CITATION: Gupta v Chief Commissioner of State Revenue [2006] NSWADT 187 DIVISION: Revenue Division APPLICANTS PARTIES: Pradeep Gupta and Neena Gupta RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 066012 HEARING DATES: 31/05/2006 SUBMISSIONS CLOSED: 05/31/2006 DATE OF DECISION: 06/21/2006 BEFORE: Hole M - Judicial Member CATCHWORDS: Land tax exemption - principal place of residence MATTER FOR DECISION: Principal matter LEGISLATION CITED : Land Tax Management Act 1956 CASES CITED: Monaro Invests Pty Ltd as trustee for the Troost Family Trust v Chief Commissioner of State Revenue [2003] NSWADT 234 APPLICANT P Gupta in person REPRESENTATION: RESPONDENT Mr Martin, solicitor ORDERS: 1. The land tax assessments made by the Chief Commissioner of State Revenue for the tax years 2000, 2001, 2002, 2003 and 2004 have been correctly assessed including any interest payable REASONS FOR DECISION 1 The applicants have applied for review of the decision of the Chief Commissioner of State Revenue ('the respondent") to assess land tax for the years 2000, 2001, 2002, 2003 and 2004 tax years in relation to a property at Epping ("the subject property"). 2 The applicants are the owners of a property at Parramatta where they lived as at 31 December 1999 and continued to reside at until July 2002. 3 The applicants purchased the subject property on 9 September 1999 and were thus the owners of both the property at Parramatta and the subject property as at 31 December 1999. 4 In September 2004 as part of a compliance project undertaken by the respondent a questionnaire was forwarded to the applicants. This questionnaire requested that the applicants disclose details of land owned. The questionnaire was returned to the respondent on 21 November 2004 and disclosed that the property at Parramatta was an investment property as at that date and the subject property was owner occupied as at that date. An assessment was issued by the respondent on 21 November 2004 for each of the tax years 2000, 2001, 2002, 2003 and 2004. The assessment disclosed that the property at Parramatta was exempt from land tax for the tax years 2000, 2001 and 2002, then the subject property was exempt for the tax years 2003 and 2004. The exemptions provided were on the basis that the property exempted was the principal place of residence of the applicants at the respective times. Interest being market rate of interest was imposed. 5 On 10 June 2005 the applicants forwarded a letter to the Office of State Revenue ("OSR") objecting to the rejection of a previous objection to the assessments that had issued. The material in that letter was considered by the OSR and on 24 June 2005 the OSR advised the applicants that their objection had been disallowed, in that letter the applicants were advised that if they were dissatisfied with the decision they could request the Administrative Decisions Tribunal to review the decision within 60 days of the date of the letter. 6 On 31 January 2006 the applicants filed this application with the Tribunal and requested that it be considered although it was out of time in terms of the 60 days allowed. 7 The subject property was rented out from the time of purchase through to May 2001. During the period from May 2001 to when the applicants moved into the subject property in July 2002 they attended to various renovations on the property to enable it to be lived by them as their principal place of residence. 8 During the period from 31 December 1999 to July 2002 the property at Parramatta remained the principal place of residence of the applicants. As and from July 2002 to the date of the hearing the subject property remained the principal place of residence of the applicants. 9 The applicants obtained a copy of an information book provided by the OSR to the general public in relation to land tax. This booklet is described as Land Tax Information Booklet 2004, being "A General Guide to Lodging a Land Tax Return". 10 During the relevant years it is convenient to set out the chart below disclosing the use of the two properties being the one at Parramatta and the subject property: Relevant Date Property Tax Year 31.12.1999 Parramatta = principal place of residence 2000 Subject property = rented out 2000 31.12.2000 Parramatta = principal place of residence 2001 Subject property = rented out 2001 May 2001 Subject property becomes vacant 31.12.2001 Parramatta = principal place of residence 2002 Subject property = vacant 2002 July 2002 Applicant moved into subject property 31.12.2002 Parramatta = rented out 2003 Subject property = principal place of residence 2003 31.12.2003 Parramatta = rented out 2004 Subject property = principal place of residence 2004 11 During the tax years 2000, 2001 and 2002 the applicants lived in the property at Parramatta as their principal place of residence, during the tax years 2003 and 2004 the applicants lived in the subject property as their principal place of residence. Legislation 12 The applicable legislation in this instance, for the tax years 2000, 2001 and 2002, is the now repealed Section 10T of the Land Tax Management Act 1956 ('the Act"): "10T Concession for unoccupied land intended to be owner's principal place of residence (1) If the Chief Commissioner is satisfied that the owner of land (or, if there are joint owners, any one or more of them) intends to use and occupy the land solely as his or her principal place of residence, that intended use and occupation of the land is to be regarded as its actual use and occupation for the purposes of section 10(1)(r). (2) This section does not apply unless: (a) the land is within a residential zone under a planning instrument or, if not within a zone under a planning instrument, is land that the Chief Commissioner is satisfied is to be used for residential purposes, and (b) the Chief Commissioner is satisfied that the intended use and occupation of the land is not unlawful, and (c) while the owner is the owner, the land is not used or occupied except as his or her principal place of residence. (2A) Subsection (2)(a) does not apply in respect of the land referred to in subsection (4)(b). (3) A person is not entitled to have his or her intended use and occupation of land taken into account for land tax purposes if: (a) the person or any joint owner of the land is entitled to have his or her actual use and occupation of other land taken into account under section 9C or 10(1)(r), or (b) the person has already received the exemption in respect of any other land in respect of a previous tax year, or (c) the person or any joint owner of the land owns land outside New South Wales which is the principal place of residence of the person." 