Taneja v Chief Commissioner of State Revenue

[2010] NSWADT 3

CITATION:	Taneja v Chief Commissioner of State Revenue [2010] NSWADT 3
DIVISION:	Revenue Division
PARTIES:	Applicant: Vinod Kumar Taneja, Pinki Taneja and Kunal Taneja Respondent: Chief Commissioner of State Revenue
FILE NUMBER:	096064
HEARING DATES:	9 October 2009
SUBMISSIONS CLOSED:	9 October 2009
DATE OF DECISION:	4 January 2010
BEFORE:	Hole M - Judicial Member
CATCHWORDS:	Use and occupation as principle place of residence - subjective intention - imposition of market rate interest
LEGISLATION CITED:	Land Tax Management Act 1956
CASES CITED:	Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50 Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26 Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41 Chief Commissioner of State Revenue v McIlroy [2009] MSWADTAP 21 Tobin v Chief Commissioner of State Revenue [2009] NSWADT 188 (“Tobin”) Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19
REPRESENTATION:	Applicant Representative: Vinod Kumar Taneja, In person Respondent Representative: Mr Gerard
ORDERS:	1. The decision of the Chief Commissioner of State Revenue to assess the subject property as liable for land tax in respect of the land tax years 2006 and 2007 is affirmed. 2. The decision of the Chief Commissioner of State Revenue to impose market rate interest is correct and is affirmed.

REASONS FOR DECISION

1 The three applicants have applied for a review of the decision of the respondent to impose land tax on the subject property for the 2006 and 2007 land tax years. This decision was made on 21 August 2008.

Facts

2 The applicants resided in a property at Campsie prior to 22 April 2005. The applicants purchased the subject property on 22 April 2005. The applicants sold the other property on 29 August 2005 to the applicant representative’s son.

3 The applicants continued to reside in the property sold to their son from 29 August 2005 until 1 April 2007.

4 During the period between 22 April 2005 and shortly before 1 April 2007 the subject property was let continuously pursuant to tenancy agreements which were managed by a real estate agent. The property was rented to various tenants between the period of 22 July 2005 to 19 February 2007.

5 Of the three applicants the applicant who appeared before the Tribunal representing those three applicants suffered a heart attack on 24 October 2006.

6 The respondent forwarded a land tax questionnaire to the applicants in respect of property ownership and correspondence continued from 30 May 2008 between the respondent and the applicants. A completed land tax questionnaire was returned to the respondent on 13 August 2008.

7 The respondent issued a Land Tax Notice of Assessment for the 2006 and 2007 land tax years to the applicants on 21 August 2008 and it is from that assessment that this application is brought.

Legislation

8 The applicable legislation includes Section 10 Land Tax Management Act 1956 (“LTMA”), the definition of principal place of residence provided in Section 3 of LTMA and the requirements as set out in Schedule 1A to the LTMA particularly Part 2 of that Schedule.

“ Part 2 Principal place of residence exemption

(1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing 1 January 2005 or any succeeding year, if the land is:

(2) Land is not used and occupied as the principal place of residence of a person unless:

(a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or

(b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person’s principal place of residence. ”

Applicants’ submissions

9 The applicants sought exemption from the requirement to pay land tax on the basis that the subject property was their principal place of residence as and from the date of sale of their previous property to the son of two of the applicants on 29 August 2005. The son is one of the applicants in this matter being a registered proprietor of a one tenth share of the subject property.

10 The applicants were assisted in their purchase by the services of a solicitor and as at the date of the application retain the services of an accountant.

11 The applicant representative continued to reside in the former property of the applicants after the date of purchase on 22 April 2005 whilst they waited for Council’s approval to demolish the swimming pool at the subject property.

