YOUNG and COMMISSIONER OF STATE REVENUE
[2005] WASAT 296
•28 OCTOBER 2005
YOUNG and COMMISSIONER OF STATE REVENUE [2005] WASAT 296
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2005] WASAT 296 | |
| TAXATION ADMINISTRATION ACT 2003 (WA) | |||
| Case No: | CC:2633/2005 | 28 OCTOBER 2005 | |
| Coram: | MR D R PARRY (SENIOR MEMBER) MR P McNAB (MEMBER) | 28/10/05 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed Decision of respondent affirmed | ||
| B | |||
| PDF Version |
| Parties: | MB YOUNG COMMISSIONER OF STATE REVENUE |
Catchwords: | Taxation – Land tax – Discretion to treat adjoining lots as single private residential property – Whether lots were established and used as an integrated area – Each lot comprised a single, free-standing dwelling-house – Lots separated by substantial masonry dividing wall – Whether a "private residential property" can include two principal buildings |
Legislation: | Land Tax Assessment Act 2002 (WA), s 21, Glossary cl 1, cl 2(3), cl 2(4) Taxation Administration Act 2003 (WA), s 40, s 43 |
Case References: | JM Bestall and Commissioner of State Revenue (2005) 38 SR (WA) 311; [2005] WASAT 32 Nil |
Orders | 1. The application for review brought pursuant to s 40 of the Taxation Administration Act 2003 of the disallowance by the, respondent of the applicant's objection to the assessment of liability for land tax for the 2004/2005 financial year is, dismissed., 2. The decision of the respondent is affirmed. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : TAXATION ADMINISTRATION ACT 2003 (WA) CITATION : YOUNG and COMMISSIONER OF STATE REVENUE [2005] WASAT 296 MEMBER : MR D R PARRY (SENIOR MEMBER)
- MR P McNAB (MEMBER)
- Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Taxation – Land tax – Discretion to treat adjoining lots as single private residential property – Whether lots were established and used as an integrated area – Each lot comprised a single, free-standing dwelling-house – Lots separated by substantial masonry dividing wall – Whether a "private residential property" can include two principal buildings
Legislation:
Land Tax Assessment Act 2002 (WA), s 21, Glossary cl 1, cl 2(3), cl 2(4)
(Page 2)
Taxation Administration Act 2003 (WA), s 40, s 43
Result:
Application dismissed
Decision of respondent affirmed
Category: B
Representation:
Counsel:
Applicant : Mr MB Young (in person)
Respondent : Ms RC Panetta
Solicitors:
Applicant : Self-represented
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
JM Bestall and Commissioner of State Revenue (2005) 38 SR (WA) 311; [2005] WASAT 32
Case(s) also cited:
Nil
(Page 3)
Summary of Tribunal's decision
1 A taxpayer objected to an assessment of land tax on the basis that the property and an adjoining property on which the taxpayer's dwelling house was constructed should be treated as a single private residential property. At the relevant date for the purposes of assessment, a separate free-standing dwelling house was constructed on the property in question. The two properties were separated by a substantial masonry dividing wall.
2 Following the hearing, the Tribunal gave an oral decision dismissing the application and affirming the Commissioner's decision. The Tribunal did so as it was not satisfied that the two properties were "established" as "one integrated area" that constituted the taxpayer's place of residence or that the use of the two properties by the taxpayer and his family was as "one integrated area" that constituted the place of residence.
3 The Tribunal's oral reasons delivered by Senior Member Parry and concurred in by Member McNab, taken from the transcript and edited in minor respects to aid clarity, were as follows.
Introduction
4 These proceedings concern an application brought by a taxpayer, Mr MB Young, pursuant to s 40 of the Taxation Administration Act 2003 (WA) (Act) for review of the disallowance by the Commissioner of State Revenue of an objection to an assessment of liability for land tax.
5 The assessment to which Mr Young objected was issued on 16 September 2004 and required him to pay land tax in the amount of $10 088 for the 2004/2005 financial year in relation to Lot 35 on Plan 2689, which is known as 16 Margaret Street, Cottesloe and is the whole of the land comprised in certificate of title volume 70 folio 197A (No 16).
6 The assessment states that an adjoining property owned by Mr Young, Lot 36 on Plan 2689, which is known as 18 Margaret Street, Cottesloe and which is the whole of the land comprised in certificate of title volume 1631 folio 568 (No 18), is subject to a "100% residential exemption" from land tax.
7 Mr Young objects to the assessment in relation to No 16 on the basis that that property and No 18 should be treated as a single private residential property under cl 2(3) of the Glossary to the Land Tax
(Page 4)
- Assessment Act 2002 (WA) (Land Tax Assessment Act) and that the Tribunal should exercise the Commissioner's discretion to treat the lots as a single property for valuation and assessment under cl 2(3) of the Glossary.
