Lee v Chief Commissioner of State Revenue [2008] NSWADT 211

CITATION: Lee v Chief Commissioner of State Revenue [2008] NSWADT 211

DIVISION: Revenue Division

APPLICANT Henry Harrie Lee PARTIES: RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 086018

HEARING DATES: 8 July 2008

SUBMISSIONS CLOSED: 8 July 2008

DATE OF DECISION: 31 July 2008

BEFORE: Handley R - 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: Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50

APPLICANT In person REPRESENTATION: RESPONDENT P Singleton, barrister

ORDERS: The decision under review is affirmed.

REASONS FOR DECISION 1 Henry Lee filed an application with the Tribunal for the review of a decision of the Chief Commissioner of State Revenue ('the Respondent') disallowing Mr Lee's objection to a notice assessing Mr Lee as being liable for the payment of Land Tax on his property at 10 Balfour Street, Wollstonecraft on the ground that it was not Mr Lee's principal place of residence at the relevant time. The Facts 2 There is no dispute about the relevant facts. Mr Lee and his late wife, Jenny Lee, purchased a property at 10 Balfour Street, Wollstonecraft in late 2004. Mr Lee states that their intention was to rebuild or undertake extensive renovation of the property with a view to occupying it as their principal place of residence. However, in order to undertake the necessary building work, they first had to sell their existing residence in Wollstonecraft. This took considerably longer than they expected – about a year - and so, in the meanwhile, they let 10 Balfour Street to tenants. 3 Sadly, in January 2006, Mrs Lee was diagnosed with lung cancer, and subsequently died in May 2006. Mr Lee was grief stricken. He decided nevertheless to go ahead with the rebuilding/renovation of 10 Balfour Street and, in about September/October 2006, he gave notice to the tenants to vacate the property with effect from 30 January 2007. The tenants vacated the property on 11 December 2006. 4 Mr Lee said that in December 2006 he was overseas and did not return to Australia until 23 January 2007. Shortly after this, Mr Lee met his builder at 10 Balfour Street to inspect the property and discuss ideas for its renovation. Because the builder had other outstanding commitments in 2007 and an architect was required to draw up plans for the building work, Mr Lee decided to re-let the property in the interim. The builder spent about one and a half days "tidying up" the property so that it could be re-let. A new tenant was found about a month later. 5 On 5 March 2007, Robert Webster, Mr Lee's accountant, completed a Land Tax Questionnaire as Mr Lee's agent and submitted this to the Office of State Revenue ('the OSR'). At the OSR's request, Mr Webster subsequently provided further information. On 27 August 2007, the Respondent issued a Land Tax Notice of Assessment for 10 Balfour Street, claiming Land Tax for the Land Tax year 2007 of $9,302.65. Mr Webster lodged an objection to this assessment on behalf of Mr Lee, claiming that when the tenant vacated 10 Balfour Street on 11 December 2006, Mr Lee took possession of the property with the intention of making it his principal place of residence. He therefore requested that an exemption be granted from Land Tax on the basis that the property was Mr Lee's principal place of residence on 31 December 2006. The OSR requested further information, which Mr Webster supplied. 6 On 8 January 2008, the Respondent notified Mr Lee that his objection had been disallowed. On 26 February 2008, Mr Lee filed an application for a review of this decision by the Tribunal. The Relevant Legislation 7 Pursuant to sections 7 and 8 of the Land Tax Management Act 1956 ('the LTM Act'), Land Tax is payable on the taxable value of land owned by taxpayers in NSW based on their ownership of land on the 31 December immediately preceding the year for which the Land Tax is levied. Section 10(1)(r) provides an exemption from taxation under the "principal place of residence exemption, as provided by Schedule 1A". 8 Schedule 1A of the LTM Act provides relevantly: 2. Principal place of residence exemption (1) Land used and occupied by the owner as the principal place of residence of the owner of the land, and for no other purpose, is exempt from taxation under this Act, in respect of the year commencing on 1 January 2004 or any succeeding year, if the land is: (a) a parcel of residential land, or (b) ... (2) Land is not used and occupied as the principal place of residence of a person unless: (a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes since 1 July in the year preceding the tax year in which land tax is levied, or (b) in any other case, the Chief Commissioner is satisfied that the land is used and occupied by the person as the person's principal place of residence. (3) ... (4) The exemption conferred by this clause is referred to as the principal place of residence exemption.. 9 Since Mr Lee was not in occupation of the property at 10 Balfour Street on the preceding 1 July (2006), clause 2(2)(a) does not apply. Thus, the issue to be determined by the Tribunal is whether, pursuant to clause 2(2)(b), the Commissioner should be satisfied that as at 31 December 2006, the property was used and occupied by Mr Lee as his principal place of residence. Pursuant to section 100(3) of the Taxation Administration Act 1996, Mr Lee bears the onus of proving his case. Mr Lee's Evidence and Submissions 10 Mr Lee said because he was overseas when the tenant occupying 10 Balfour Street moved out on 11 December 2006, he was physically unable to occupy the property until he returned to Australia on 23 January 2007. Then, because his builder was otherwise committed and unable to commence work on the property in the immediate future, Mr Lee decided the re-let the property for the interim. However, as at 31 December 2006, it was his intention that the property should be his principal place of residence and, in September/October 2006, he gave the tenants notice to vacate the property to enable him to occupy it for this purpose. 