Truscott v Chief Commissioner of State Revenue

[2009] NSWADT 303

CITATION:	Truscott v Chief Commissioner of State Revenue [2009] NSWADT 303
DIVISION:	Revenue Division
PARTIES:	APPLICANT Herbert Wallace Truscott RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	096051
HEARING DATES:	8 October 2009
SUBMISSIONS CLOSED:	8 October 2009
DATE OF DECISION:	7 December 2009
BEFORE:	Hole M - Judicial Member
CATCHWORDS:	Principal place of residence, separately owned strata units
LEGISLATION CITED:	Land Tax Management Act 1956 State Revenue Legislation Amendment Bill 2008
CASES CITED:	Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305 Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160 Chief Commissioner of State Revenue v Ferrington (GD) (2004) NSWADTAP 41 Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 Chief Commissioner of State Revenue v Timbs (RD) [2006] NSWADTAP 25
REPRESENTATION:	APPLICANT D Ash, barrister RESPONDENT S Kaur-Bains, barrister
ORDERS:	The decision of the Chief Commissioner of State Revenue made on 9 December 2008 is affirmed.

REASONS FOR DECISION

1 The applicant has brought this application in respect of the decision of the respondent made on 9 December 2008. The respondent issued a Land Tax Notice of Assessment on 19 December 2008 in respect of three properties being Unit 1 (“the subject property”), Unit 36 (“the car space”) and a property in Ballina for the tax years 2004, 2005, 2006 and 2007.

Facts

2 The applicant and his wife lived in a large home in the suburbs up to 1986. This home was sold and the applicant’s wife purchased Unit 2 (in the same strata scheme as the subject property). Unit 2 is a 2 bedroom unit and is considerably smaller than the applicant’s previous home.

3 The applicant’s wife suffers from sleep apnoea and needs to be connected to a machine with a humidifier and lung support to sleep.

4 It became apparent to the applicant and his wife that Unit 2 was too small to accommodate their necessary sleeping arrangements or to allow them to entertain their family and friends including the members of the family sleeping over.

5 In August 1988 the applicant purchased the subject property which has 3 bedrooms to allow expansion into that area. The units have a common wall and it was thought that they could be joined by a common entry through that wall.

6 Following purchase of the subject property the applicant indicated that he had approached the Owners Corporation for permission to put an entry between the common walls and that this had been refused as the engineers indicated that the wall was a load bearing wall. The applicant did not provide any independent evidence of the refusal.

7 The applicant attested by affidavit that when the Owners Corporation refused permission to put an entry between the common walls of Units 1 and 2 that he and his wife then proceeded to make extensive alterations to the internal furnishings of the two units to the effect that they were matching insofar as carpet was concerned and other furnishings. The entry way to each of the units was configured in such a way that it was possible to place two interlocking doors across the end of the hallway, which was common property, and thus common entry was available by matching locks to each of the units. When Unit 2 was sold this common entranceway was removed.

8 The divider between the balconies at the time of purchase of the second unit was a substantial divider and could not be seen through, it was constructed of opaque glass and metal. This divider was replaced with a divider which had an open doorway in it with a step over the base of the doorway to allow ease of access between the two units, the divider was clear and could be seen through. Various services were connected to the subject property on its own such as Foxtel and other installations were made to Unit 2 separately. Matching bedroom suites were installed in each of the units.

9 The applicant attested by affidavit that he lived in the subject property equally as he lived in Unit 2, that the subject property was the formal entertainment unit and that when the applicant and his wife were on their own they would dine in Unit 2. He attested that they used Unit 2 as much as they used the subject property and that he and his wife considered that Unit 2 was part of their home in conjunction with the subject property and was their principal place of residence.

Applicable Legislation

10 Clause 2 Schedule 1A of the Land Tax Management Act 1956 (“LTMA”) and Clauses 12(1), 12(2) 12(6) and 12(8) of Schedule 1A LTMA specifically apply to the situation.