12 In October 2006 the applicants decided to move to the subject property and the applicant representative suffered a heart attack on 25 October 2006. The applicant representative was advised by his medical advisers to avoid any further damage or complications from that heart attack and to avoid any rigorous activity or strenuous work for a few months. Due to this advice the applicants suffered a lot of financial hardships with the applicant representative’s business and as well with his personal life. The applicants were unsure that they could afford the weekly commitments of the subject property and considered selling it in view of the applicant representative’s health condition. The applicant representative and his wife, one of the other applicants, opted to spend a few more months living in the property that had been sold to the son as they were worried about the financial future and did not know of the difficulties that might arise as a result of the applicant representative’s heart condition.

13 The applicant representative submitted that they were not advised by their advisers as to the implications of not living in the subject property in relation to the imposition of land tax.

14 The applicant representative submitted that the applicants were ready to move into the subject property and postponed doing so on account of the heart attack that the applicant representative suffered on 25 October 2006.

15 The applicant representative submitted that on account of his health condition and the applicants’ lack of knowledge concerning the imposition of land tax that they should be exempted from the imposition of land tax for the land tax years 2006 and 2007.

16 The applicant representative submitted that if they had known they could have rented out the unit that had been sold to the son and moved into the subject property.

Respondent’s submissions

17 The respondent’s representative submitted that the land tax for the 2006 and 2007 land tax years is based on the ownership of the land as at midnight on 31 December 2005 and 31 December 2006 respectively. As at both of those dates the subject property was owned by the applicants and those applicants were not living in the property therefore the applicants are prima facie liable for land tax for the 2006 and 2007 land tax years.

18 Any exemption pursuant to the principal place of residence exemption set out in Section 10(1)(r) and as described in Schedule 1A of LTMA requires that the applicants use and occupy the subject property as their principal place of residence on the relevant dates.

19 The respondent’s representative submitted that the subject property was tenanted for the period from 22 July 2005 continuously to 20 February 2007 and that therefore on the relevant dates the property was not used as the applicants’ principal place of residence and could not satisfy the requirements of the legislation.

20 The respondent’s representative submitted that the relevant time for determination of whether the property is subject to land tax or whether it is exempt pursuant to an exemption is 31 December immediately preceding the year for which the land tax is levied and drew attention to paragraph 8 of Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50 (“Aldridge”).

21 The respondent’s representative drew attention to the requirement of Clause 2(1) of Schedule 1A LTMA which sets out that the subject land being the relevant “residential land” be used and occupied by the owner as their principal place of residence. That the subjective intention to occupy the property as the principal place of residence is insufficient to bring the property within the exemption and the fact that the applicant may subjectively consider that particular property to be the principal place of residence is also not sufficient to attract the exemption set out in Clause 2(1) Schedule 1A LTMA as referred to.

22 The respondent’s representative submitted that Clause 21(1) of Schedule 1A LTMA requires that the relevant “residential land”, that is the subject property, be actually used and occupied by the owners as their principal place of residence, a subjective intention to so so is not sufficient. Subjective intention has been considered in Zakariya v Chief Commissioner of State Revenue [2003] NSWADT 26 (“Zakariya”), Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41 (“Ferrington”), Chief Commissioner of State Revenue v McIlroy [2009] MSWADTAP 21 (“McIlroy”) and Tobin v Chief Commissioner of State Revenue [2009] NSWADT 188 (“Tobin”).

23 The respondent’s representative drew attention to the comment in Aldridge relating to the discretion of the respondent in relation to the circumstantial facts and particularly where the applicants in this matter did not use and occupy the subject property as their principal place of residence at either 31 December 2005 or 31 December 2006 or at all until April 2007. Clause 2(2)(b) of Schedule 1A LTMA had been considered in Aldridge in the context of Section 3(3)(b) of LTMA as it was at the time of Aldridge at paragraph 26 where the following comment was made:

“ Section 3(3)(b) of the Act does not confer a true discretion on the Chief Commissioner. If the evidence of the factual circumstances supports that a particular parcel of land or a flat is used and occupied by a person as the person’s principal place of residence (as defined in Section 3(1) of the Act) as at midnight on 31 December in a particular year, the Chief Commissioner must be ‘satisfied’ of that fact. If the factual circumstances do not support that a particular parcel of land or a flat is used and occupied by a person as the person’s principal place of residence as at 31 December in a particular year, the Chief Commissioner cannot be ‘satisfied’ of that fact. (emphasis in original) ”

24 The respondent’s representative submitted that there is no provision within the LTMA which allows the respondent to exercise a discretion based on the unfortunate circumstances surrounding the applicant representative’s health problems.

