Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Zhang v Chief Commissioner of State Revenue [2023] NSWCATAD 207 Hearing dates: 16 March 2023 Date of orders: 3 August 2023 Decision date: 03 August 2023 Jurisdiction: Administrative and Equal Opportunity Division Before: R J Perrignon, Senior Member Decision: The assessment of the Chief Commissioner to land tax in respect of the 2018 land tax year is confirmed. Catchwords: Administrative Law – land tax – whether principal place of residence exemption applied – whether clause 6 of Schedule 1A to the Land Tax Management Act 1956 applied – whether clause 8 of Schedule 1A applied – whether Tribunal has power to exempt land from land tax or reduce amount of tax payable Legislation Cited: Land Tax Management Act 1956 Taxation Administration Act 1996 Cases Cited: Cooney v Chief Commissioner of State Revenue [2017] NSWCATAD 375 Prendiville v Chief Commissioner of State Revenue [2010] NSWADT 270 Texts Cited: None cited Category: Principal judgment Parties: Hui Fang Zhang (First Applicant) Qing Ping Zhang (Second Applicant) Chief Commissioner of State Revenue (Respondent) Representation: First Applicant (Self Represented) Second Applicant (Hui Fang Zhang) Crown Solicitor (Respondent) File Number(s): 2022/00367897 Publication restriction: None Reasons for Decision Applications for review 1. Mrs and Mrs Zhang own a residential property in Sydney. They purchased it in June 2000, and lived in it as their home until 26 March 2013, when they vacated it for the purposes of demolishing the existing house and replacing it with a two-storey detached dual occupancy. They resided with their child in a rental property until 9 September 2018, when they returned to their property to live in their newly built home. 2. The Chief Commissioner has assessed the property to land tax for the 2018 land tax year. 3. The taxpayers seek review of that assessment, on the basis that they are entitled to the principal place of residence (PPR) exemption provided by clause 6 of Schedule 1A to the Land Tax Management Act 1956 (LTMA), or alternatively to the benefit of clause 8, which in certain circumstances deems an owner of land to continue to use and occupy it as a PPR for 6 years after ceasing to live there. They also seek review on the basis that the events which caused them not to use and occupy their land as their PPR from 2013 to 2018 were beyond their control. 4. Objection to the assessment has been made by the applicants and disallowed by the Chief Commissioner, so the Tribunal has power to review the assessment: section 96, Taxation Administration Act 1996. The applicants bear the onus of proving their case on review: section 100(3). 5. The Chief Commissioner says that Clause 6 does not apply, because it applies only in respect of the four years following the year in which the Applicants became owners of the property, which in this case was the year 2000. She says that clause 8 not apply, because its application ceased four years after the land ceased to be capable of being used and occupied as a residence – that is, in March 2017, when the land was still not capable of being used and occupied as a residence. 6. The issues for determination are whether clauses 6 or 8 of Schedule 1A apply so as to exempt the land from land tax and, if not, whether the Tribunal can or should exempt the land from land tax or reduce the amount of tax payable, by reason that the relevant events were beyond the control of the taxpayers. Mrs Zhang's statement 1. Mrs Zhang kindly provided a statement dated 26 January 2023, to which she attached a series of documents, and on which she relied in oral submissions. Though unsigned, I am satisfied it is her statement, and true to the best of her knowledge. She gave the following chronology of events. 1. On 22 May 2013 the local Council issued a 'stop work' order due to the builder carrying out unauthorised work in the form of retaining walls on the northern and eastern side of the premises and failing to protect and support the adjoining premises from possible damage from excavation work. 2. On 18 June 2013 the Council issued a further stop work order due to structural defects in one of the retaining walls, and its encroachment on the neighbouring property. 3. The builder abandoned the site and became uncontactable – according to par [16] of the Applicants' Statement of Claim in the District Court proceedings referred t below, which the Applicants have provided to the Tribunal, the builder abandoned the site on 22 May 2013. 4. On 28 June 2013, Mr and Mrs Zhang commenced proceedings against the builder in the Consumer Trader and Tenancy Tribunal (CTTT) to force the builder to rectify the defects and comply with orders of Council. 5. In September 2013, due to defects in the building, the engineer withdrew certification and a building expert recommended total demolition of the building – presumably in connection with the CTTT proceedings, though nothing turns on that. 6. On 17 January 2014, the Applicants commenced District Court proceedings against the builder for breach of contract among other things, in which judgment was ultimately delivered on May 2015. 7. Mr and Mrs Zhang were unsuccessful in the result, as the Court found that they had consented to the works which were done. 8. They commenced proceedings in the Court of Appeal on 26 November 2015. 9. On 13 September 2016, the day before the appeal hearing, the builder went into liquidation. 10. On 5 October 2016, the Zhang's made a claim on their home warranty insurance. 11. On 7 December 2016, they submitted a development application to Council in order to overcome the effects of the stop work order, which was still current. 12. On 30 March 2017, development consent was granted. 13. On 9 April 2017, the insurance claim was settled. 14. On 27 July 2017, they entered into a building contract with another builder. 15. On 4 August 2017, building works recommenced. 