Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222

CITATION: Volpatti v Chief Commissioner of State Revenue [2007] NSWADT 222

DIVISION: Revenue Division

APPLICANT PARTIES: Mary Kate Volpatti RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 076075

HEARING DATES: 20 September 2007

SUBMISSIONS CLOSED: 20 September 2007

DATE OF DECISION: 26 September 2007

BEFORE: Handley R - Acting Deputy President

CATCHWORDS: Land tax exemption - principal place of residence

MATTER FOR DECISION: Principal matter

LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996

CASES CITED: Le Sueur Investments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 151 Stature Pty Ltd v Chief Commissioner of State Revenue [2002] NSWADT 271

APPLICANT R Volpatti, agent REPRESENTATION: RESPONDENT A Rider, counsel

ORDERS: The decision under review is affirmed

REASONS FOR DECISION 1 On 23 May 2007, Mary Volpatti filed an application with the Tribunal for the review of a decision of the Chief Commissioner of State Revenue disallowing her objection to a notice assessing her as being liable for the payment of Land Tax on her property situated at 9 Betts Avenue, Five Dock, New South Wales. Background 2 Mrs Volpatti was born on 29 April 1914 and is aged 93. After suffering a stroke in 1999, she moved from her home in Five Dock, purchased in 1937, to Lewisham Nursing Home, where she has lived since. Mrs Volpatti's son, Raymond Volpatti, holds a power of attorney from his mother and acted on her behalf in these proceedings. There is no dispute about the facts, which are summarised below. 3 Since Mrs Volpatti moved to the Nursing Home, her house at Five Dock has been let for the following periods: 15 May 2000 to 5 December 2001, 25 May 2002 to 28 July 2004, 29 July 2004 to 18 December 2005, and 19 December 2005 to the present. She has received rental income from her property of approximately $400 per week. 4 In 2006/2007, Mrs Volpatti's gross annual income was $25,182, derived from rent from her property at Five Dock, a small payment from her late husband's superannuation fund, and interest from a small fixed deposit. Since 2004, she has not received an age pension and her medical prescriptions are not subsidised. From her income, Mrs Volpatti pays Nursing Home fees ($17,947 in 2006/2007), Council and water rates and telephone charges ($1,837 in 2006/2007), and day to day living expenses such as optical, dental and podiatry fees, charges for pharmaceuticals and medical equipment, for clothing and toiletries, outings and gifts, and for the expenses associated with the ongoing maintenance of her property at Five Dock. Mr Volpatti states that since his mother moved into the Nursing Home, maintenance expenses for her house have included $2,000 for internal painting, $3,000 for external painting, and $3,000 for the replacement of guttering. 5 On 10 November 2006, the Chief Commissioner wrote to Mrs Volpatti about possible liability for Land Tax, and asking her to complete and return a questionnaire. The Chief Commissioner received the completed questionnaire on 23 November 2006. Following this, on 17 January 2007, the Chief Commissioner issued a Land Tax Notice of Assessment for the Land Tax Years 2003 to 2007, totalling $12,778.20. 6 On 21 January 2007, Mr Volpatti wrote to the Chief Commissioner stating that his mother was not aware of being liable for Land Tax and objecting to the severity of the assessment in the light of his mother's special circumstances. On 2 May 2007, the Chief Commissioner wrote to Mr Volpatti advising him that the objection had been disallowed because the property had been continuously leased since 2002. On 23 May 2007, Mrs Volpatti applied to the Tribunal for a review of this decision. Mrs Volpatti's submissions 7 Mr Volpatti said Centrelink cancelled his mother's pension several years after she moved into Lewisham Nursing Home, and the Nursing Home, subsequently increased her fees. Her financial situation is very tight and she cannot afford to pay the amount of $12,778 for which the Chief Commissioner says she is liable. Mrs Volpatti's expenditure exceeds her income if major medical bills arise, as happened recently, and he and his wife have had to provide her with financial assistance. They have also paid some instalments for his mother in addressing her Land Tax liability. 