Tuck v Chief Commissioner of State Revenue

[2005] NSWADT 196

CITATION:	Tuck v Chief Commissioner of State Revenue [2005] NSWADT 196
DIVISION:	Revenue Division
PARTIES:	APPLICANT Philllip John Tuck and Nicola Tuck RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	056045
HEARING DATES:	09/08/2005
SUBMISSIONS CLOSED:	08/09/2005
DATE OF DECISION:	08/09/2005
BEFORE:	O'Connor K - DCJ (President)
APPLICATION:	Land tax exemption - principal place of residence
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Land Tax Management Act 1956 Strata Schemes (Freehold Development) Act 1973
CASES CITED:
REPRESENTATION:	APPLICANT In person RESPONDENT S Free, solicitor, Crown Solicitor's Office
ORDERS:	Decision under reveiw affirmed

REASONS FOR DECISION

1 The applicants, a married couple, have applied for review of a decision of the respondent (the Commissioner), disallowing their objection to a land tax assessment. They were assessed as required to pay land tax on a vacant block of land at Warrawee purchased by them on 26 February 2003. It was later sold vacant, with settlement taking place on 31 January 2005. The applicants have paid under protest the amount of the Commissioner’s assessment.

2 In their view they should not be required to pay the tax as it fell within the scope of the exemption in respect of a ‘principal place of residence’. The relevant legislation is the Land Tax Management Act 1956 (LT Management Act).

3 The husband, Mr Tuck, appeared at the hearing and explained the circumstances that had led the couple ultimately not to proceed with the building of the home, and instead sell the land. Their 12 year old son had been found to have a chronic condition known as Type 1 diabetes. This condition, he said, needs very careful and regular management; including injections at least twice a day and constant monitoring. The couple decided that it was impractical to proceed with their dream of building a new home and moving from Beecroft to Warrawee. They decided to leave their son at the same school and it was better to remain in Beecroft as it was closer to the Westmead Hospital, which their son needed to attend for medical attention on a regular basis. The school was also near Westmead.

4 The Commissioner accepted that the applicants had genuinely intended to build a new home on the land at Warrawee, and accepted the applicants’ evidence of the many steps that had taken preliminary to proceeding with the project (council applications, consultation with architects, obtaining building quotes and the like).

5 The difficulty, in the view of the Commissioner, is that legislation requires in such cases that the owner actually take up residence on the land as his or her principal place of residence. That never occurred in this case, accordingly the exemption is lost. At the times relevant to this matter there was no relief discretion provided in the legislation to enable the Commissioner to dispense the owner from paying the tax in cases where there were exceptional circumstances that had led to the owner never taking up occupation of the land as his or her principal place of residence.

6 In brief oral reasons given at the conclusion of the hearing, the Tribunal indicated its sympathy for the circumstances that had led the applicants not to take up occupation of the land, but held that, in its view, the submissions of the Commissioner were correct; the rules laid down by the legislation as they went to this matter were inflexible ones; and it was necessary to take up residence on the land in order to retain the exemption. Accordingly the notices issued by the Commissioner for payment of land tax for the years 2004 and 2005 were valid, and they were liable to pay the amount of the assessment.

7 These reasons set out more fully the relevant law.

The Legislation

8 Pursuant to s 7 and s 8 of the LT Management Act, unless exempt, land tax was chargeable on the property for the 2004 and 2005 Tax Years based on the ownership of that land as at midnight on 31 December 2003 and 31 December 2004, respectively.

9 Section 10 of the LT Management Act provides, and provided at the relevant times:

‘ 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 Schedule 1A of the LT Management Act provides, and provided at the relevant times:

‘ Schedule 1A Principal place of residence exemption

Part 1 Preliminary

1 Definitions

(1) In this Schedule:

principal place of residence exemption—see clause 2.

residential land—see clause 3.

taxing date—means midnight on the thirty-first day of December.

(2) For the purposes of this Schedule, a reference to the owner of land includes, if there are joint owners, any one or more of those joint owners.