16. On 9 September 2018, the Zhang's resumed their residency by moving into their newly built home. Findings 1. Par [11] of the applicants' Statement of Claim (attached to the statement) alleges that demolition works on the property had been completed by 26 March 2013, when a construction certificate was issued. As there is no evidence to the contrary, I am satisfied that the existing home had been demolished by then. 2. Mrs Zhang's chronology of events is not disputed. I make findings in accordance with it. 3. In particular, I am satisfied that the Applicants ceased to use and occupy the land on 26 March 2013 at the latest, and that they resided there once again, using and occupying the land as their PPR, from 9 September 2018. 4. As indicated, the Applicants submit that the events which prevented them from using and occupying the land as their PPR from 26 March 2013 to 9 September 2018 were beyond their control. The Chief Commissioner does not dispute that the events which prevented them from using and occupying the property as their PPR were beyond their control. In those circumstances, I will assume for the purposes of this decision, in the applicants' favour, that all those events were beyond their control, without making any finding to that effect. Legislation 1. Unless land is exempt from land tax, land tax is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers at midnight on the thirty-first day of December immediately preceding the land tax year for which the land tax is levied. A land tax year is a period of twelve months commencing on the first day of January: ss7 and 8, LTMA. 2. For the 2018 land tax year, clause 6 of Schedule 1A relevantly provided an exemption from land tax by way of a concession in the following terms – emphasis added: 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. …. (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) 4 tax years immediately following the year in which the person became owner of the land, or (b) if, after the person became owner and before the building or other works physically commence, the land is used and occupied for residential purposes by another person—4 tax years immediately following the tax year in which the other person ceases to use and occupy the land for those purposes. (4) Without limiting subclause (3) (a)— (a) this clause does not apply in respect of the assessment of a person's ownership of land in a period referred to in subclause (3) (b) unless the Chief Commissioner is satisfied that, by the end of the first of the 4 tax years concerned— (i) the building or other works will be, or have been, physically commenced, or (ii) significant steps will be, or have been, taken to enable those works to physically commence, and (b) if the building or other works are not physically commenced by the end of that tax year (or the Chief Commissioner is not satisfied that, by the end of that tax year, significant steps have been taken to enable those works to physically commence)— (i) the principal place of residence exemption applying by operation of this clause to the land is taken not to have applied to the land in respect of that tax year (unless subclause (3) (a) applied to the assessment in that tax year), and (ii) land tax liability is to be assessed or reassessed accordingly. (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. … 1. In certain circumstances, clause 8 of Schedule 1A deemed an owner's use and occupation of the land as a PPR to continue. As it stood in respect of the 2018 land tax year, clause 8 relevantly provided - emphasis added: 8 Concession for absences from former residence (1) A person is taken, for the purpose of the principal place of residence exemption, to continue to use and occupy land formerly used and occupied by the person as a principal place of residence (a former residence), after the person ceases to so use and occupy the former residence, if the Chief Commissioner is satisfied that— (a) the person used and occupied the former residence as a principal place of residence for a continuous period of at least 6 months, and (b) the person does not own any other land used and occupied by the person as a principal place of residence. (2) The maximum period for which a person may be taken, under this clause, to continue to use and occupy a former residence as a principal place of residence is 6 years starting at the end of the last period (of at least 6 months) during which the former residence was used and occupied by the person as a principal place of residence (not including any period for which the person may be taken, under clause 7 or this clause, to have used and occupied the former residence as a principal place of residence). (3) If the principal place of residence exemption applies to the former residence of a person by operation of this clause, the exemption ceases to have effect if the person is the owner of the former residence at the end of the 6-year period referred to in subclause (2) and fails— (a) to resume actual use and occupation of the residence as a principal place of residence by the end of that period, and (b) to continue that use and occupation for at least 6 months. (3A) The principal place of residence exemption also ceases to have effect if the land ceases to be capable of being used and occupied as a residence and remains incapable of being so used and occupied for a period exceeding 4 years. Clause 6 1. The effect of Clause 6(1) was to deem an owner of unoccupied land to use and occupy it as their PPR if 'the owner intends to use and occupy the land as his or her [PPR]', provided that all three requirements of clause 6(2) were met. 2. It is not disputed that, as at midnight on 31 December 2017, Mr and Mrs Zhang's land was unoccupied, and that they intended to use it as their PPR. It is not disputed that all three requirements of clause 6(2) were met. Clause 6(1) applied, subject to the operation of clause 6(3). 3. The effect of clause 6(3) was to limit the application of the deeming provisions to (a) the four land tax years immediately following the year in which a person became owner of the land, or (b) if, before building works commenced, some other person used and occupied the land as their PPR, four tax years after they ceased to do so. 4. It was not suggested that anyone other than the Zhang's used and occupied the land as their PPR prior to the commencement of works. Clause 6(3)(b) has no application. 