13 The applicable legislation for the tax years 2003 and 2004 is as set out in Schedule 1A Clauses 6 and 7 of the Act: Clause 6 – Schedule 1A "Schedule 1A – Principal place of residence exemption 6. Concession for unoccupied land intended to be owners 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) 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. …" Clause 7 – Schedule 1A 7. Concession for sale of former principal place of residence (1) If the Chief Commissioner is satisfied that, on a taxing dated ("the relevant taxing date"): (a) a person is the owner of land ("the former residence") that was the principal place of residence of the person on the relevant taxing date or was the principal place of residence of the person on the preceding taxing date, and (b) the person is the owner of other land ("the new residence") that is being or is intended to be used and occupied by the person as his or her principal place of residence. both the former residence and the new residence are taken, for the purpose of the principal place of residence exemption, to be used and occupied by the person as the person(s) principal place of residence on the relevant taxing date. (2) This clause applies in respect of land owned by a person only if the Chief Commissioner is satisfied that: (a) the former residence has not been used or occupied except as the person(s) principal place of residence, and no income has been derived from the use or occupation of the residence, since the preceding 1 July, except: (i) income derived from an excluded residential occupancy (within the meaning of clause 4), or (ii) income derived under a lease or licence entered into by the purchaser under a contract fro the sale of the former residence for a period pending completion of the sale, and (b) the person became the owner of the new residence within the period of 6 months before the relevant taxing date, and (c) since the person became owner of the new residence the new residence has not been used or occupied except: (i) as the person(s) principal place of residence, or (ii) by a tenant under a lease entered into by the previous owner, and (d) the person intends to dispose of the former residence within 6 months after the relevant taxing date. (3) If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person at the relevant taxing date, the exemption is revoked if: (a) the person fails to dispose of the former residence within 6 months after the relevant taxing date, or such further period as may be approved by the Chief Commissioner, or (b) the person is not actually using and occupying the new residence as his or her principal place of residence by the next taxing date immediately following the relevant taxing date. (4) The effect of the revocation is that the principal place of residence exemption is taken not to have applied 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. (5) For the purposes of this clause, a person "disposes" of a former residence if: (a) the person ceases to be an owner of the former residence, or (b) the person enters into an agreement for the sale of the former residence." 14 In relation to each of the relevant land tax years Section 3 is applicable: Section 3 "Section 3 Definitions "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." Applicants' submissions 15 Mr Gupta, representing the applicants, submitted that his impression had been gained from the booklet referred to above which he had become aware of in 2004. He had picked the booklet up and perused that booklet and had determined that they were not liable because there was an exemption available for them in accordance with that booklet and therefore he kept quiet on the basis that he did not believe he had to provide a return to the respondent. 16 The applicants had bought the subject property in October 1999 and that they had intended to move into that property as their principal place of residence. 17 During the period from 31 December 1999 to July 2002 the applicants resided in the property at Parramatta as their principal place of residence. 18 The applicants submitted that they believed that they could elect which property was their principal place of residence and that pursuant to that election the subject property should not have been subject to land tax, the property at Parramatta should have been assessed for land tax if land tax was payable. However, the applicants believed that neither property was liable relying on the interpretation and impression that they had gained from pages 3 and 4 of the booklet previously referred to. 19 The particular information in the booklet that the applicants relied on was the statement on page 3 of that booklet being: "Where more than one residence is used, you need to elect which property will be treated as your family's principal place of residence." 20 Further that in paragraph (b) shown on page 4 of that booklet there is a reference to the intention to use a property as the principal place of residence being: "(b) Land intended as the owner's principal place of residence This includes residential land that is improved or unimproved. The exemption applies to land that it intended to be used and occupied as the owner's principal place of residence and will apply: for a period of two years following the year in which the person became the owner of the land; or if the owner did not occupy the land after it was acquired (eg it was rented for residential purposes), the concession will apply for two years from the date that actual work commenced to renovate or rebuild the residence; and when the residence has been completed the owner must physically occupy the property for a period of at lease six months. If not, the exemption that has been allowed will be revoked." 21 The applicants had rented the subject property out as, at the time of purchase they could not move in. The subject property needed to be improved to allow the applicants to move in and they rented it out until they received approval from the Local Council to undertake the work on the property to renovate it for the purposes of moving in. 22 The applicants submitted that they were happy to pay land tax in respect of an investment property and believed that for the tax years 2000 and 2001 they should have been exempt in respect of the subject property as it was intended to be their principal place of residence, that they should have been exempt from land tax for the tax year 2002 as they were residing in the subject property as at 31 December 2001 and that for the tax years 2003 and 2004 they should only be liable in relation to the investment property which by that stage was the property at Parramatta. That they believed that they could elect the subject property as their principal place of residence and that it was unnecessary, in accordance with the booklet, for them to do anything further. 