8 Mrs Volpatti was not aware that she was liable to pay Land Tax on her property, the assessment "came out of the blue", and is unfair, excessive and punitive. Mr Volpatti said there should be some provision for the exercise of discretion in the case of those with limited means to enable the liability to be waived or, at least, substantially reduced. His mother wanted to retain ownership of the property, which was her home for over 60 years, believing that one day she might be well enough to return there. He said there should be some mechanism in place so that nursing home residents are made aware of any potential liability for Land Tax. The administrators of Lewisham Nursing Home state that they have never been asked to inform residents or their families of such potential liability. Mr Volpatti suggested that the NSW State Government prepare a pamphlet for distribution to each person entering a nursing home addressing the issue of Land Tax. A person of advanced age cannot be expected to be aware of notices published about such matters in the Government Gazette. The Chief Commissioner's submissions 9 Mr Rider, for the Chief Commissioner, noted that pursuant to s 100(3) of the Tax Administration Act 1996 ('the TAA'), Mrs Volpatti bears the onus of proofing her case. He said Mrs Volpatti relies on two principal grounds: first, that she was not given proper notice of any possible Land Tax liability and, second, that the amount of Land Tax assessed is excessive given her circumstances. 10 With regard to the first ground, Mr Rider said that pursuant to s 12(1) and (1A) of the Land Tax Management Act 1956 ('the LTMA'), the Chief Commissioner could by order published in the NSW Government Gazette require the furnishing of Land Tax returns for a specified year or years by 31 January in the relevant year. The Tribunal has held that the effect of these provisions is that there is a clear statutory obligation on relevant land owners: Stature Pty Ltd v Chief Commissioner of State Revenue [2002] NSWADT 271, at par 10; Le Sueur Investments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 151, at par 16. 11 In Mrs Volpatti's case, the Chief Commissioner published the relevant orders in the Gazette in all the Land Tax Years in question and, thus, Mrs Volpatti was deemed to have notice of her obligation under the LTMA. Mr Rider said that notice of Land Tax requirements is also widely published in the newspapers, including local newspapers, and in different languages. 12 With regard to the second ground, whether the Land Tax assessed is excessive given Mrs Volpatti's circumstances, the issue in her case is whether an exemption applies, in particular that which applies in respect of a person's principal place of residence, being the only relevant exemption. Section 9(1) of the LTMA states, "Land tax is payable by the owner of land on the taxable value of all the land owned by that owner which is not exempt from taxation under this Act." There is no general power or discretion to exempt a person from liability on the ground of special circumstances. 13 Mr Rider said for the 2003 Land Tax Year, the 'principal place of residence' exemption was contained in s 10(1)(r) of the LTMA. He examined in some detail the application of this provision which, as the law is not, essentially, disputed by Mrs Volpatti, I need not repeat here. Suffice it to say that as Mrs Volpatti continuously leased out the property from mid to late May 2002 onwards, Mr Rider submitted that she did not 'occupy' the property for the purposes of the LTMA and, therefore, the principal place of residence exemption under s 10(1)(r) did not apply. He said, in any event, the evidence shows Mrs Volpatti's principal place of residence during 2003 was the Lewisham Nursing Home. The Chief Commissioner therefore submits that neither the principal place of residence exemption nor any other exemption applied to Mrs Volpatti during the 2003 Land Tax Year. The Land Tax assessed for that year was the correct amount for the property, and not excessive. 14 With regard to the Land Tax Years 2004 to 2007, Mr Rider stated that the principal place of residence exemption was contained in cl 2, Sch 1A of the LTMA and applies, relevantly, in respect of "[l]and used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose", and defined as land that is continuously used and occupied by the owner for residential purposes. Because the evidence shows that Mrs Volpatti continuously leased out the property in these years, deriving an income of approximately $400 per week, and continuously used and occupied other land – the Nursing Home – for residential purposes, the principal place of residence exemption does not apply in her case. 15 Mr Rider submitted that even if the expenditure incurred by Mrs Volpatti in maintaining the property, of which there is no documentary evidence, were incurred in one Land Tax Year, the cl 8, Sch 1 concession in respect of absences from the principal place of residence of up to six months, would not apply. This is because the level of income Mrs Volpatti derived from the property was "more than is reasonably required to cover council, water and energy rates and charges and maintenance costs of the owner in respect of the residence" (cl 8(7)(b) of Sch 1). Thus, because no exemption applied, the Land Tax for the years 2004 to 2007 was assessed correctly and was not excessive. 