Part 2 Principal place of residence exemption

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 on 1 January 2004 or any succeeding year, if:

(a) the land has a land value in respect of the year of less than the premium tax threshold, and

(b) the land is:

(i) a parcel of residential land, or

(ii) a lot under the Strata Schemes (Freehold Development) Act 1973 or a lot under the Strata Schemes (Leasehold Development) Act 1986.

…

6 Concession for unoccupied land intended to be owner’s principal place of residence

(1) If the Chief Commissioner is satisfied that the owner of unoccupied land intends to use and occupy the land solely as his or her principal place of residence, the owner is taken, for the purposes of the principal place of residence exemption, to use and occupy that land as his or her principal place of residence.

(2) This clause does not apply unless the Chief Commissioner is satisfied that:

(a) the land is unoccupied because the owner intends to carry out, or is carrying out, building or other works necessary to facilitate his or her intended use and occupation of the land as a principal place of residence, and

(b) if those building or other works have physically commenced on the land, no income has been derived from the use and occupation of the land since that commencement, and

(c) the intended use and occupation of the land is not unlawful.

(3) This clause applies in respect of the assessment of a person’s ownership of land only in the period of:

(a) 2 tax years immediately following the year in which the person became owner of the land, or

(b) if the land is used and occupied for residential purposes by a person other than the owner at any time after the person became owner, 2 tax years immediately following the tax year in which the building or other works necessary to facilitate the owner’s intended use and occupation of the land are physically commenced on the land.

(4) The Chief Commissioner may extend the period in which this clause applies if satisfied that:

(a) there is a delay in the completion or, in a case referred to in subclause (3) (b), the commencement of the building or other works necessary to facilitate the owner’s intended use and occupation of the land, and

(b) the delay is due primarily to reasons beyond the control of the owner.

(5) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person’s ownership of the land and to continue to so use and occupy the land for at least 6 months.

(6) The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the land in respect of any tax year to which, but for the revocation, it would have applied. Land tax liability is to be assessed or reassessed accordingly.

(7) This clause does not apply in respect of land owned by a person if:

(a) the person or any member of the person’s family (within the meaning of clause 12) is entitled to have his or her actual use and occupation of other land taken into account under section 9C or under this Schedule, or

(b) the person or any joint owner of the land owns land outside New South Wales that is the principal place of residence of the person or joint owner, or

(c) the land, or the land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it.

(8) For the purposes of this clause:

unoccupied land means land that is not being used or occupied for any purpose.’

Effect of Clause 6, Schedule 1A

11 As Mr Free for the Commissioner noted in his submissions, this application for review turns on the application of cl 6 of Sch. 1A of the LT Management Act. Clause 6 deems the Principal Place of Residence (PPR) exemption to apply to land that is unoccupied but which it is intended will be the owner’s principal place of residence, provided certain conditions are satisfied. The circumstances did satisfy the requirements of sub-sections (1), (2) and (3) of s 6. The difficulty in this case has to do with sub-sections (5) and (6). Sub-section (5), to reiterate, provides:

‘(5) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person’s ownership of the land and to continue to so use and occupy the land for at least 6 months.’

12 As Mr Free submitted, the effect of cl 6(5) is to impose a positive obligation that a person must in fact actually use and occupy the land as his or her principal place of residence (and continue to do so for at least 6 months) by the end of the period in which cl 6 applies (in this case, by the end of the 2005 Tax Year).

13 If such actual use and occupation does not occur within the relevant time period, then cl 6(5) provides that the PPR exemption is revoked. Sub-clause 6(6) makes clear that the effect of the revocation under cl 6(5) is that the PPR exemption is taken not to have applied to the land in respect of any tax year to which, but for the revocation, it would have applied. It is also specifically stated that land tax liability is to be assessed or reassessed accordingly.

14 As Mr Free submitted, in this case it was not necessary, as might ordinarily be the case, to wait until the end of the 2005 Tax Year to determine if the applicants had satisfied the positive obligation in cl 6(5). Rather, it was clear from the time the property was sold that the Tucks would not satisfy the obligation.

15 In these circumstances the clear effect of cll. 6(5) and 6(6) is that the PPR exemption is revoked and is taken not to have applied in respect of any tax year to which, but for the revocation, it would have applied (the 2004 and 2005 Tax Years).

Order

Decision under review affirmed.