11 Mr Lee said the next-door property, 8 Balfour Street, is owned by his two sons. During the period following his late wife's treatment for cancer, which was after they had sold their previous home in Wollstonecraft, he and his wife had to move twice. In February 2007, 8 Balfour Street became vacant and so, in March 2007, his son took occupation of the property as his principal place of residence and Mr and Mrs Lee moved there to live with him. 12 Mr Lee said that as a matter of fairness and equity he should be able to claim an exemption in respect of 10 Balfour Street, especially in view of the fact that his son occupied 8 Balfour Street as his principal place of residence for nine months of 2007 and was still subject to Land Tax for that property. Mr Lee said it was inequitable for Land Tax to be payable on both properties. The Respondent's Submissions 13 Mr Singleton, for the Commissioner, submitted that the principal place of residence exemption does not apply in this case. While expressing sympathy for Mr Lee in respect of the tragic death of his wife, Mr Singleton submitted that, as explained by the Appeal Panel of the Tribunal in Chief Commissioner of State Revenue v Aldridge & Anor (RD) [2003] NSWADTAP 50 ('Aldridge'), the Respondent has no discretion in such a case. Rather, it is a matter of the Respondent applying the law to the facts. For the principal place of residence exemption to apply in respect of the 2007 Land Tax year, the Respondent has to be satisfied that the property was used and occupied by Mr Lee as his principal place of residence as at 31 December 2006. 14 The fact that the tenant moved out of 10 Balfour Street on 11 December 2006 does not mean that the property became Mr Lee's principal place of residence. The property remained vacant until March 2007 when it was re-let because Mr Lee's builder was not available to commence the required building work. The fact that Mr Lee had a subjective intention to occupy the property as his principal place of residence and move in at a future time when the rebuilding/renovation work had been completed, does not establish that the property was his principal place of residence. He never used the property as his principal place of residence. As explained by the Appeal Panel in Aldridge, actual occupation is required to attract the exemption. Discussion 15 Mr Lee contends that the principal place of residence exemption should apply in respect of the payment of Land Tax for 10 Balfour Street for the 2007 Land Tax year. The Respondent submits that the facts do not support the application of the exemption. 16 I agree with the Respondent's analysis of the decision in Aldridge. At paragraph 26 of that decision, the Appeal Panel concluded, in relation to a provision similar to clause 2(2) of Schedule 1A, that no discretion is conferred on the Respondent in a case such as this. It is a question of the facts: "If the evidence of the factual circumstances supports that a particular parcel of land or a flat is used and occupied by a person as the person's principal place of residence (as defined in section 3(1) of the Act) as at midnight on 31 December in a particular year, the Chief Commissioner must be "satisfied" of that fact. If the factual circumstances do not support that a particular parcel of land or a flat is used and occupied by a person as the person's principal place of residence as at midnight on 31 December in a particular year, the Chief Commissioner cannot be "satisfied" of that fact." 17 The Appeal Panel also stated, at paragraph 14, that "[a] subjective intention to occupy is not alone sufficient to bring a property within section 10(1)(r)." The words in clause 2(2)(b) "land used and occupied by the person as the person's principal place of residence", require actual occupation of the land and an intention to occupy does not satisfy this requirement. 18 The case put forward by Mr Lee is one based on fairness and equity in imposing liability for Land Tax, taking into account his intention to occupy the property as his principal place of residence once renovation/rebuilding work has been completed. 19 However, as is made clear in the decision in Aldridge, there is no discretion in the relevant provisions of the LTM Act, and, in particular, in clause 2(2)(b) of Schedule 1A, referred to above, for the Commissioner to take into consideration anything other than the stipulated facts. The Commissioner must be satisfied that the land in question "is used and occupied by the person as the person's principal place of residence" for the exemption in clause 2(2)(b) to apply. 20 As at 31 December 2006, Mr Lee was not in occupation of 10 Balfour Street – he was overseas. Whilst I accept that it was his intention to occupy the property as his principal place of residence, this was to be in the future once rebuilding/renovation work had been completed. It appears that discussions with his builder over the nature of this work did not start until after Mr Lee's return to Australia on 23 January 2007. The builder was, at that time, fully committed and unable to undertake the building work that might be required at 10 Balfour Street in the immediate future. It was for this reason that Mr Lee re-let the property. 21 Whilst sympathetic to Mr Lee's grief following the sudden death of his wife from cancer and how this affected the relevant events of 2006/2007, I am not satisfied that on 31 December 2006 Mr Lee used and occupied the property as his principal place of residence so as to meet the requirements for the exemption in clause 2(2)(b) to apply. Thus, the decision under review must be affirmed. Orders The decision under review is affirmed.