23 During the period from the time of purchase of the property to May 2001 the applicants, according to Mr Gupta, had received about $350.00 per week in rental. 24 Mr Gupta submitted that as the Chief Commissioner knows who owns what in relation to property that it was unfair that the applicants were required to pay land tax on the properties as at any time from the time of purchase of the subject property the Chief Commissioner knew that they owned two properties and should have advised them at an earlier time as to any possible liability to land tax and thus as to any possibility of requirement to pay interest on unpaid land tax. 25 Mr Gupta submitted that the applicants were not aware of Section 10T and only became aware of land tax responsibilities as set out in the 2004 booklet referred to and that in accordance with the provisions of that booklet they believed that they were not liable and were exempt. Respondent's submissions 26 The respondent's representative submitted that the assessment of land tax must be considered in relation to the use of the property at a particular time and the applicable legislation at that time. Therefore during the period of the tax years 2000, 2001, 2002 and 2003 the relevant legislation was as shown in Section 3 and the now repealed Section 10T. 27 The respondent's representative submitted that to be able to claim a concession for unoccupied as referred to in that section it was necessary that the owner not have claimed exemption for another principal place of residence during the particular tax years. That as the principal place of residence during the tax years 2000, 2001 and 2002 was Parramatta an exemption could not apply for a second property being the subject property. There was no facility for the applicants to elect the property upon which land tax was to be assessed. 28 As and from 1 January 2004 the provisions of Clauses 6 and 7 of Schedule 1A of the Act apply and that this only applied to the tax year 2004. A facts sheet entitled "Land Tax 2004 – what you need to know" was available, this noted that a concession was available if two residences were owned and the former residence was to be sold, in which case the former residence needed to be sold by 30 June 2004. 29 The respondent's representative also submitted that to enable an election to be made as to which property was the principal place of residence it was necessary for both properties to be used as the principal place of residence and the fact that the subject property was leased from the time of purchase in 1999 up to May 2001 precluded the election of the subject property as the principal place of residence rather than the property at Parramatta. 30 The respondent's representative drew attention to the decision in Monaro Invests Pty Ltd as trustee for the Troost Family Trust v Chief Commissioner of State Revenue [2003] NSWADT 234 in relation to the lodgement of the return and the imposition of an interest rate on unpaid land tax. That in this instance the Chief Commissioner of State Revenue had only imposed a market rate of interest in the sum of 4.8%. 31 The respondent's representative noted that all land tax and interest had been paid as at the date of hearing. Reasons for decision 32 The applicants have applied for review of the decision of the Chief Commissioner of State Revenue out of time, however, the applicants submitted that this was due to personal circumstances and it would be appropriate in this instance for the time limit to be extended. In this particular instance the time limit should be extended to allow the application to proceed. 33 During the tax years 2000 and 2001 the evidence discloses that the applicants owned two properties and that the subject property was rented out and the applicants received rental on that property. The impression that the applicants had that they were entitled to an exemption was ill founded and at the time that they became aware of the possibility of land tax, as the onus is on the tax payer to ascertain the position, further enquiries ought to have been made as to their liability or whether they were entitled to an exemption. 34 Pursuant to Section 12(1) of the Act the onus is placed on the taxpayer to lodge a land tax return. 35 Section 10T permits a concession to be given for unoccupied land intended to be the owner's principal place of residence, however pursuant to Section 10T(3) the intended use is not to be taken into account where another property has been exempted as the principal place of residence of the owner. In this case the applicants were only using one residence as their principal place of residence, being the property at Parramatta, the subject property during the tax years 2000 and 2001 as at the applicable dates being 31 December 1999 and 31 December 2000 was rented out. 36 During the period after 31 December 2001 the subject property became vacant in May 2001 and although it was not rented out, it was subject to assessment as the principal place of residence at Parramatta was exempt and the subject property was excluded from the concession in Section 10T by the operation of Section 10T(3). Thus for the tax year 2002 the subject property was assessable for land tax. 37 During the period after 31 December 2001 the applicants moved into the subject property and the property at Parramatta became an investment property for them. 38 During the tax years 2003 and 2004 the respondent has assessed land tax on the property at Parramatta correctly, that being the investment property of the applicants. 39 During the period from the date on which land tax was payable in 2000 for the tax year 2000 through to payment of all monies following the assessment made on 21 November 2004 interest at market rate interest only has been correctly assessed by the respondent. 40 As the onus remains with the tax payer in relation to assessment for land tax and to disclose to the respondent the ownership to enable any assessment or exemption to be applied and as the interest imposed compensates the respondent in relation to the unreceived land tax due and the applicants have had the use of that money for periods varying from 6 years to 4 years it has been correctly imposed. ORDER 1. The land tax assessments made by the Chief Commissioner of State Revenue for the tax years 2000, 2001, 2002, 2003 and 2004 have been correctly assessed including any interest payable. 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.