Turbott v Chief Commissioner of State Revenue
[2007] NSWADT 274
•27 November 2007
CITATION: Turbott v Chief Commissioner of State Revenue [2007] NSWADT 274 DIVISION: Revenue Division PARTIES: FIRST APPLICANT
RESPONDENT
Michael John Turbott
SECOND APPLICANT
Kathleen Marie Turbott
Chief Commissioner of State RevenueFILE NUMBER: 076097 HEARING DATES: 9 November 2007 SUBMISSIONS CLOSED: 9 November 2007
DATE OF DECISION:
27 November 2007BEFORE: Handley R - Judicial Member CATCHWORDS: Land tax exemption - principal place of residence MATTER FOR DECISION: Principal matter LEGISLATION CITED: Environmental Planning and Assessment Act 1979
Land Tax Management Act 1956
Local Government Act 1993
State Revenue Legislation Further Amendment Act 2003CASES CITED: Pearse v Chief Commissioner of State Revenue [2007] NSWADT 14
Reuman v Chief Commissioner of State Revenue [2004] NSWADT 96REPRESENTATION: APPLICANTS
H El-Hage, solicitor
M TurbottORDERS: The decision under review is affirmed.
REASONS FOR DECISION
1 On 23 July 2007, Michael Turbott filed an application with the Tribunal for the review of a decision of the Chief Commissioner of State Revenue (‘the Respondent’), disallowing his objection to a notice assessing Mr Turbott and his wife, Kathleen Turbott, (‘the Applicants’) as being liable for the payment of Land Tax on their property in Kangaroo Valley. Mrs Turbott was added as an applicant in these proceedings by order of the Tribunal on 31 August 2007.
Background
2 On 15 December 2000, the Applicants settled on the purchase of two blocks of adjoining vacant land in Kangaroo Valley: Lot 2 comprising 3.952 hectares, and Lot 3 comprising 4.828 hectares. In July 2001, Shoalhaven City Council granted the Applicants development consent for the construction of a new dwelling on Lot 3. However, due to personal circumstances, the Applicants did not go ahead with the construction and the development consent expired. The Applicants still propose to build a dwelling on the property.
3 The Applicants do not own any other land. Due to Mr Turbott’s work commitments, they rent a two bedroom unit at Cremorne Point where they stay on most weeknights. They maintain a postal address and telephone landline for this unit, which is their registered address for the purposes of the NSW Electoral Roll. The unit is also their nominated address for their driving licences issued by the NSW Road Traffic Authority (‘RTA’).
4 The Applicants spend most weekends and holidays at their Kangaroo Valley property, where they have set up a camp comprising a refurbished shipping container for secure storage and water collection, for which there is an adjacent water tank, together with tent accommodation, a camp kitchen and bathroom facilities. The Applicants also have a dam fed water supply for fire protection, a generator for electricity, and a gas water heater. They use mobile phones on the property, coverage being good. They maintain insurance for the property, are on the waiting list for a Post Office Box at the Kangaroo Valley Post Office, and are members of the Kangaroo Valley Golf Club, Bowling Club, and Kangaroo Valley Arts Festival Inc. Kangaroo Valley Security patrol the property when the Applicants are not present.
5 On 25 October 2005, the Applicants lodged a Land Tax Questionnaire in which they stated that the Kangaroo Valley “property is unoccupied, however we intend to build our principal residence at a future date”. On 16 November 2005, the Respondent issued a Land Tax Notice of Assessment for the 2003, 2004 and 2005 Land Tax years requiring payment of Land Tax totalling $13,624.23 (including interest) in respect of the property. The Applicants paid this sum in three instalments on 19 December 2005, 25 January 2006, and 27 February 2006.
6 By letter dated 23 December 2005, the Applicants lodged an objection to the Respondent’s assessment, stating they did not complete the Land Tax Questionnaire correctly, and claiming that they occupied the property as their principal place of residence. By letter dated 6 February 2007, the Respondent noted that because the property was vacant land, a Land Tax concession had been applied for the 2001 and 2002 Land Tax years, and requesting further information in relation to the Applicants’ claim that the property was occupied as their principal place of residence as at 31 December 2002, 2003 and 2004, in respect of the Land Tax years 2003, 2004 and 2005 respectively.