25 The respondent’s representative submitted that the market rate of interest had been imposed pursuant to Section 12 LTMA and this interest imposition continued up until such time as the land tax was paid. The respondent did not impose the premium rate of interest as the Chief Commissioner considered in the circumstances that Chief Commissioner’s discretion should be exercised to remit the premium component in this instance.

26 The respondent’s representative submitted that notwithstanding the respondent’s discretion to remit the market rate component of interest that it should not be remitted as this would devalue the amount payable by the applicants and this would discriminate unfairly against taxpayers who had met their obligation to pay the land tax on time and that the comment in Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor [2004] NSWADTAP 19 (“Incise”) where at paragraph 60 the comment made is applicable:

“ 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. ”

That accordingly as the respondent had not contributed to the default and that in view of the comment made concerning the devaluation of the amount payable by the taxpayer being discriminatory against other taxpayers that this discretion should not be exercised in these circumstances. They are not exceptional circumstances.

Decision

27 The applicants relied on lack of knowledge of the imposition of land tax notwithstanding that they were assisted by a solicitor and an accountant. They did not move into the subject property prior to 31 December 2005 and therefore they did not come within the requirements of Schedule 1A Part 2 to allow them to claim the exemption pursuant to Section 10(r) of LTMA. The applicants were not using and occupying the subject property as their principal place of residence as at that date.

28 The applicant representative suffered a heart attack on 24 October 2006 and deferred the decision to move into the subject property due to his health difficulties. The applicants moved into the subject property on 1 April 2007. The applicants had the assistance of an accountant. The intention of the applicants to move into the subject property where that intention had been in existence prior to 31 December 2005 and immediately prior to the heart attack suffered by the applicant representative on 25 October 2006 is insufficient to permit the applicants to claim the exemption

29 There is no dispute that the subject property was rented between the period of 22 July 2005 and 20 February 2007.

30 The applicants entered into a residential tenancy agreement which permitted occupation of the subject property from 12 August 2006 to 19 February 2007. As at 31 December 2006 the applicants were not in occupation and using the subject property and the subject property was tenanted for the period through to 9 February 2007.

31 The subjective intention of the applicants as submitted by the applicant representative is not supported by the documentation of the residential tenancy agreements and even if they held that subjective intention it was insufficient to attract the benefit of the exemption provided pursuant Schedule 1A Part 2(2) and Section 10(r) of LTMA. The subjective intention as considered in Zakariya, Ferrington, McIlroy and Tobin is applicable and it is insufficient to exempt the applicants from the liability to pay land tax.

32 The unfortunate circumstances of the applicant representative’s health is not a matter which would attract a discretion that could be exercised by the respondent.

33 The respondent has imposed a market rate component of interest and this is consistent with the relevant principles governing the imposition and remission of market interest as considered in Incise.

34 Once again as commented, whilst unfortunate, the state of the applicant representative’s health does not provide exceptional circumstances to justify a remission of market rate interest.

35 As at 31 December 2006 the applicants were not in occupation of the subject property and were not using the subject property as their principal place of residence. The subject property continued to be let to tenants as at that date and continuing until 19 February 2007.

36 For the above reasons the following Orders are made.

Orders

1. The decision of the Chief Commissioner of State Revenue to assess the subject property as liable for land tax in respect of the land tax years 2006 and 2007 is affirmed.

2. The decision of the Chief Commissioner of State Revenue to impose market rate interest is correct and is affirmed.