Shah v Chief Commissioner of State Revenue

[2010] NSWADT 184

CITATION:	Shah v Chief Commissioner of State Revenue [2010] NSWADT 184
DIVISION:	Revenue Division
PARTIES:	APPLICANT Sandip Shah and Shilpa Shah RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	106011
HEARING DATES:	5 July 2010
SUBMISSIONS CLOSED:	5 July 2010
DATE OF DECISION:	27 July 2010
BEFORE:	Verick A - Judicial Member
CATCHWORDS:	Land Tax - apportionment
LEGISLATION CITED:	Land Tax Management Act 1956 Taxation Administration Act 1996 Real Property Act 1900 State Revenue Further Amendment (No 2) Act 2001
CASES CITED:	Amir v Chief Commissioner of State Revenue [2010] NSWADT 93 York and Anor v Chief Commissioner of State Revenue [2003] NSWADT 119 Kumaran v Chief Commissioner of State Revenue [2006] NSWADT 269
REPRESENTATION:	APPLICANT Sandip Shah and Shilpa Shah RESPONDENT Chief Commissioner of State Revenue
ORDERS:	The decision under review is affirmed.

REASONS FOR DECISION

Introduction

1 The applicants seek a review of the respondent’s decision dated 3 February 2010 to disallow the Applicants’ objection against land tax assessment for the 2010 land tax year in respect of land situated at Kildare Road, Blacktown in the State of New South Wales (“the Land”).

2 The issue in the proceedings is whether the applicants are liable to pay land tax for the whole of the 2010 land tax year under the Land Tax Management Act 1956 (NSW) (“the Act”). The applicants ceased to be owners of the Land on 27 January 2010 when the Land was sold. As a consequence, the applicants claimed that they, as vendors, were only liable to land tax in respect of the Land for the 2010 land tax year on a proportionate basis and only for the period 1 January 2010 to 27 January 2010.

Facts

3 The facts relevant for purposes of this review are not in dispute and are as follows.

4 The applicants have owned the Land since August 2004. The Land was part of a larger block of land, which was subdivided by the applicants after it was purchased.

5 On 4 December 2009, the applicants entered into a Contract for Sale to sell the Land.

6 On 7 January 2010, the respondent issued a Land Tax Notice of Assessment to the applicants for the 2010 land tax year. Both parcels of land situated at Kildare Road Blacktown and another property owned by the applicants situated at Keene Road, Baulkham Hills were included in the assessment. The applicants were granted the principal place of residence exemption for another property.

7 On 19 January 2010, the applicants’ solicitors lodged an objection to the assessment. The solicitors informed the respondent that the “contract for sale” was entered into on behalf of the applicants by their real estate agent, as they were overseas for the period 24 November 2009 to 29 December 2009 and that final settlement of the property was expected to be completed on 27 January 2010. The grounds of objection were that because the applicants would be “holding” the Land as owners for only one month out of the 12 months in the 2010 land tax year the land tax charges should be on a “pro-rata basis”.

8 Settlement occurred on 27 January 2010.

9 On 3 February 2010, the respondent disallowed the applicants’ objection. The following reasons were provided by the respondent:

“Land tax is an annual tax based on landholdings at the taxing date of midnight 31 December of the year prior to the tax year, eg total value of landholding at 31 December 2009 is the land assessed for 2010 tax year assessment.

There is no provision in the legislation for the pro-rata calculation of land tax in the event of acquisitions and disposal of land during the year. If there is to be any split of land tax on sale of land, this is not ( sic ) normally dealt with between the legal representatives of the vendor/purchaser at the time of sale. This office takes no part in these arrangements.

As you are the owner of … Kildare Rd, Blacktown as at 31 December 2009 (2010 taxing date) are you ( sic ) liable to pay land tax on this property for the 2010 tax year. We therefore consider that the assessment issued on the 7 January 2010 is correct as issued.”

10 In their application for review the applicants, in addition to their grounds as set out in the objection, submitted that as they had incurred large losses in buying and selling the Land, the land tax for the period 28 January 2010 to 31 December 2010 should be “waived” in accordance with the hardship provisions in s.50 of the Act and Part 10 Division 5 of the Taxation Administration Act 1996 (‘the TA Act”).

Submissions

11 At the hearing, the applicants appeared in person and essentially relied on the grounds set out in their objection and in the application for review.

12 Mr Al-Hage for the respondent submitted that there was no provision in the Act to charge an owner of land to tax on a pro-rata basis. Further, it was submitted that the provisions of s 26 of the Act “make it clear that, in the circumstances where the relevant land is the subject of a Contract for Sale and the land has not been transferred to the purchaser, the registered proprietor is taken to be owner of that land for the purposes of the Act”. Some reliance was placed by the respondent on the recent decision of the Tribunal in Amir v Chief Commissioner of State Revenue [2010] NSWADT 93 where Judicial Member Hirschhorn considered the operation of s 26.Mr Al-Hage also noted in his written submissions that “no provision was made under the Contract for Sale for the purchasers to pay a proportionate amount of the land tax with respect to the Property for the 2010 land year, ie, no adjustment for land tax was made on settlement”.

