occupation of the former residence in the preceding tax year, except as permitted by subclause (7).
(7) Income may be derived from the use or occupation of the former residence in a tax year if:
(a) the income is derived from a lease, licence or other arrangement under which a person has a right to occupy the former residence and the total period for which any such right of occupation is conferred does not exceed 6 months in the tax year, or
(b) the income is derived from any arrangement under which a person occupies the former residence, but the income is no more than is reasonably required to cover council, water and energy rates and charges and maintenance costs of the owner in respect of the residence.
(8) This clause is subject to clause 12 (which limits members of a family to one principal place of residence exemption).
(9) In this clause:
"hospital" means an institution at which relief is given to sick or injured people through the provision of care or treatment.
"mental hospital" means an institution conducted principally for the treatment of mentally ill persons, and includes a hospital within the meaning of the Mental Health Act 1990.”

This clause was amended on three occasions thereafter. There was an amendment which applied to the period 7 December 2005 to 2 April 2006, an amendment which applied to the period from 31 December 2006 to 3 July 2007 and then an amendment which applied to the period from 4 July 2007 to 1 July 2008 and this remains as at the date of hearing the current legislation. For the purposes of this matter the provision of Clause 8(1)(a) remained the same.

11 Clause 12 Schedule 1A LTMA provides that:

“12 Only one principal place of residence for all members of same family

(1) For the purposes of the principal place of residence exemption, only one place of residence may be treated as the principal place of residence of all members of the same family.
(2) If members of a family own (whether jointly or separately) more than one residence used and occupied by any of them as a principal place of residence, the Chief Commissioner is to treat the one place of residence elected as the principal place of residence of the family as the principal place of residence of all members of the family in respect of a tax year.
(3) Such an election is to be made, by or on behalf of the members of the family, in writing and must be lodged with the Chief Commissioner within the period for the lodging of objections under section 89 of the Taxation Administration Act 1996 .
(4) An election may be made, in respect of a tax year, by the end of the period allowed for the lodging of an objection to a notice of assessment of land tax liability (being an initial assessment of land tax liability) for that tax year.
(5) If an election is not made, the Chief Commissioner is to treat the residence that has the highest land value for land tax purposes as the principal place of residence of all members of the family.
(6) For the purposes of this clause, a "family" consists of the following:
(a) a person and his or her spouse (if any),
(b) any dependent child or dependent step-child of the person and his or her spouse (or of either of them) who ordinarily resides with the person or his or her spouse.”

12 The second reading of the State Revenue Legislation Further Amendment Bill during the debate on 14 November 2003 included a reference by Ms Gladys Berejiklian that:

“… The principal place of residence exemption from land tax will be rewritten, closing a number of loopholes. This provision extends and confirms concessions for the principal place of residence exemption. Most significantly, persons who own property and then move to a rented property – that is, move interstate or overseas – do not have to pay land tax on that property for six years so long as they do not rent our their property for more than six months per year.

A further reference during the debate by Mr Bryce Gaudry on that date is also applicable:

“… The bill amends the Land Tax Management Act 1956 provisions relating to the land tax concession for an owner’s principal place of residence. The amendments will allow an owner to claim the concession for two residences where the owner has bought a new residence and is in the process of selling the existing residence, but has not been able to complete the sale by the taxing date. The bill will also remove certain restrictions on the current exemption on land where a new family residence is being built or an existing one is being refurbished, provided the owner takes up residence in the completed house within two years and remains in residence for at least six months. The bill will allow a principal residence to be used for incidental business purposes, such as the use of one room as a home office or workshop, without losing the principal place of residence exemption from land tax.

The bill clarifies an existing concession where the owner is absent from the home for extended periods, but resumes occupation within six years. Under the amendments an owner will be allowed to rent the home for a period of up to six months in any tax year before the concession ceases to apply. The amendments also impose a condition that the owner must occupy the home for at least six months after resuming occupation or forfeit the concession for the entire period of the owner’s absence from the home. The bill allows each family, including dependents under 18, a concession for only one property, except when buying a new principal place of residence.
…”

13 Mr Graham West commented on 15 November 2005 during the debate on the second reading of the Bill:

“… The bill provides further concessions for an owner’s principal residence. The land tax legislation allows a person who temporarily vacates his or her principal place of residence to retain the exemption for up to six years, provided the property is not rented for more than six months in a particular year and the owner resumes occupation or sells the land within six years. However, if the owner fails to resume occupation within six years, the land becomes liable retrospectively for the entire six-year period. …”

Applicants’ submissions

14 The applicants provided comprehensive bound submissions to the Tribunal including those filed 3 March 2009, 8 May 2009 (including copies of tax returns filed on that day) and 11 June 2009. Further submissions were handed up at the hearing on 21 July 2009 together with documents tendered. Following completion of the hearing a direction was made that further submissions be furnished relating to industry practice concerning calculation of days for letting purposes and the applicant filed those submissions on 17 August 2009.