8 Section 43 of the Act provides that when the State Administrative Tribunal is dealing with a matter brought before it under that Act relating to an assessment under the Land Tax Assessment Act 2002 (WA), the Tribunal is to be constituted by or is to include its President or a Deputy President or a Senior Member as defined in s 3(1) of the State Administrative Tribunal Act 2004 (WA), who is a legal practitioner as defined in that subsection. In accordance with s 43 of the Act, for the purpose of hearing and determining these proceedings, the Tribunal was constituted by a panel comprising a senior member and another member.
9 The relevant statutory background to this review is fully set out in a decision of the Tribunal: JM Bestall and Commissioner of State Revenue (2005) 38 SR (WA) 311 at 314-316; [2005] WASAT 32 at [10]-[16]. It is unnecessary for us to reproduce that statutory background in these reasons.
Factual background
10 On or about 27 May 1997, Mr Young purchased No 18 and, from at least January 2003 used it as his home, together with his wife and three children. Number 18 has an area of 491 square metres and has erected on it a one to two-storey free-standing dwelling house of 1960's construction. The house contains three bedrooms, kitchen, lounge/family room, bathroom and laundry.
11 On or about 30 June 1985, Mr Young's parents purchased No 16. When Mr Young's father passed away in 1996, Mr Young's mother became the sole proprietor of that property. On or about 25 June 2004, Mr Young's mother transferred ownership of No 16 to Mr Young. Number 16 is an identically sized and shaped lot to No 18. It has erected on it a one-storey free-standing dwelling house of 1930's construction. It contains a single bedroom, kitchen/living area, lounge room, bathroom and "sleepout".
12 On 23 September 2004, Mr Young objected to the assessment. The objection stated in part as follows:
"The house is used as a primary residence together with the property at 18 Margaret Street as combined residence from
(Page 5)
- June 17 2004. We have space restrictions and utilising both houses while we developed around the property. Further development has been planned to occur as we can afford to undertake the work over several years.
Even before further development occurs the property still qualifies for exemption:-
• Lots 16 and 18 Margaret Street Cottesloe ('the lots') are in the same ownership (see note below).
• The lots have common boundaries.
• The lots are used as one integrated area that constitutes a private residence.
Current floor plan
Both houses are very small with restrictions for a family of two adults and three teenagers.
16 Margaret Street - one bedroom. Approx 1930 construction.
18 Margaret Street - three bedroom approx 1965 construction.
Together both houses are only four bedrooms and an office and the combined space is smaller than most family houses. Arrangements with the house on 16 Margaret Street will be short term until we can construct new residence and renovate 18 Margaret Street.
Long term we are going to remain using both properties as one residence." (Reproduced as written).
13 On 28 February 2005, the Commissioner by his delegate disallowed the objection for the following reasons:
"Your objection is disallowed in full as:
• lot 35 and lot 36 constitute two private residential properties on which they are two private residences,
• the two private residences constitute two places of residence, and
(Page 6)
- • lot 35 and lot 36 are not established as to be one integrated place of residence." (Reproduced as written).
Consideration of application for review
14 It is common ground that No 18 is exempt from land tax for the 2004-2005 financial year under s 21(1) of the Land Tax Assessment Act 2002 (WA), as at midnight on 30 June in the financial year before the assessment year, it was a private residential property owned by Mr Young, who used it as his "primary residence", that is as his "sole or principal place of residence": Glossary cl 1.
15 Mr Young contends that the Commissioner's discretion under cl 2(3) of the Glossary to treat No 16 as a single property with No 18 for valuation and assessment should be exercised in the circumstances of this case. That discretion arises only where two or more lots of land are in the same ownership and have common boundaries, which was the case at midnight on 30 June 2004 in this case.
16 However, the discretion is guided by the consideration of whether it is appropriate to treat the lots as a single property. Moreover, cl 2(4) precludes the Commissioner, and the Tribunal on review, from treating two or more lots as a single private residential property, unless satisfied that "the lot or lots on which the private residence is constructed and each other lot are established, and used by the individuals who reside there, as one integrated area that constitutes the place of residence".
17 As the Tribunal held in JM Bestall and Commissioner of State Revenue at 322; [45], the point in time at which an assessment must be made as to whether the lot or lots on which the private residence is constructed and each other lot are established and used as one integrated area is the point in time specified in s 21, namely at midnight on 30 June in the financial year before the assessment year in question.
18 In this case, Mr JN Raven, a senior inspector employed by the Commissioner, inspected No 16 and No 18 with Mr Robert Andrews, a compliance officer employed by the Commissioner, three weeks after the date for assessment. An inspection report prepared by Mr Raven five days later, states as follows:
"There are currently two separate homes on lots 16 and 18 (refer to photographs 1 and 2).
(Page 7)
- The lots have been separated by a brick wall, which extends alongside the boundary of lot 18 and 16 and down the rear of lot 18 (refer to photographs 3 and 4).
Currently Mr Young's children for extra space are using lot 16."
19 The photographs referred to in Mr Raven's inspection report confirm Mr Raven's observations. Number 16 and No 18 appeared to be entirely separate self-contained residential properties, each with a separate dwelling house. The properties were separated from one another by a substantial masonry boundary wall, which extended from the front building alignment to the rear boundary of each property. Each property had its own letterbox with its individual street number displayed on it.