Applicant’s Submissions

11 The applicant’s representative provided comprehensive written submissions and two affidavits were filed on behalf of the applicant by the applicant setting out the living arrangements and the alterations that had been made to the units.

12 The applicant’s representative submitted that the subject property together with Unit 2 is one place of residence and the two units were used together by the applicant and his wife as the applicant’s principal place of residence together with his wife. In accordance with the definition of owner provided in Section 3(1) of LTMA the applicant was eligible for an exemption as the principal place of residence, provided that he discharges the onus of proof that both units were used as his principal place of residence and satisfied the other requirements of LTMA and the relevant case law in particular Ryan v Commissioner of Land Tax [1982] 1 NSWLR 305 (“Ryan”).

13 Clause 2(2) of Schedule 1A of LTMA provides that:

(a) “the land, and no other land, has been continuously used and occupied …”.

The reference to no other land does not mean additional land rather it means “separate and different”. On this basis that because the applicant only owned part and not the other lot then it was not an ownership by him of separate and different land it was additional to the land owned by his wife.

14 The applicant’s representative drew attention to Chuang v Chief Commissioner of State Revenue [2009] NSWADT 160 (Chuang”) wherein consideration was given to the onus placed on the applicant to provide evidence that the particular property was the principal place of residence and if that onus was discharged then the exemption applied. Further that in Chief Commissioner of State Revenue v Ferrington (GD) (2004) NSWADTAP 41 (“Ferrington”) the appeal panel referred to the manner in which an applicant must occupy the home as his or her principal place of residence and that the applicant in this matter occupied the subject property together with Unit 2 as his principal place of residence in a manner sufficient to satisfy the test in Ferrington.

15 The applicant had discharged the onus of proving that the occupation of the subject property together with Unit 2 had been used as his principal place of residence together.

16 The applicant’s representative referred to Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 (“Paspaley”) wherein reference was made to two persons jointly owning two houses on two parcels of land where each person had his or her principal place of residence in a different home from the other. That if the two persons are members of the same family then they would only be able to claim one principal place of residence and could elect which of the two residences that could be assessed for land tax.

17 The applicant’s representative noted that the onus was on the applicant to provide sufficient evidence of the use and occupation of the subject property as his principal place of residence and to satisfy the other requirements to allow any exemption to be applied. The representative noted that Clause 12(1) provides the exemption and that then Clause 12(2) removes the exemption. That the purpose of Clause 12 is that if you own two properties you cannot get the benefit of the exemption for both except where the two properties make up two separate parcels of one residence.

18 The applicant’s representative submitted that both the applicant and his wife are occupying both of the Units 1 (the subject property) and 2 as husband and wife.

19 The applicant’s representative submitted that there is only one principal place of residence comprised of two parts and that accordingly this is not inconsistent with the provisions of Clause 12 of Schedule 1A. That the subject property and Unit 2 are two parts of the one principal place of residence and that the facts disclose that the applicant and his wife live in both together and that it is only one principal place of residence. That Clause 12 Schedule 1A addresses the mischief disclosed in Paspaley. The applicant and his wife did occupy the subject property and Unit 2 and used those two together for the purposes of their living arrangements.

Respondent’s Submissions

20 The respondent’s representative drew attention to Schedule 1A Clause 12(6) and that the applicant and his wife were a family.

21 Clause 12(2) Schedule 1A provides that only one principal place of residence may be claimed by a family where the family consists of the person and his or her spouse. In this matter the applicant owns the subject property and his wife owns Unit 2. The question then is whether Clause 12(6)(a) Schedule 1A applies in that a person and his or her spouse constitutes a family and that then Clause 12(8) Schedule 1A must be then considered. Unless there is an exemption available within Clause 12(8) then Clause 12(2) will apply. In this matter the applicant and his wife are legally married and are cohabitating with each other therefore there is no exemption pursuant to Clause 12(8) which would allow Clause 12(1) and (2) to not apply.