15 The applicant, Mr Scott, represented the applicants at the hearing and referred to the various written submissions that had been made. After proceeding through the history of the applicants and the reasons for their moves between the various properties over the period of seven years the applicants’ representative drew particular attention to the following items:

(a) that at the time that the first land tax bill was received relating to the 2005 land tax years in respect of the subject property an employee of the applicants’ business attended to payment of that bill on 24 January 2005 and that if they had known of the bill they would have challenged it at that time and would have had the evidence available to them to disclose that for the period December 2001 to June 2002 it was their principal place of residence;

(b) that the applicants believed that the subject property was their principal place of residence and that on the variation return that was forwarded to the respondent by the applicants dated 15 February 2005 the subject property was shown as their principal place of residence. This variation return showed the commercial factory in Guildford as the postal address of the applicants;

(c) that the applicants had received a reviewed assessment summary on 7 February 2006 which disclosed that the respondent had reviewed the previous assessments provided on 2 February 2005 and 7 February 2006 whereby the subject property was now exempt from land tax. The applicants accepted that at that time and did not take any further action;

(d) as at February 2006 the applicants did have full records and would have been able to provide sufficient evidence of use and occupation of the subject property and due to the respondent exempting the subject property they had not retained those records;

(e) that when the applicants received the letter dated 21 January 2008 from the respondent requiring evidence of use and occupation of the subject property the applicants were working as volunteers overseas and did not have the evidence available as to their use and occupation. This letter was accompanied by an assessment to land tax of the subject property for the years 2004, 2005, 2006, 2007 and 2008. That the commercial property at Guildford was disclosed as the principal place of residence which was incorrect;

(f) that following representations to the respondent then the respondent revoked exemption for the commercial property and the applicants paid the new amount outstanding. That no exemption was then applied to the subject property;

(g) the subject property was sold in April 2008 which was within the six years absence period permitted pursuant to Clause 8(7) of Schedule 1A LTMA;

(h) that a claim was made on taxation for only one half of the depreciation of the subject property;

(i) that the applicants had been married for 16 years and had not been separated;

(j) that the applicants had not lived at the property in Rozelle it had been owned on behalf of the applicant representative’s brother and sister-in-law. This property provided a stable postal address for the applicants;

(k) that the evidence given by Mrs Vanessa Scott in relation to the mortgage loan disclosed that an amount of interest in the sum of $16,000.00 per annum was being paid on the mortgage;

(l) that as the applicants’ future was unclear they had intended to use the subject property as their principal place of residence and did not intend to use the subject property as a continuing rental property;

(m) that the postal address of the applicants changed from time to time to ensure that they received the mail;

(n) that the applicants’ personal belongings remained at the subject property and were not moved from that property until August 2006 when those belongings were placed in storage;

(o) that the applicants feel disadvantaged because the records that would be required to prove the use and occupation of the subject property for the period of six months from December 2001 would have been available and but for the respondent reviewing the exemption provided in respect of the principal place of residence in 2006 that evidence would have been available;

(p) that the applicants had been ill advised by professionals that they had employed as to tax exemptions;

(q) that the average rental for the subject property was $1,500.00 per week when it was rented out or leased.

16 The written submissions of the applicants addressed the questions initially raised by the respondent and included the supply of documentation concerning those initial representations.

Respondent’s submissions

17 The respondent’s representative noted that there was no record as to the reason for the amendment of the assessment to land tax which occurred on 7 February 2006 which resulted in the amended assessments disclosing that no land tax was due or payable for the land tax years 2004, 2005 and 2006. This amendment was apparently based on the variation return forwarded to the respondent and dated 15 February 2004 which disclosed that the applicants’ principal place of residence was being used for other purposes and that the reason given was:

A further variation return was received from the applicants on 20 December 2007 dated 20 November 2007 which disclosed in the same box:

“when we travel overseas people stay there for a few weeks and give us some money.”