7 The Applicants responded by letter dated 17 March 2007, providing further information. On 22 May 2007, the Respondent disallowed the Applicants’ objection to the assessment. In Mr Turbott’s appeal to the Tribunal filed on 23 July 2007, he stated that Land Tax policy should recognise the eligibility of “non-traditional permanent dwellings such as that located at our property” for Land Tax exemption.
The Relevant Legislation
8 Pursuant to sections 7, 8 and 9 of the Land Tax Management Act 1956 (‘the LTM Act’), Land Tax was chargeable on the taxable value of the Kangaroo Valley land based on the ownership of the land as at midnight on the 31 December of each year. Thus, the Applicants were presumed to be liable for Land Tax on their land for the 2003, 2004 and 2005 Land Tax years based on their ownership of the land on 31 December 2002, 2003 and 2004, respectively, unless the land was exempted from tax. For the Land Tax year 2003, section 10(1)(r) of the LTM Act provided, relevantly, an exemption in respect of land:
9 Section 10(1D) stated:
“that is used and occupied as the principal place of residence of the owner of the land (or, if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose ... being:
(i) ...
(ii) a parcel of residential land, or
(iii) ...”
10 ‘Principal place of residence’ was defined in section 3(1):
“In paragraph (r) of subsection (1) residential land means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes: ...”
11 Section 3(3) stated:
“ principal place of residence of a person means the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person.”
12 The State Revenue Legislation Further Amendment Act 2003 amended the LTM Act, including the transfer of the substantive provisions in sections 3(3) and 10(1)(r) to a new Schedule 1A, which provided as follows:
“For the purposes of this Act, in respect of any year in respect of which taxation is leviable or payable, land or a flat is not used or occupied as the principal place of residence of the person unless:
(a) that land or flat and no other land or flat has, since before the first day of July that last preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for no other purpose, or
(b) in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person’s principal place of residence.”
“Part 1 Preliminary
1 Definitions
(1) In this Schedule:
(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.
principal place of residence exemption —see clause 2.
residential land—see clause 3.
taxing date—means midnight on the thirty-first day of December.
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 a parcel of residential land, or
(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 .
(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.
(3) If the owner of land is entitled to the exemption conferred by this clause, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner’s entitlement to the exemption.(4) The exemption conferred by this clause is referred to as the principal place of residence exemption.
13 Other minor subsequent amendments are not relevant for present purposes.
3 Residential land—meaning
(1) In this Schedule, residential land means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes, other than a building or buildings:
(a) comprised of lots within a strata plan or residential units, or
(b) containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner, or
(c) from any part of which income is derived.
(2) Land does not cease to be used and occupied as provided by subclause (1) by reason of there being on that land any building or improvement that is used or occupied for a purpose ancillary to the purposes for which the building is, or the buildings are, designed, constructed or adapted.
Note. Clause 4 allows one residential occupancy to be disregarded in applying the principal place of residence exemption. Clause 5 allows the use of land for purposes ancillary to a business conducted at a different place to be disregarded in certain circumstances.”
The Applicants’ Case
14 Mr Turbott said he and his wife drive down to Kangaroo Valley every Friday afternoon returning on Sunday or sometimes on Monday morning. He estimated that they spend at least 30% of their time, if not more, at their property, including holidays. They are involved in the local community and are members of the Golf and Bowling Clubs, and the Kangaroo Valley Arts Festival Inc, and have developed a wide circle of friends locally. They regard the property as their permanent home – it is not an investment property.
15 The Applicants have established a permanent site on the property comprising a converted shipping container for storage, over which a roof has been built to collect water, together with two heavy duty tents on wooden platforms, a bush kitchen and bathroom facilities, which are permanently in place. Additional tents and other equipment are kept in the container for use as needed. Electricity and telephone lines can be accessed on the property but the Applicants are currently using a generator for electricity and mobile phone coverage for the property is good. Mr Turbott sometimes works with a laptop computer there. Town water is not available, hence the need to collect rainwater.
16 Mr Turbott said he has established a small citrus garden and cleared a lot of trees from the second block. He and his wife are having discussions with a builder and hope to start building a house there next year. They will reapply for development consent. When they are not present at the property, they have a contract with Kangaroo Valley Security to patrol the property. They also maintain “Farm Pak Insurance” for the property.