5. It remains to consider the operation of clause 6(3)(a). As indicated, Mr and Mrs Zhang purchased the land in 2000. The four land tax years immediately following that year were the 2001, 2002, 2003 and 2004 land tax years. Clause 6 did not apply to any subsequent tax year. In particular, it did not apply in respect of the 2018 land tax year. 6. It follows that clause 6 does not deem Mr and Mrs Zhang to have used and occupied the land as their PPR for the purposes of the 2018 land tax year. It does not exempt the land from land tax in respect of that year. Clause 8 1. The effect of clause 8(1) was to deem an owner of land to continue to use and occupy the land as their PPR after ceasing to do so, if they had done so for at least six months, and did not at any relevant time own, use and occupy any other land as a PPR. It is uncontroversial that the Zhang's satisfied these requirements. I am satisfied they did. 2. However, the effect of clause 8(3A) was to exclude the operation of clause 8(1) if the land remained incapable of being used and occupied as a PPR for more than 4 years. 3. As indicated, demolition works were complete by 26 March 2013. By then, I am satisfied that the land was incapable of being used and occupied as a PPR, because there was no house on the land. The existing house had been demolished. I remains to consider when the land once again became 'capable of being used and occupied as a residence' in terms of clause 8(3A). 4. The parties were unable to provide any binding authority on the meaning of 'capable of being used and occupied as a residence' in clause 8(3A), but the Chief Commissioner referred the Tribunal to Prendiville v Chief Commissioner of State Revenue [2010] NSWADT 270 and Cooney v Chief Commissioner of State Revenue [2017] NSWCATAD 375. In those cases, the former Administrative Decisions Tribunal and this Tribunal respectively considered the meaning of 'buildings … capable of being used for separate occupation' in clause 13(2)(b) of Schedule 1A. In both cases, it was found that capability for occupation depended on whether an existing building was habitable or not. In Prendiville at [37]-[40], the building was found to be habitable. In Cooney at [37]-[38] it was found to be uninhabitable. Each case depended on its particular facts. 5. Clause 8(3A) uses the phrase, 'capable of being used and occupied as a residence'. 'Residence' must be given its ordinary meaning. A structure which is uninhabitable is incapable of being used as a residence. In this case, the land became capable of being used and occupied as a PPR when the new dwelling was built to a reasonably habitable stage. 6. The evidence does not establish precisely when that occurred. As indicated, building works recommenced on 4 August 2017 and the Zhang's moved into their new home on 9 September 2018. I am satisfied that the new house became reasonably habitable at some time between those two dates. 7. The four-year period referred to in clause 8(3A) commenced on 26 March 2013 (at the latest) and ended on 26 March 2017. There is no evidence that a habitable house existed on the land between those two dates. The applicants provided aerial photographs which show that a framework structure had been built (without roof) as at 18 May 2015, but provide no evidence that it had progressed beyond that by 26 March 2017. In paragraph 21(d) of their Statement of Claim filed on 17 January 2024, the applicants alleged that the builder had 'failed to carry out the necessary works so that they would be reasonably fit for occupation as part of the dwelling'. The works were described in paragraph 18 as residential building works. That is consistent with the aerial photographs which provide no evidence that the structure built by the first builder was ever fit for habitation. It is also consistent with Mrs Zhang's statement at [5] to [6], in which she gives evidence that by May 2013, prior to the stop work order of 22 May 2013, 'the timber framework was almost completed, and brick work had commenced'. I am not satisfied that the structure was ever reasonably habitable. I am not satisfied that the land was capable of being used and occupied as a PPR by the end of the four-year period on 26 March 2017. 1. It follows that the application of the exemption provided by clause 8(1) ceased on 26 March 2017, and that the exemption did not apply in respect of the 2018 land tax year. Whether events beyond control 1. I have assumed, for the purposes of these reasons, that the events which prevented Mr and Mrs Zhang from using and occupying the land as their PPR were beyond their control. In their favour, in the absence of objection I will also assume that the events which caused their land to be incapable of being used and occupied as a residence were beyond their control. 2. Land tax is to be charged on land in accordance with the provisions of the LTMA, except where the legislation provides an exemption. For the reasons given, I have found that no such exemption is provided by clauses 6 or 8. No other legislative source for an exemption was suggested or relied on. 3. The legislation does not empower the Chief Commissioner to exempt land from land tax where land tax would otherwise be leviable, or to reduce the amount of land tax payable. That is so even if, as here, events which excluded the application of exemptions which might otherwise have been available were beyond the control of the taxpayers. It follows that the Tribunal, on review of the Commissioner's assessment, does not have power to exempt the land from land tax, or to reduce the amount of land tax payable. Conclusion 1. For all those reasons, neither clause 6 nor clause 8 of Schedule 1A to the LTMA applied to exempt the land from land tax in respect of the 2018 land tax year, and the Tribunal does not have power to exempt the land from land tax or to reduce the amount of tax assessed. 2. The Commissioner's assessment must be confirmed. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 August 2023