18 The respondent’s representative noted that the subject property is advertised as a bed and breakfast on a website and that this information had come to hand on 21 January 2008. The assessment was duly made in accordance with that information as a bed and breakfast.

19 There was no land tax payable in respect of the subject property for the land tax years of 2002 and 2003 as the value was below the threshold. The respondent’s representative drew attention to the onus being upon the applicants to establish that the subject property was being used as their principal place of residence.

20 The respondent’s representative noted that the Chief Commissioner has power to amend an assessment that has occurred and that there is no estoppel upon that ability to amend the assessment.

21 Clause 8 Schedule 1A LTMA applies as it was as at 31 December 2003 and that for the subject property to be exempt from land tax pursuant to the provisions of Clause 8 Schedule 1A LTMA that property must be the principal place of residence of the applicants. If the subject property is the principal place of residence of the applicants then pursuant to Clause 8(7) Schedule 1A LTMA, where the property is subject of short term rentals or leasing, this will not affect the exemption provided those leasing fall within the provisions of Clause 8(7) Schedule 1A LTMA in relation to time and derived income.

22 The respondent’s representative drew attention to Yen-Cheng Chuang & Anor v Chief Commissioner of State Revenue [2009] NSWADTAP 160 (“Yen-Cheng Chuang”) wherein the onus of establishing that a property is the principal place of residence is usually discharged on the basis of the facts of the case. At paragraph 21 the Tribunal observed:

“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 …””

23 The onus is an objective test and has been referred to in Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 (“Ferrington”) at 18:

“…
23 It does not matter if the resident (sic) is for a short period of time as long as the occupation is as a principal place of residence; that is, a person's main residence (see Zakariya v. Chief Commissioner, Office of State Revenue [2003] NSWADT 26).
…. ”

24 The respondent’s representative drew attention to Holcombe v Chief Commissioner of State Revenue [2009] NSWADT 82 (“Holcombe”). This case also related to an assessment for a property in rural New South Wales for four successive tax years. The facts are not dissimilar to this particular case in that the applicant therein would move into a unit when it was not let out. Attention was particularly drawn to paragraph 28 therein:

“28 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 expression “principal place of residence” found in the Stamps Act 1894 (Qld)).”

25 Further reference was drawn to paragraph 36 in the decision of Holcombe:

“36 Against the factual background, it is difficult to conclude that the two units were used and occupied by the Applicant as his principal place of residence in terms of clauses 2 and 3. The evidence before the Tribunal was that, from October 2003, the units were used for the purpose of earning rental income. He was only able to occupy and use a unit or units when they were not let. Under clause 2 he was required to establish that the units were continuously used and occupied by him as his “principal place of residence”, and no other purpose since July in the year preceding each tax year under review.”

26 That when the applicants were not in possession then their belongings were locked in a cupboard as disclosed in the cross examination of the applicants.

27 The respondent’s representative submitted that the applicants had considered that the only time that the subject property could have been their principal place of residence was from January 2001 to August 2002. That as from 2 August 2002 they resided at another address.

28 The respondent’s representative drew attention to the application to the mortgagee for the mortgage the purpose that was disclosed was as a holiday home and it was that as from the date of purchase until early 2002.

29 The subject property was not the principal place of residence as at 31 December 2001 nor in any other year. The subject property was advertised for rental through the real estate agent that they had engaged as from December 2001 and then from the cessation of that agency agreement the applicants managed the rental of the property themselves particularly through the internet. The letting of the property for the one week at Easter 2002 was undertaken pursuant to the agency agreement that the applicants had with the real estate agent and was therefore by consent.

30 The respondent’s representative noted that the signing of the tax returns as they had been prepared was ill advised and the applicant Mrs Vanessa Scott had given information for the purposes of preparation of that tax return and sworn the declaration that it was correct prior to submission to the Australian Taxation Office.

31 Pursuant to the requirements of Clause 8(1)(a) Schedule 1A LTMA it would be necessary for the applicants to show that they were in continual use and occupation for the six months period required and attention was drawn to Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50 (“Aldridge”). The requirement for continuous use and occupation was also considered in Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 (“Flaracos”) where Gzell J commented at paragraphs 28 and 29:

“28 The continuous use and occupation required by s 3(3)(a) of the Act means that the use of the land for residential purposes must remain constant throughout each relevant eighteen month period. 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.
29 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. The observation of Sir Nigel Bowen in Christie that physical presence over all the land is not necessary to establish occupation is equally apposite when there is some hiatus in physical presence over time.”