13 It was also submitted that there is no provision in the Act “which allows the Chief Commissioner or the Tribunal to alter the requirement that the applicants pay land tax with respect to the Property for the 2010 tax year in the absence of an applicable exemption”.

14 In relation to the applicants’ “hardship” ground, the respondent’s response was that -

“… the Tribunal does not have jurisdiction to exercise the powers conferred under Pt. 10 Div. 5 of the TA Act, and, therefore, cannot waive land tax on hardship grounds: York and Anor v Chief Commissioner of State Revenue [2003] NSWADT 119, at [10]; see also Kumaran v Chief Commissioner of State Revenue [2006] NSWADT 269, at [10]. That is a matter which falls within the powers of the Hardship Review Board (or the Chief Commissioner if the relevant amount is less than $2,000 – see s. 106B(2)). It is not a matter which the Tribunal is able to consider.”

Discussion and Reasons

15 The short issue in this matter is whether there is any provision in the Act that allows the respondent to refund a proportionate amount of the land tax on the basis of the period of ownership during the relevant land tax year. In this matter the applicants were owners on 31 December 2009 and sold the Land with settlement on 27 January 2010. Their case was essentially that their liability for the 2010 land tax year in respect of the Land should only be for the period 1 January 2010 to 27 January 2010.

16 Unfortunately, as correctly submitted by Mr Al-Hage for the respondent, there is no such provision in the Act to allow land tax to be calculated on any pro-rata ownership basis. Land Tax was levied pursuant to sections 7, 8 and 9 of the Act on the basis of ownership of the relevant land on 31 December 2009 for the 2010 land tax year. It was not in dispute that the applicants were the registered owners of the Land on 31 December 2009.

17 Where land is the subject of a contract for sale, the ownership of land for purposes of the Act is determined under the provisions found in s 26 of the Act which are as follows:

26 Purchaser and vendor

(1) If land under the provisions of the Real Property Act 1900 is the subject of an agreement for sale that has not been completed by transfer of the land, the person who is registered as the proprietor of the land under the Real Property Act 1900 is taken, for purposes of this Act, to be the owner of the land, to the exclusion of the liability of the purchaser.

(2) If land, not being land under the provisions of the Real Property Act 1900 , is the subject of an agreement for sale that has not been completed by conveyance of the land, the vendor of the land is taken, for purposes of this Act, to be the owner of the land, to the exclusion of the liability of the purchaser.

(3) Despite subsections (1) and (2), the purchaser under the agreement for sale is taken, for purposes of this Act, to be owner of the land (to the exclusion of the liability of the registered proprietor or vendor) if:

(a) under the terms of the agreement for sale the purchaser is entitled to exclusive possession of the land and is entitled to receive, if the land is let to a tenant, any rents and profits derived from the tenancy, and

(b) the purchaser has taken possession of the land.

(4) In this section:

agreement for sale means an agreement for sale of land that is in force.”

18 The scope of s 26 was explained in the explanatory notes to the bill that was enacted as State Revenue Further Amendment (No 2) Act 2001, which inserted s 26 in the Act to apply with effect from the 2003 land tax year -

“At present, liability for land tax on land that is subject of an agreement for sale is determined on the basis of who has possession of the land and the percentage of the purchase price that has been paid.

Under the new arrangements, if land that is subject to the provisions of the Real Property Act 1900 is subject to an agreement for sale that has not been completed, the registered proprietor of the land will be taken to be the owner of the land for land tax purposes, and will be liable for land tax in respect of the land, to the exclusion of the liability of the purchaser.

However, the purchaser will be taken to be owner of the land, and liable to land tax, if the purchaser obtains the right to exclusive possession of the land and takes possession of the land.”

19 Under the provisions of s 26 of the Act, the applicants were owners of the Land as at 31 December 2009 because on that date they were the registered owners of the Land and the sale had not been completed. Settlement only occurred on 27 January 2010.

20 It is not uncommon for parties to enter into arrangements as to land tax liability on settlement when selling or buying land. In this matter, the applicants unfortunately did not in the contract for sale of land make any provision for the adjustment of the land tax that they were required under the Act to pay for the 2010 land tax year. That was, in any case, a matter between the parties.

21 The applicants have also placed some reliance on “hardship” as a ground for review. The Tribunal has no jurisdiction to waive or reduce any land tax properly payable under the Act on hardship grounds. Waiver of land tax on hardship grounds is a matter for the Hardship Review Board under Division 5 of the TA Act.

22 In the circumstances, the objection decision under review must be affirmed.

Order

The respondent’s decision dated 3 February 2010 to disallow the applicants’ objection to the Land Tax Notice of Assessments for the 2010 Land Tax Year is affirmed.