Zughbi v Chief Commissioner of State Revenue

[2009] NSWADT 106

CITATION:	Zughbi v Chief Commissioner of State Revenue [2009] NSWADT 106
DIVISION:	Revenue Division
PARTIES:	APPLICANTS Habib Daoud Zughbi and Suyati Zughbi RESPONDENT Chief Commissioner of State Revenue
FILE NUMBER:	086132
HEARING DATES:	1 May 2009
SUBMISSIONS CLOSED:	1 May 2009
DATE OF DECISION:	13 May 2009
BEFORE:	Handley R - Deputy President
CATCHWORDS:	Land Tax threshold – joint owners of land
LEGISLATION CITED:	Taxation Administration Act 1996 Administrative Decisions Tribunal Act 1997 Land Tax Management Act 1956 Land Tax Act 1956 Land Tax Assessment Act 1910 (Cth) Interpretation Act 1987
CASES CITED:	Bailey v Federal Commissioner of Land Tax (1911) 13 CLR 302
REPRESENTATION:	APPLICANT Habib Zughbi, in person RESPONDENT A Tsekouras, counsel
ORDERS:	The decision under review is affirmed.

1 On 16 December 2008, Habib Zughbi filed an application with the Tribunal for the review of a decision of the Chief Commissioner of State Revenue disallowing the Applicant’s objection to a notice assessing Dr Zughbi and his wife, Suyati Zughbi, as being liable for the payment of Land Tax on their investment properties. On 9 February 2009, Dr and Mrs Zughbi lodged an amended application including Mrs Zughbi as a joint applicant.

The Facts

2 The facts are not in dispute. Dr and Mrs Zughbi’s principal place of residence is their jointly owned property in Earlwood. In addition to this property, they jointly own two investment properties: one in Sefton and one in Bulli. Mrs Zughbi also separately owns a property in Ryde. The Office of State Revenue (‘OSR’) has assessed Dr and Mrs Zughbi’s properties for Land Tax for the Land Tax years 1998 to 2008.

3 On 22 January 2008, the OSR issued Dr and Mrs Zughbi with a Land Tax Notice of Assessment for the 2008 Land Tax year. In this, as in previous years, the OSR granted a principal place of residence exemption in respect of Dr and Mrs Zughbi’s Earlwood property, but otherwise assessed them as being liable for Land Tax on their other properties.

4 By letter dated 26 February 2008, Dr and Mrs Zughbi objected to the assessment on the ground that they should each be entitled to a tax threshold for the purpose of assessing their liability for Land Tax in respect of their jointly owned properties. On 8 April 2008, a delegate of the Commissioner disallowed their objection in respect of the 2005 to 2008 Land Tax years, explaining that jointly owned land is assessed as if it is owned by one person.

5 On 16 December 2008, Dr Zughbi lodged his application for a review of this decision by the Tribunal. As stated above, this application was subsequently amended to include Mrs Zughbi. Because the application for review was made outside the 60 day period allowed by s 99 of the Taxation Administration Act 1996 (‘the TA Act’), it was necessary for Dr and Mrs Zughbi to apply for an extension of time. At the hearing, there being no objection from the Chief Commissioner, and on my being satisfied that Dr and Mrs Zughbi had a reasonable explanation for the delay (as per section 57(1) of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’)), I granted an extension of time for the making of the application.

The Relevant Legislation

6 Pursuant to section 100(3) of the TA Act, an applicant for review bears the onus of proving his/her case in the Tribunal.

7 During the relevant period, 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 land that was not exempt based on the ownership of the land as at midnight on the 31 December of each preceding year for which Land Tax was to be levied. Thus, Dr and Mrs Zughbi, being the registered owners of land, were presumed to be liable for Land Tax on that land for the years in issue - the 2005 to 2008 Land Tax years - based on their ownership of the land on the 31 December of each preceding year, unless the land was exempt from tax.

8 The issue in dispute is whether, as contended by the Chief Commissioner, Dr and Mrs Zughbi are entitled to one tax threshold for the purpose of calculating their liability for Land Tax by reason of their joint ownership of the Sefton and Bulli properties, or whether, as Dr and Mrs Zughbi contend, they are each entitled to a tax threshold for that purpose. The Chief Commissioner accepts they are entitled to a principal place of residence exemption for their jointly owned Earlwood property.

9 The ‘tax threshold’ for Land Tax is defined in section 62TB of the LTM Act for the pre-2005 Land Tax years and in section 62TBA in respect of the 2006 Land Tax year and subsequent years. The Land Tax threshold in 2006 was $352,000 and is indexed for subsequent years and calculated in accordance with the formula set out in section 62TBA.