However, the periods that the applicants spent at the subject property were not continuous and had been broken by at least one rental and in any event there was little evidence of the use and occupation by the applicants.

32 The evidence provided by the applicants as to their continuous use and occupation of the subject property for the period from December 2001 to August 2002 consisted of:

(a) confirmation of a joining of Video Ezy on 7 December 2001;

(b) the connection of the electricity supply from 6 December 2001 to 29 April 2008; and

(c) a copy of a credit card account from the period May 2002 to June 2002 which disclosed that various purchases were made in the vicinity of the subject property along with purchases made in a suburb of Sydney.

33 The respondent’s representative submitted that if Clause 8(1)(a) Schedule 1A LTMA is available then the applicants would need to also satisfy the requirements of Clause 8(7) Schedule 1A LTMA and in this regard the periods that the subject property was leased for would in the respondent’s opinion be in excess of the figures as shown on the rental record produced due to the manner in which the date would be calculated. Further that the income permitted under Clause 8(7) Schedule 1A LTMA provides that any income derived pursuant to a letting must be no more than that which is reasonably required to cover council, water and energy rates and charges and maintenance costs of the owner in respect of the residence. This issue was considered in Beashel v Chief Commissioner of State Revenue [2008] NSWADT 103 (“Beashel”) at paragraph 32 and in Holcombe at paragraph 49.

Reasons

34 The applicants bear the onus of proving that they are entitled to the subject property being regarded as their principal place of residence. The applicants have moved several times during the period from May 2001 through to March 2008.

35 The questions to be considered in relation to an entitlement to an exemption from assessment to land tax are as submitted by the respondent:

(a) whether the applicants used and occupied the subject property as the principal place of residence as required by LTMA;
(b) if the applicants did use and occupy the subject property as their principal place of residence for what period did they so use it;
(c) whether the applicants are entitled to the principal place of residence exemption in Clause 2 of Schedule 1A LTMA; and
(d) whether the applicants are entitled to the concession under Clause 8 Schedule 1A LTMA.

36 Pursuant to the provisions of Clause 8 Schedule 1A LTMA it is necessary for the applicants to discharge the onus of proving that they used and occupied the subject property as their principal place of residence for at least six months prior to June 2002.

37 The applicants submitted that due to the passage of time and to the requirement that they place their documents and belongings in storage over two periods during the time between June 2002 and March 2008 that they were disadvantaged as they could not find all of the evidence that they would rely on if it was available and they did not bring to the Tribunal any witnesses that could show that they were in occupation of the subject property for that initial requisite period of six months. The applicants brought a witness to the Tribunal in relation to them renting property in Sydney and attending various properties in Sydney although this witness was not able to assist in any detail in relation to those rentings. This witness did not provide any evidence of the applicants use and occupation of the subject property during the requisite period of six months.

38 The applicants both gave evidence as to the moving of furniture between Sydney and Batemans Bay and elsewhere. This evidence was detailed in relation to a rental in 2003 however it did not assist in discharging the onus of disclosing that the subject property was used as their principal place of residence. The applicants have been industrious over the years in their continuation of running a business in Sydney whilst going backwards and forwards to the subject property and they have been industrious in relation to their work supporting an organisation of which they are members.

39 The evidence given by them both became confused in relation to the presentation of material in documents supplied to the Australian Tax Office by them.

40 The applicants arranged for the subject property to be available for short term rentals and leasings by way of agreement initially with the real estate agent which pre-dated 31 December 2001 and then through their own management of the leasing. Between the beginning of 2002 through to 2003 the subject property continued to be rented and then from that time the subject property was advertised on the internet. From 2004 through to the time that the subject property was sold the subject property continued to be used for short term rentals.