22 The respondent’s representative drew attention to the Explanatory Note in respect of the State Revenue Legislation Amendment Bill 2008 (“the Bill”) which amended the provisions of the LTMA. That Note referred to the amendment of the LTMA to “Clarify the application for principal place of residence exemption to land comprised of two or more lots or strata lots, …”. Further that the Explanatory Note refers to the principal place of residence exemption in that Schedule 4(15) of the Bill clarifies the application for principal place of residence exemption to land comprised of two or more lots or two or more strata lots. In order to qualify for the exemption:

(a) the lots must be adjoining or, in the case of strata lots, must have adjoining walls or floors, and
(b) the lots must be owned by the same person or, if any of the lots are jointly owned, the lots must all be jointly owned by the same persons, and
(c) the lots must be the site of, or comprise, a single residence.

23 The respondent’s representative drew attention to the Second Reading Speech in respect of the Bill and to the comment made by the Parliamentary Secretary incorporated into Hansard:

“I turn now to amendments to the Land Tax Management Act.

A land tax exemption currently applies to land used and occupied as the principal place of residence of one or more owners provided all of the owners are natural persons.

The exemption can apply to two or more parcels of land or two or more strata units provided the land is not physically separated and is owned by the same person or the same joint owners.

If these criteria are satisfied eligibility for the exemption should be determined by the owner’s use of the property as a single residence regardless of the number of lots.

This “sole use and occupation” test was confirmed in the Supreme Court by what is known as Ryan’s case. However several recent decisions of the Administrative Decisions Tribunal and the Supreme Court have highlighted the possibility of inconsistent interpretation of these tests.

To remove any ambiguity the amendments spell out and define the principles adopted in Ryan’s case.

The amendments provide that where there are separate buildings located on separate lots and the buildings are separately occupied or are capable of separate occupation the exemption will only apply to one of the lots.

This is consistent with the principles under the Valuation of land Act which identify when two or more parcels of land can be valued as one parcel.

In the case of two or more strata lots the exemption will only apply to all of the lots if there is internal access between the lots allowing use as one residence except for lots used for an ancillary purpose such as a garage or storage area.”

24 The respondent’s representative drew attention to Chief Commissioner of State Revenue v Timbs (RD) [2006] NSWADTAP 25 (“Timbs”). In that particular case both units were owned by the one owner. In this matter each of the units is owned separately by different owners.

25 Reference was made to Ryan’s case and the four unitities of unity of use, occupation title. In this particular matter there is no unity of title as each of the units are owned by different owners and undivided by physical separation.

26 The respondent’s representative drew attention to Chuang wherein there was discussion as to what constitutes a principal place of residence. However in this particular matter the question of which was the principal place of residence must be considered and the applicant, being the owner of the subject property, was using that unit and the applicant’s wife was using Unit 2 as the principal place of residence and therefore it is not possible to say that both units become the principal place of residence of the applicant and his wife as Clause 12(6) of Schedule 1A applies and therefore as the applicant and his wife constitute a family then Clause 12(1) will apply. Consequently the applicant and his wife being members of the same family may only claim one place of residence as the principal place of residence.

Reasons for decision

27 Unit 2 was owned by the applicant’s wife and the subject property was owned by the applicant. They were not joint owners.

28 As the units were separately owned it is not necessary to consider the evidence of use and occupation of the units. The evidence of use and occupation of the units did disclose some common usage and occupation although for the purposes of Clause 12 Schedule 1A this did not have any bearing on the application for exemption.

29 Evidence was provided by the applicant to show that there had been attempts made to remove physical separations between the units to allow them both to be used for the purposes of the applicant and his wife. However once again as the units were separately owned the test as set in Ryan that the contiguous units could not satisfy that test unless they were undivided not only by physical separation but also in use, occupation and title.

Orders

1. The decision of the Chief Commissioner of State Revenue made on 9 December 2008 is affirmed.