16 Mr Rider concluded that Mrs Volpatti has failed to discharge the onus of establishing that an exemption to liability for Land Tax is applicable in her case and the application must therefore be dismissed. Mr Rider said the Chief Commissioner's offer to allow the payment of outstanding Land Tax by instalments, without interest being applied, is still open to Mrs Volpatti. However, instalment payments must be made in accordance with the instalment plan, failing which interest at the market rate will be applied to the outstanding debt. It is also open to Mrs Volpatti to apply to the Hardship Review Board for relief from liability from paying the Land Tax. Among relief that may be granted by the Board is deferment of payment of outstanding Land Tax until the property is sold. Discussion 17 Mr Volpatti did not dispute the relevant law outlined by Mr Rider. However, he submitted that his mother was not given proper notice of any Land Tax liability, and that the amount of Land Tax assessed is excessive given her circumstances. 18 First, with regard to the giving of notice, s 12 of the LTMA states relevantly: 12 Taxpayer to furnish returns (1) The Chief Commissioner may by order published in the Gazette require all persons or specified classes of persons to furnish land tax returns for a specified year or years or for a specified year and each subsequent year. (1A) Every person subject to such a requirement in force in respect of a year shall furnish a land tax return to the Chief Commissioner on or before 31 January in that year. (1B) A land tax return required to be furnished by a person must: (a) set out a full and complete statement of all land owned by the person at midnight on 31 December in the previous year, and (b) set out, or be accompanied by, such information as to the person's land ownership as may be required to complete the return. (1C) ... (1D) ... (2) The Chief Commissioner may at any time require any person to furnish a return or a further and fuller return setting forth a full and complete statement of all or any land owned by the person, or in respect of which the person is agent or trustee, at midnight on the thirty-first day of December in any year including the year one thousand nine hundred and seventy-three or at midnight on the thirty-first day of October in any preceding year, with such other particulars as the Chief Commissioner requires, and whether or not any return has previously been made by that person in respect of land owned by the person, or in respect of which the person is agent or trustee, on that date. (3) ... 19 In Stature Pty Ltd v Chief Commissioner of State Revenue [2002] NSWADT 271, at par 10, the Tribunal said: "there is a clear statutory duty on persons who fall within the Chief Commissioner's Gazette notification published under the provisions of s 12(1) of the LTM Act to lodge tax returns by virtue of the provisions found in s 12(1A) of the LTM Act." 20 This was followed in the recent Tribunal decision in Le Sueur Investments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 151, at par 16. 21 Mr Rider referred to copies of the relevant Notices (requiring land owners to lodge Land Tax returns) published in the Government Gazette for the years 2003 to 2007, which were attached to the Chief Commissioner's written submissions. He submitted that, pursuant to s 12 of the LTMA, Mrs Volpatti was deemed to have notice of her obligation to review her Land Tax liability for the years 2003 to 2007 and to furnish a Land Tax return. 22 In my view, there is no doubt that the Chief Commissioner is correct. Whilst it may seem unfair to a person such as Mrs Volpatti, s 12 of the LTMA operates to impose an obligation on a land owner provided that the required notice is given in the Government Gazette. The Chief Commissioner has, in this case, provided evidence of notice having been properly given, and Mrs Volpatti is therefore deemed to have received notification, with the result that she had an obligation to lodge a Land Tax return. I therefore dismiss this first ground of appeal. I note that, according to Mr Rider, notice of Land Tax requirements is widely published in local newspapers. If it does not already happen, it may also be useful, as suggested by Mr Volpatti, for pamphlets about Land Tax to be distributed to places such as nursing homes so that every opportunity is taken to raise awareness of Land Tax among the broader community. 