41 During the period that the applicants agreed that they were absent from the subject property between June 2002 to the time that they sold the subject property in April 2008 the applicants derived income from letting the subject property on short term renting and leases. The applicants supplied a copy of the terms of rental and leasing during that period which disclosed that they operated the business of the Sandcastle Holiday House in accordance with the principles suggested by the Real Estate Institute of New South Wales Best Practice Guidelines for Holiday and Short Return Rentals. The house was available for short term and weekly rental. There had been an agency agreement between the applicants and an agent in the area of the subject property relating to renting and leasing the subject property during the period prior to 31 December 2001 through to a time when the applicants took over management of the leasing of the subject property. The applicants attested that the agent had let the subject property for one week during the Easter period in 2002 and that this had been against their instructions to the real estate agent.

42 The applicants supplied a record of the rentals and short term leasing for each of the years 2004, 2005, 2006 and 2007. For the purposes of calculating the liability to land tax if in fact the exemption does not apply then these records of rental are inapplicable. If in fact the applicants are entitled to the principal place of residence exemption on the basis of Clause 8 Schedule 1A LTMA then consideration would need to be given to the rental records relating to the calculation of short term rental as provided within Clause 8(7) Schedule 1A LTMA.

43 If the principal place of residence exemption pursuant to Clause 8 Schedule 1A LTMA is available then the provisions of Clause 8(7) Schedule 1A LTMA will need to be considered as to whether the subject property would be assessable for land tax for the years 2005 and 2007. In this regard both the applicants and respondent supplied further submissions relating to industry practice concerning the calculation of days. Consistent with legislative interpretation and taking into consideration, for instance, where letting was shown to be from 31 December 2006 to 2 January 2007 and the letting immediately following was from 2 January 2007 to 12 January 2007 then clearly it could not be considered that both short term tenants occupied the subject property on the 2 January 2007 for calculating the number of days. In any event as the applicants have not discharged the onus to supply sufficient evidence to disclose that they used and occupied the subject property as their principal place of residence during the relevant period it is unnecessary to come to a conclusion regarding the applicability or otherwise of Clause 8(7) Schedule 1A LTMA.

44 The respondent supplied a copy of two variation returns supplied to the respondent by the applicants. The first being dated 15 February 2004 in which the applicants showed their postal address at the property that they had purchased in October 2004 at Guildford being a commercial property. They disclosed the other activities that the subject property was used for as:

“let others stay for holidays when we are working in Sydney. When in Sydney rent a property have investment unit in Qld – never go there.”

The applicants supplied a copy of Sandcastle Holiday House client records for 2004 disclosing that during the period from 13 January 2004 through to 1 January 2005 the subject property was subject of short term lettings for a period of 91 days (calculated by the respondent as 107 days) and that according to the records kept by the applicants the total amount received for 2004 by way of Tariff was the sum of $21,040.00.

45 The second variation return supplied to the respondent, signed as at 20 November 2007, the response given as to whether their principal place of residence was used for any other purpose was “yes” and the description of the other activities was given as:

“when we travel overseas people stay there for a few weeks and give us some money”.

This response is contrary to the sophisticated system of lettings that had been arranged by way of the real estate agent and then by way of the internet over the period from December 2001 through to August 2008. The applicant representative gave evidence that the average rental for the subject property was $1,500.00 per week over the period that the subject property was leased.

46 As at the time of providing the variation return executed on 15 February 2004 the applicants had an opportunity to make full disclosure in respect of the nature of the holiday house letting. The respondent accepted the statement made in the variation return at that time. The respondent provided a reviewed assessment on 7 February 2006 which was not supported by any evidence supplied by the respondent as to the reason for the review of the assessment. In the event that had the respondent reviewed the variation return signed on 15 February 2004 and noted that an exemption was claimed as it was ‘Intended as the principal place of residence’ then it may have been the case that the applicants may have been able to provide evidence to support the submission that the subject property was their principal place of residence for the period from December 2001 through to June 2002 could have been tested.

47 The submission by the applicants as to the destruction of their records has been considered very carefully and it is noted that the three pieces of evidence supplied in relation to the connections of Country Energy, the membership of Video Ezy and the copy of a bank statement during the period have been obtained through sources other than their own private records which were destroyed. The onus to prove their use and occupation of the premises rests on the applicants and could have been supported by evidence from independent witnesses if they were available and could so attest. The applicants have not supplied evidence to the Tribunal to disclose that the subject property was used as their principal place of residence for the requisite period, and their evidence was not persuasive in relation to the reasons for the paucity of evidence concerning the six month period required pursuant to Clause 8 Schedule 1A LTMA.