10 Land Tax is levied in accordance with the provisions of the Land Tax Act 1956. For example, for the 2008 Land Tax year, Land Tax is levied in respect of the taxable value of “all the land owned by any person at midnight on 31 December 2007”: section 3AK(1). Where the taxable value is more than the tax threshold, the rate of Land Tax payable is $100 plus 1.6c for each $1 in excess of the tax threshold: section 3AK and Schedule 12.

11 Section 27 of the LTM Act applies to ‘joint owners’ of land (defined in section 3 as including those who own land jointly or in common):

27 Joint owners

(1) Joint owners of land shall be assessed and liable for land tax in accordance with the provisions of this section.

(2) Joint owners (except those of them whose interests are exempt from taxation under section 10) shall be jointly assessed and liable in respect of the land (exclusive of the interest of any joint owner so exempt) as if it were owned by one person, without regard to their respective interests therein and without taking into account any land owned by any one of them in severalty or as joint owner with any other person.

(2A) ...

(3) Each joint owner of land shall in addition be separately assessed and liable in respect of:

(a) his or her individual interest in the land (as if he or she were the owner of a part of the land in proportion to his or her interest), together with

(b) any other land owned by him or her in severalty, and

(c) his or her individual interests in any other land.

(4) The joint owners in respect of their joint assessment shall be deemed to be the primary taxpayer, and each joint owner in respect of his or her separate assessment to be a secondary taxpayer; and from the land tax payable in respect of his or her interest in the land by each joint owner under subsection (3) there shall be deducted such amount (if any) as is necessary to prevent double taxation.

12 Section 33 applies to prevent double taxation of a person who is a ‘secondary taxpayer’ (pursuant to section 27(4)):

33 Deductions to prevent double taxation

Where under this Act:

(a) any person is deemed to be the secondary taxpayer in respect of any land or interest, and

(b) it is provided that there shall be deducted from the land tax payable by the secondary taxpayer, in respect of the land or interest, such amount (if any) as is necessary to prevent double taxation,

the amount of the deduction (if any) shall be the lesser of the following amounts:

(i) the amount of land tax payable in respect of the land or interest by the secondary taxpayer, or

(ii) the amount of land tax (if any) payable in respect of the land or interest by the primary taxpayer aggregated with the amount of land tax (if any) payable in respect of the land or interest by a precedent secondary taxpayer (if any):

Provided that the secondary taxpayer shall be assessed and liable in respect of the land or interest, notwithstanding that the primary taxpayer is exempt from taxation in respect of the land or interest, or that there is no primary taxpayer in respect of the land or interest.

The Chief Commissioner’s Submissions

13 The Respondent submits that pursuant to section 27 of the LTM Act, the tax threshold is applied only once to all land owned by joint owners. No regard is had to whether the land holdings of individual owners can be aggregated for Land Tax purposes on the basis of their relationship or association. Thus, Land Tax is levied on all land owned by an owner or joint owners as at 31 December of the preceding year. Clearly, Dr and Mrs Zughbi are joint owners of the Sefton and Bulli properties.

14 Ms Tsekouras noted that when a joint assessment is raised under section 27(2), section 27(3) provides that there is to be a further assessment of each individual owner as to his share of the jointly owned land and any other land owned by him or her. In such circumstances, section 33 applies to prevent double taxation.

15 Ms Tsekouras said that sections 27 and 33 of the LTM Act have been in substantially the same form since the LTM Act was enacted in 1956. These provisions were derived from sections 38 and 43 respectively of the Land Tax Assessment Act 1910 (Cth), the application of which was considered by the High Court in Bailey v Federal Commissioner of Land Tax (1911) 13 CLR 302 (‘Bailey’s case’) (see Griffiths CJ at 313). The High Court treated the matter as one of statutory construction and concluded that the legislature had deliberately provided specific relief in the case of double taxation.

16 In relation to Dr Zughbi’s argument that ‘land’ in section 27 should interpreted as meaning a single parcel of land, Ms Tsekouras referred to section 8 of the Interpretation Act 1987 which states that a reference to a word in the singular incudes a reference to the word in the plural form, and vice-versa. Thus, the reference in section 27 to ‘land’ is a reference to all land owned by the joint owners.

17 With regard to Dr Zughbi’s objection that section 27 operates unfairly and illogically, Ms Tsekouras submitted that this is not a matter for review by the Tribunal, being a matter of public policy and, ultimately, for Parliament. The Tribunal’s role is limited to reviewing the assessment made by the Chief Commissioner and making the correct and preferable decision in accordance with the law. The Tribunal’s powers on a review are set out in section 101 of the TA Act and include confirming or revoking an assessment under review or substituting as assessment in place of that to which the application relates.