17 Mr Turbott is the Managing Director of company developing technology for processing mineral sands. The company is based in Sydney but is building a plant in Newcastle. Mr Turbott needs to be in Sydney during the week for his work, although he commonly spends one or two days in Newcastle. He and his wife rent a two bedroom unit in Cremorne Point where they live during the week. They use this as their postal address, have a telephone connected there, and this is the address against which they are registered on the electoral roll and for the purposes of the RTA. Mr Turbott said they have been on the waiting list for a Post Office Box at the Kangaroo Valley Post Office, which has only limited opening hours, for six years.
18 Mr Turbott said the first Land Tax Questionnaire lodged on 25 October 2005, on which they declared the land was unoccupied, was completed by their financial adviser. Mr Turbott said they did not realise the implications of the declaration and should have read the form more thoroughly. In answer to a question in cross-examination, Mr Turbott agreed that his Commonwealth Bank credit card statement showed that in 2003/2004, there were five weekend transactions away from the Kangaroo Valley area. He noted that he has four other credit cards, which would show a variety of transactions around the area.
19 Mr Turbott called two witnesses to give oral evidence. Dr Sue Craig is a doctor in Artarmon. She said she has known the Applicants for more than 10 years and understands that the Kangaroo Valley property is their dream and where they want to live. She is regularly invited to stay there and has been there two or three times a year in recent years. She said the property has luxurious tented accommodation with a full kitchen, hot shower and proper toilet.
20 Mr Turbott’s second witness was Ms Wendy Trigg who is the Applicants’ neighbour in Cremorne Point. She and her husband have known the Applicants since they moved into their rented flat in Cremorne Point in 2002. She said the Applicants usually leave for the Kangaroo Valley every Friday afternoon, returning late Sunday or early Monday morning. They usually also spend any time off there. Ms Trigg, who is Head of Group Finance with Westpac, said she and Mrs Turbott often correspond by email during the week, and Mrs Turbott lets her know when they are going to the Kangaroo Valley, and Ms Trigg and her husband “look out” for the Applicants’ rented unit. Ms Trigg said she and her husband have visited the Applicants’ Kangaroo Valley property four or five times, sometimes for lunch and on one occasion staying overnight. The accommodation there is very comfortable with permanent tents, kitchen, bathroom facilities etcetera.
21 Mr Turbott said he and his wife consider the Respondent’s decision unfair and unjust. They own no other land other than their Kangaroo Valley property. They regard this as their principal home, which they use for residential purposes, and “spend every spare minute there”, including 31 December each year. Currently, they use the tents, permanently erected on site, for accommodation, in conjunction with the converted shipping container for storage. Mr Turbott contended that, like buildings, the tents do have a degree of permanence and have walls and a roof. However, because they are movable, Council approval is not required.
22 Mr Turbott provided documentary evidence concerning his and wife’s rented unit in Cremorne Point, the Kangaroo Valley property, and their involvement in the Kangaroo Valley community. He also provided statutory declarations from Jane Freeman and Sharon Pritchard, who attested to their knowing the Applicants, to having stayed at the Kangaroo Valley property, to the accommodation there, and to the Applicants’ regarding this as their permanent home.
The Respondent’s Case
23 Mr El-Hage, for the Respondent, said the default position is that Land Tax is payable on land. It is for the owner of land to establish that an exemption applies. In this instance, the Applicants are seeking to rely on the principal place of residence exemption. However, there are two threshold issues that they have been unable to satisfy. First, the exemption only applies in the case of land used and occupied for residential purposes involving the “use and occupation of a building or buildings designed, constructed or adapted for residential purposes”.
24 Mr El-Hage submitted that there is no building on the property. Tents are not buildings. In the absence of a definition of ‘building’ in the LTM Act, the word should be given its ordinary and natural meaning. He noted that the definition of ‘building’ in section 4(1) of the Environmental Planning and Assessment Act 1979 (NSW) (‘the EPA Act’) does not include “a temporary structure within the meaning of the Local Government Act 1993”. In the latter Act, ‘temporary structure’ is defined as including a tent.
25 Mr El-Hage submitted that the second threshold issue requires that the land be lawfully used and occupied as a residence. Here the Applicants have failed to establish that the tents and shipping container comprise a structure or dwelling house which has been approved by Shoalhaven City Council for use as a residence, as required by section 149 of the EPA Act.