23 The second ground of appeal is that the amount of Land Tax assessed is excessive given Mrs Volpatti's circumstances. The way is which the Land Tax scheme operates is to impose liability unless an exemption apples. Section 9(1) states that, "Land tax is payable by the owner of land on the taxable value of all the land owned by that owner which is not exempt from taxation under this Act." A series of exemptions are set out in s 10 of the LTMA. The issue, therefore, is whether an exemption applies in Mrs Volpatti's case. 24 As Mr Rider explained, although the relevant provisions of the LTMA were amended with effect from 2004, the essential terms of the only possible exemption that might be applicable in Mrs Volpatti's case remains the same. This is the exemption in s 10(1)(r) in respect of residential land used and occupied as a person's principal private residence, as defined in the legislation and interpreted by the courts and the Tribunal. (For the 2003 Land Tax Year see the LTMA then in effect for the definition of "residential land" in s 10(1)(d), and the definition of "principal place of residence" in s 3(1), as qualified by s 3(3). For the Land Tax Years 2004 to 2007, see the "principal place of residence" exemption set out in cl 2, Sch 1A of the LTMA. These provisions are discussed in the Chief Commissioner's submissions and are not in dispute.) 25 There is no dispute that Mrs Volpatti has not resided at her property at Five Dock since 1999 when, following a stroke, she moved to Lewisham Nursing Home. Her principal place of residence became the Nursing Home and her property at Five Dock was subsequently let to tenants. The evidence of the Residential Tenancy Agreements in respect of the property between 2000 and the present indicates that for the years 2003 to 2007 under review in this matter, the tenants were granted a right to occupy the property, subject to the terms of the Agreements. Thus, because Mrs Volpatti did not "occupy" the property as her principal private residence during these years, the s 10(1)(r) exemption did not apply. 26 In respect of the years 2004 to 2007, Mr Rider considered whether the additional concession allowed in the Land Tax Years from 2004, set out in cl 8 Sch 1A of the LTMA, applied. This concession is available where the land in question is used and occupied by the owner of land for a continuous period of at least 6 months in the Land Tax Year, but where the owner uses and occupies other land as his or her principal place of residence for the remainder of the year. However, Mr Rider concluded, correctly in my view, that on the evidence of Mrs Volpatti's principal place of residence being Lewisham Nursing Home during this period, this concession did not apply in her case. (Moreover, she also did not meet the additional requirements of cl 8(6) and (7) because she derived rental income from the property throughout this period - of approximately $400 per week, well in excess of the expenditure reasonably required in respect of council, water and energy rates and maintenance costs, even taking into account the $8,000 spent on internal and external painting and the replacement of guttering to which Mr Volpatti referred.) 27 I note there is no general discretion in the LTMA allowing the Chief Commissioner to take into account other special circumstances that may apply in respect of a landowner which are not the subject of an exemption under the Act. Thus, I am satisfied that Land Tax has been assessed correctly in respect of Mrs Volpatti's property at Five Dock, notwithstanding that I accept Mr Volpatti's submission that his mother is financially straitened and that her income is barely sufficient, and sometimes insufficient, to cover the expenditure needed to maintain her in modest circumstances at Lewisham Nursing Home. I note the Chief Commissioner's offer to allow payment of the outstanding Land Tax liability by instalments, without interest being imposed, provided payments are made in accordance with the instalment plan. I also note, as mentioned by Mr Rider, that it is open to Mrs Volpatti to apply to the Hardship Review Board for relief from paying the Tax. Decision 28 The decision under review is affirmed.