Tulloch v Chief Commissioner of State Revenue

[2007] NSWADT 5

CITATION:	Tulloch v Chief Commissioner of State Revenue [2007] NSWADT 5
DIVISION:	Revenue Division
PARTIES:	APPLICANTS William Paul Tulloch, Melanie Susan Tulloch RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	066091
HEARING DATES:	19/12/2006
SUBMISSIONS CLOSED:	19 December 2006
DATE OF DECISION:	9 January 2007
BEFORE:	Block J - ADCJ (Judicial Member)
CATCHWORDS:	Land tax exemption - principal place of residence
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Land Tax Management Act 1956
CASES CITED:	Chief Commissioner of State Revenue v Aldridge & Anor [2003] NSWADTAP 50 Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68
REPRESENTATION:	APPLICANT In person RESPONDENT I Latham, Barrister
ORDERS:	The decision under review is affirmed

1 The decision under review is the disallowance by the Respondent of an objection by the Applicants against an assessment of land tax referable to residential real property situated in Clontarf, Sydney ("the Property”) in respect of the 2004 and 2005 land tax years ("the relevant years").

2 The Tribunal had before it the documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997; it also received a statement by the Applicants and written submissions by the Respondent.

3 Some of the documents before the Tribunal might indicate that there is only one Applicant and being William Paul Tulloch. Any possible difficulty in this context was resolved on the basis that, with the consent of Mr Latham, Melanie Susan Tulloch was, insofar as might have been necessary, joined as an applicant; the Applicants are joint owners of the Property.

4 There is in fact no dispute of fact between the parties and there was thus no need for oral evidence. Clauses 2, 3 and 4 of the Respondent’s submissions (and the Applicants do not dispute the factual content of those clauses) can conveniently be quoted in these reasons; they read as follows:

2. It is alleged by the Applicant that:
(i) the Property in question was purchased in 29 August 2003

(ii) a Development Application was submitted in September 2003

(iii) the house was rented to tenants in or about September 2003

(iv) a contract was entered into on 19 July 2005 to demolish the house

(v) a further contract reached on 23 December 2005 to conduct building work.

3: A search of the Rental Bond Board indicates that the tenants had their rental bond refunded on 13 April 2005.

4. It is said by the Applicant that delays in the approval process have caused a delay beyond their control. In their submission, an exemption should be granted. This submission should be rejected for the reasons below. It is totally misconceived.

5 Mr Tulloch agreed in particular that the Applicants acquired the Property on 29 August 2003; the term "acquired" in this context means that completion took place on 29 August 2003.

6 During the period from September 2003 on till April 2005, the Property was leased to tenants; there were in all three separate tenants and there were gaps of short duration between the terminations and commencements of the relevant leases; the gaps in question amounted, according to Mr Tulloch, to about two months altogether.

7 Mr Tulloch informed the Tribunal that all of the contracts with tenants of the properties were leases in the sense that the tenants were entitled to sole occupation of the Property, (and paying rentals of between $600 and $700 per week). The decision in Flaracos v Chief Commissioner of State Revenue [2003] NSWSC 68 is relevant but not directly in point.

8 Mr Tulloch contended that when the Property was acquired the law as regards the principal place of residence exemption was governed by section 10T of the Land Tax Management Act 1956 (“ the Act”) and that the Applicants were entitled to claim a principal place of residence (“PPR”) exemption in respect of the relevant years in accordance with the provisions of that section. In fact, and with effect from the 31st of December 2003 and in accordance with the State Revenue Legislation Further Amendment Act 2003 the relevant law was, in respect of the relevant years (and thereafter) contained (to the exclusion of section 10T) in Schedule 1A to the Act ("the Schedule"), which provides as follows:

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

(1) An owner of unoccupied land is entitled to claim the land as his or her principal place of residence, if the owner intends to use and occupy the land solely as his or her principal place of residence. In such a case, the owner is taken, for the purpose of the principal place of residence exemption, to use and occupy the unoccupied land as his or her principal place of residence.

Note: It is an offence under section 55 of the Taxation Administration Act 1996 to make a statement to a tax officer, or give information to a tax officer, orally or in writing, knowing that it is false or misleading in a material particular.

(2) This clause does not apply unless:

(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 the owner of the unoccupied land demonstrates 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 owns land outside New South Wales that is the principal place of residence of the person or a member of the person’s family (within the meaning of clause 12), 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.

9 The Respondent submitted that the applicable test requires a number of steps identified by him in clause 7 of his submissions as follows:

7. It is submitted that the test has a number of separate steps being:

(i) that there be an exemption if the owner intends to use and occupy the land as his sole principal place of residence (sub section 1)

(ii) the exemption does not apply unless the land is unoccupied at the relevant date 31st December (sub section 2)

(iii) If the above steps are satisfied, it is necessary to show the following for the period to be extended:

(a) there is delay in commencement

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

10 The crux of this case turns quite simply on whether or not and in respect of the relevant years, the Property was unoccupied. It was not, given that it was leased to tenants from September 2003 until April 2005. It was not until July 2005 that the prior residence on the Property was demolished; a new residence will according to Mr Tulloch be completed shortly.

11 The commencing point must be clause 6(1) of the Schedule which in its terms relates to unoccupied land; the Property was not in respect of the relevant years unoccupied land.

12 Clause 6(3) of the Schedule makes it clear than in any event the concession provided by clause 6 can, under clause 6(3)(a) apply only for the two tax years following the year in which the land was acquired, or (and alternatively) under clause 6(3)(b) if it was used and occupied by someone other than the owner for that period of two years, following commencement of construction of the buildings required to facilitate its use by the owners. Of these two alternatives the second is not relevant because the relevant years are those to which clause 6(3)(a) applies.

13 The Respondent has a discretionary power under clause 6(4) of the Schedule but only in the case of unoccupied land and, and as I have said, in respect of the relevant years, (and which are the only years with which the Tribunal is concerned) the Property was not unoccupied land. That discretionary power is thus in this case not applicable.

14 The relevant years in this case are, as previously noted, the period of two tax years which are referred to in clause 6(3)(a) of the Schedule. In respect of the relevant years, the Applicants were not on the relevant taxing dates and being 31 December 2003 and 31st of December 2004 respectively, both the owners of the Property and entitled to occupy it. See in this regard Chief Commissioner of State Revenue v Aldridge & Anor [2003] NSWADTAP 50 at paragraph 20 reading as follows:

20 In this case, there was no evidence that the lease granted by the Respondents was not a lease with exclusive possession given to the tenants. Absent evidence to the contrary, the lease of the subject Property was a lease and not a licence. As such, absent evidence to the contrary, the subject Property was not capable of being occupied by the Respondents during the term of the lease since the Respondents had given a right to exclusive occupation to the tenants under the lease. The fact that the Respondents regarded the Croydon Property as their principal place of residence is not sufficient to bring the Property within Section 10(1)(r) if the Respondents did not retain the right to possession and control of possession of the Property at the relevant time.

15 It is not necessary to incorporate the prior section 10T of the Act in these reasons, but it is perhaps relevant to note that its provisions were, as regards the PPR exemption in question less generous than those contained in clause 6 of the Schedule.

16 It follows then that this application cannot succeed (and the Respondent has correctly contended that it was misconceived) accordingly the decision under review must be affirmed.