The Applicants’ Submissions

18 Dr Zughbi contended that the law as applied by the OSR discriminates against those who jointly own more than one investment property. The effect of the OSR’s application of section 27(2) is that, in the case of him and his wife, if they own the two investment properties jointly they are permitted one threshold for Land Tax purposes, whereas if they each own one investment property separately, they are each accorded a threshold. The result is that they are presently being penalised for their joint ownership. This is illogical, unreasonable and unfair.

19 Dr Zughbi said that in his and his wife’s case, if they had been permitted one threshold each for the Land Tax years 2005 to 2009, they would have paid $18,020.59 less Land Tax in respect of the two investment properties than has been the case with the OSR permitting them only one tax threshold because of their joint ownership of these two properties.

20 Dr Zughbi said that in such a situation, the State Government has a moral obligation to inform potential investors of the negative impact of joint ownership.

21 Dr Zughbi said because he and his wife are no longer pressing their secondary contention - that his wife should be accorded the full amount of the threshold in respect of her separately owned Ryde property, the decision in Bailey’s case, referred to by Ms Tsekouras, is not relevant. However, he noted that the word ‘land’ in section 27 could be interpreted as referring to land in the singular so that joint owners are treated as one person in respect of each piece of land they jointly own, thereby being entitled to one tax threshold for each piece of land.

22 Dr Zughbi noted that the interest rate applied by the OSR is significantly higher than the market rate. Whereas the official interest rate in Australia dropped by 3% between January 2008 and January 2009, the interest rate the OSR imposes on late balances increased by 1.38% during the same period.

Discussion

23 As noted above, the issue in dispute is whether, as contended by the Chief Commissioner, Dr and Mrs Zughbi are entitled to one tax threshold for the purpose of calculating their liability for Land Tax by reason of their joint ownership of the Sefton and Bulli properties, or whether, as Dr and Mrs Zughbi contend, they are each entitled to a tax threshold for that purpose. The focus, therefore, is on the interpretation of section 27 of the LTM Act, and, in particular, on section 27(2).

24 The approach adopted by the courts and followed in tribunals in interpreting the provisions of a statute is to look first at the ordinary meaning of the words used and ascertain the intention of Parliament from the meaning of those words. Section 33 of the Interpretation Act 1987 provides that a construction that promotes the purpose or object underlying the Act shall be preferred to one that does not. Section 34 permits reference to extrinsic material to, for example, confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision. Such extrinsic material includes the Second Reading Speech on the Bill.

25 Ms Tsekouras provided me with a copy of the Second Reading Speech by the Premier and Colonial Treasurer, Mr JJ Cahill, on the Land Tax Management Bill 1956. In that speech, Mr Cahill said, “Joint owners will be assessed in respect of the land jointly owned as if it were owned by a single person”: Hansard, NSW House of Assembly, 4 October 1956, p 2811.

26 In my view, the ordinary meaning of the words in section 27(2) is clear: that joint owners are jointly assessed and liable in respect of jointly land as if the land were owned by one person. As Ms Tsekouras pointed out, section 8 of the Interpretation Act 1987 states that a reference to a word in the singular incudes a reference to the word in the plural form, and vice-versa. Thus, I agree that the reference in section 27 to ‘land’ is a reference to all land owned by the joint owners. Moreover, I do not agree with Dr Zughbi’s contention that joint owners should be treated as one person in respect of each piece of land they jointly own, thereby being entitled to one tax threshold for each.

27 I recognise, as Dr Zughbi pointed out, that in the case of joint owners of two investment properties, this application of section 27(2) results in the joint owners being treated less favourably than if they had owned the properties separately. If, instead of the two owners owning the two pieces of land jointly (and being accorded one tax threshold only), each of the two persons owns one piece of land separately, each owner is accorded a separate tax threshold.

28 Whilst acknowledging this less favourable treatment of joint owners, it must be remembered that the role of the Tribunal on receipt of an application is to conduct a review of the relevant decision and “decide what the correct and preferable decision is having regard to the material before it”, including any relevant factual material and the applicable law: section 63(1) of the ADT Act. In doing so, the Tribunal may exercise all the functions conferred by law on the administrator: section 63(2). The powers of the court or tribunal dealing with the application for review are set out in section 101 of the TA Act and include confirming or revoking the assessment to which the application relates. Any change in the law is a matter for Parliament.

29 Thus, in this case, the role of the Tribunal is to identify the applicable law and apply the law to the facts, about which there is no dispute. That being so, in my view, it is clear that, being joint owners of land, section 27 of the LTM Act is applicable to Dr and Mrs Zughbi who, pursuant to section 27(2), are jointly assessed and liable for Land Tax in respect of their jointly owned land as if the land was owned by one person. They are, therefore, entitled to only one tax threshold in respect of such land. I note that Mrs Zughbi’s assessment as a ‘secondary taxpayer’ (sections 27(4) and 33) is no longer in issue.

Decision

30 The decision of the Chief Commissioner is affirmed.