48 The incidence of land tax relies on those subject to payment of land tax to disclose to the respondent at appropriate times the evidence required to permit the respondent to assess land tax if payable. The applicants were availed of two dates when sufficient evidence could have been supplied to the respondent as to the use and occupation of the premises as the principal place of residence, if it was available, rather than as an intended place of residence. In view of the sophisticated system of lettings that had been arranged by the applicants in respect of the property these arrangements should have been disclosed to the respondent at the time of the variation returns.

49 The evidence given under cross examination by both of the applicants was, as to be expected due to the passage of time, hazy and confused in respect of the activities that occurred in the period between December 2001 and June 2002. The applicants have been engaged in many and various activities including running their own business and being heavily engaged in volunteer work both in Australia and overseas on behalf of an organisation of which they are a member and they are to be commended for their activities in this regard.

50 As noted by the Tribunal in Holcombe it is necessary to consider the extent and quality of use and occupation of the residence in each case. In this particular case the Tribunal is asked to rely on scant information regarding the extent and quality of use and occupation of the residence. There is conflicting evidence in respect of short term rentals made of the subject property by an agent on their behalf although the applicants attested that this was contrary to their instructions to that agent. The evidence in respect of their extent of use and occupation of the subject property during the requisite period also encompasses the renting of property elsewhere for their use for business purposes, once again the evidence in relation to this is confused and not persuasive.

51 In order that the applicants be entitled to the exemption provided by Clause 8 Schedule 1A LTMA it would be necessary for them to show that the subject property was used and occupied for them for the continuous period of six months. The six month period was calculated as between December 2001 and June 2002. The tax return of Mrs Scott for the tax year through to June 2002 discloses that the subject property was first available for rental on 7 December 2001 following through to June 2002, the tax return of Mr Scott is identical in this regard. These tax returns also disclose the number of weeks that the subject property was rented during the period from 7 December 2001 to 30 June 2002 as being for a period of 23 weeks. That the income disclosed was for the gross rental, being the combined amount as disclosed in the tax returns for 2002 tax year of Mr and Mrs Scott, is in the sum of $2,563.00. The tax returns also claimed interest on the loans in a total sum of $9,008.00 and interest on a loan for the purposes of residence only would not usually be deductible from the taxable income.

52 The applicants engaged an accountant for the purposes of attending to their tax returns. The applicants have the responsibility for ensuring that all information supplied to the Australian Taxation Office is correct for the purposes of assessing income tax.

53 The evidence discloses that the subject property was rented out on short term rentals for the period from December 2001 until the date of sale being April 2008.

54 As the evidence has disclosed that the applicants did not use the subject property as their principal place of residence then it is unnecessary to consider whether any other question needs to be answered.

Orders

1. The decision of the Chief Commissioner of State Revenue dated 21 January 2008 is confirmed.

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Citations

Scott v Chief Commissioner of State Revenue [2010] NSWADT 14

Cases Citing This Decision

0

Cases Cited

6

Statutory Material Cited

1

Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41

O'Donnell v Commissioner of Police [2009] NSWADT 82

Chief Commissioner of State Revenue v Aldridge & Anor [2003] NSWADTAP 50

CITATION:	Scott v Chief Commissioner of State Revenue [2010] NSWADT 14
DIVISION:	Revenue Division
PARTIES:	APPLICANTS Vanessa Pauline Scott and Darren Robert Scott RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086084
HEARING DATES:	21 July 2009
SUBMISSIONS CLOSED:	11 September 2009
DATE OF DECISION:	15 January 2010
BEFORE:	Hole M - Judicial Member
CATCHWORDS:	Principal place of residence - exemptions - Clause 8 Schedule 1A LTMA
LEGISLATION CITED:	Land Tax Management Act 1956
CASES CITED:	Yen-Cheng Chuang & Anor v Chief Commissioner of State Revenue [2009] NSWADTAP 160 Chief Commissioner of State Revenue v Ferrington (GD) [2004] NSWADTAP 41 Holcombe v Chief Commissioner of State Revenue [2009[ NSWADT 82 Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50 Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 Beashel v Chief Commissioner of State Revenue [2008] NSWADT 103
REPRESENTATION:	APPLICANT In person –Darren Robert Scott RESPONDENT S Kaur-Bains, barrister
ORDERS:	1.The decision of the Chief Commissioner of State Revenue dated 21 January 2008 is confirmed.