20 Mr Young has not disputed that the physical characteristics of the land referred to in the inspection report and depicted on the photographs were in existence three weeks earlier, at midnight on 30 June 2004. The Tribunal finds that this was the case. It was Mr Young's evidence that when No 16 was transferred to him, he moved furniture and personal effects from external storage, and to some degree from No 18, into No 16. He said that he uses No 16 for the following purposes:
"Storage of furniture
Storage of possessions and records accumulated over years
Study facilities for children with desks, computer and copier
Storage of craft and sewing materials
Enabling entertaining area in backyard
Office for taxation records and preparation of accounting information
Separate area for children and adults to have space"
21 Mr Young tendered a series of photographs which, although substantially taken recently, showed on his evidence the physical characteristics and uses to which No 16 was put as at midnight on 30 June 2004. The photographs show that the bedroom at No 16 contained a bed. The kitchen had a stove and sink and kettle, although on his evidence, no hot water, and another room contained a desk, filing cabinet and computer, which appeared to be used by Mr Young's children.
(Page 8)
- The photographs indicate that No 16 was capable of being used for habitable purposes.
22 The Tribunal does not consider that the criteria set out in cl 2(4) of the Glossary were satisfied as at midnight on 30 June 2004 for each of two reasons. First, the Tribunal is not satisfied that No 16 and No 18 were "established" as "one integrated area" that constituted Mr Young's place of residence as at that date for the three reasons submitted on behalf of the Commissioner.
23 The first reason is that each lot was separated by a substantial dividing fence. The two lots were not commonly fenced or otherwise physically designated as a common area: JM Bestall and Commissioner of State Revenue at 321; [39]. Mr Young correctly and fairly conceded that the fence caused a significant problem for the success of his argument as at the critical date for assessment.
24 The second reason is that the appearance and physical characteristics of the two lots were such that they appeared to be two separate houses on two separate, although adjoining, residential properties with two separate front and rear yards. There were no physical characteristics which suggested that the two properties were established as one integrated area: JM Bestall and Commissioner of State Revenue at 321; [40].
25 Finally, and importantly, physical access from one lot to the other was only possible by walking from one front yard to the other front yard or through the public domain. Alternatively, one would have had to climb over the brick wall.
26 Second, the use Mr Young and his family made of No 16 as at 30 June 2004 for storage and study facilities for his children was not "as one integrated area that constitutes the place of residence". Rather, to the extent that No 16 was used, it was used as a quite distinctly different property, not as part of the whole that constitutes a single place of residence.
27 In addition, it seems that the use of the definite article "the" before "private residence" in cl 2(4) of the Glossary indicates that the clause contemplates only one private residence on the lots in question. Moreover, the opening words of the definition of "private residence" in cl 1, namely "a building or part of a building" appear to contemplate that a "private residence" must be comprised within one principal building. In this case, No 16 had erected on it a separate building to the building at No 18. Each contained at least one living area, a kitchen, a bathroom and
(Page 9)
- at least one bedroom. Although Mr Young suggested that No 16 is "uninhabitable in its current form as it leaks in the roof, [has] poor wiring and no hot water", and is therefore not a second residence, it is in fact used for some habitable purposes, namely office and study purposes, and the problems alluded to could be resolved by maintenance. However, ultimately it is unnecessary in this review to reach a final conclusion on this issue and we do not base our decision on it.
28 Finally, the Tribunal notes that at some point after 21 July 2004, a section of wall, having a length, very roughly from the photographs in evidence, of 1.5 to 2 metres, between the rear yard of No 16 and the rear yard of No 18 was roughly removed. This constitutes a small proportion of the overall length of the inter-allotment boundary wall, although it does now permit direct access from part of the rear yard of one property to part of the rear yard of the other property.
29 However, as the Tribunal determined in Bestall at 322; [45]:
"Physical characteristics which came into being after midnight on 30 June in the financial year before the assessment year in question can[not] be taken into account in determining whether an objection as to the assessment should be allowed in relation to that year."
30 Furthermore, the Tribunal does not consider that the removal of a small proportion of the boundary wall would have resulted in the two lots in question being established and used by Mr Young's family as one integrated area that constitutes the place of residence. In particular, the physical characteristics of the two lots are still not such that we could conclude that the lots are "set up on a firm or permanent basis" (to use the Moore A, (snr ed) "Macquarie Concise Dictionary Revised Third Edition" Macquarie University Library, Sydney, 2004 page 643 definition of "established") as one integrated or whole area that constitutes the place of residence. In this regard, the relatively small section of wall could be rebuilt at any time, without significant work, and the physical characteristics of the two properties remain separate, although now with what might be described as a break in the wall.
31 In consequence of these findings, the orders of the Tribunal are:
1. The application for review brought pursuant to s 40 of the Taxation Administration Act 2003 of the disallowance by the respondent of the applicant's objection to the assessment of liability for land tax for the 2004/2005 financial year is dismissed.
(Page 10)
- 2. The decision of the respondent is affirmed.
I certify that this and the preceding [31] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR D R PARRY, SENIOR MEMBER
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