26 Thus, in the Applicants’ case, as a matter of law, there being no residential building on the property approved by the Council for use as a residence, the principal place of residence exemption cannot apply.
27 However, the Respondent submits that even if the threshold issues are satisfied, the Applicants have failed to prove that the Kangaroo Valley property was their principal place of residence throughout the relevant period. The evidence suggests that the Cremorne unit was their principal place of residence where they spent the majority of their time, and their connection with the Kangaroo Valley property was “temporary and transient in nature, limited to short stays on particular occasions” (submissions par 61).
28 Mr El-Hage said the Respondent has imposed market rate interest in respect of the 2003 and 2004 Land Tax years as a result of the Applicants’ failure to lodge a return, which constituted a tax default. The Respondent submits that there are no exceptional circumstances justifying remission of the market rate interest imposed.
Discussion
29 The relevant provisions of the LTM Act are set out above. Turning to the first threshold issue to which Mr El-Hage drew attention, section 10(1)(r) of the LTM Act in effect in respect of the 2003 Land Tax year, and Schedule 1A, clause 2 of the Act in effect in respect of the 2004 and 2005 Land Tax years, each required that for the principal place of residence exemption to apply the land in question had to be ‘residential land’, as defined in section 10(1D) and Schedule 1, clause 3, respectively. The definitions require that the residential use and occupation of the land be “use and occupation of a building or buildings designed, constructed or adapted for residential purposes”. The Respondent submits that there is no building on the Applicants’ land. The Applicants contend that their tent accommodation and storage container, which have walls and roofs, comprise a permanent camp and should be considered buildings.
30 The word ‘building’ is not defined in the LTM Act. In construing such a word, it is well established that a literal approach should be followed and the word should be given its ordinary and natural meaning in the absence of some contrary indication in the statute in which the word appears. As pointed out by the Respondent, the word ‘building’ is relevantly defined in the Macquarie Dictionary (4th edition, 2005) as a “substantial structure with a roof and walls, as a shed, house, department store, etcetera ...”. In the Oxford English Dictionary (1961 reprint), the word ‘building’ is relevantly defined as “[t]hat which is built; a structure, edifice: now a structure of the nature of a house built where it is to stand”.
31 I agree with the Respondent that as a matter of ordinary usage tents are not considered to be ‘buildings’, even if, as with the Applicants, the tents are erected on a wooden base and remain erected from week to week. Tents do not have a substantial structure of a more permanent kind usually associated with a building. I note such an interpretation is consistent with the definition of ‘building’ in the EPA Act, which specifically excludes ‘temporary structures’, a term defined in the Local Government Act 1993 to include a tent. Nor do I consider that the converted shipping container, which is used for storage and has a roof erected over it for water collection, is a building designed, constructed or adapted for residential purposes.
32 With regard to the second threshold issue, which requires that the land be lawfully used and occupied as a residence, the Respondent referred to the previous decision of the Tribunal in Reuman v Chief Commissioner of State Revenue [2004] NSWADT 96 (‘Reuman’), which was followed in Pearse v Chief Commissioner of State Revenue [2007] NSWADT 14 (see paragraph 40). In Reuman, at paragraph 20, the Tribunal held that for a structure to be a residence, a person must be able to live there, that is it must be capable of satisfying the requirements of the State and Local Government for lawful occupation as a residence.
33 In both cases, the local Council had not approved occupation of the structure in question as a residence. The material facts of the present case are slightly different in so far as there is no apparent requirement for Council approval of temporary accommodation such as tents or a converted shipping container used for storage, which the Applicants agree are movable. I am not therefore satisfied on the basis of the information before me that the Applicants’ camp is of a permanent nature requiring Council approval.
34 In any event, I am satisfied that, as a matter of law, the principal place of residence exemption cannot apply in the Applicants’ case because their occupation of the land does not involve the “use and occupation of a building or buildings designed, constructed or adapted for residential purposes”. It is not therefore necessary for me to determine the factual issue concerning whether the Kangaroo Valley property was the Applicants’ principal place of residence throughout the relevant period. I do, however, note that this is the only property owned by the Applicants, that they spend a significant amount of time there, and that they appear to be genuinely committed to establishing this as their long term principal place of residence.
Order
The decision under review is affirmed.
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