Vassiliou and anor v Chief Commissioner of State Revenue [2008] NSWADT 15

CITATION: Vassiliou and anor v Chief Commissioner of State Revenue [2008] NSWADT 15

DIVISION: Revenue Division

APPLICANTS Anthony Vassiliou and Despina Vassiliou PARTIES: RESPONDENTS Chief Commissioner of State Revenue

FILE NUMBER: 076064

HEARING DATES: 5 December 2007

SUBMISSIONS CLOSED: 5 December 2007

DATE OF DECISION: 11 January 2008

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

Chief Commissioner of State Revenue v Aldridge [2003] NSWADTAP 50 CASES CITED: Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41 Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57

APPLICANT BL Jones, barrister REPRESENTATION: RESPONDENT A Rider, barrister

ORDERS: That part of the decision under review concerning the Land Tax assessment for 2005 of land owned by the Applicants at Liguria Street, South Coogee is set aside and the Tribunal remits the matter to the Respondent for reconsideration with the direction that the Applicants' Liguria St, South Coogee land was their principal place of residence as at 31 December 2004.

REASONS FOR DECISION 1 On 26 April 2007, Anthony Vassiliou filed an application with the Tribunal for the review of a decision of the Chief Commissioner of State Revenue ('the Respondent') disallowing his objection to a notice assessing Mr Vassiliou and his wife Despina Vassiliou ('the Applicants') as being liable for the payment of Land Tax on their land at Coogee. Mrs Vassiliou was added as an applicant in these proceedings by order of the Tribunal on 5 December 2007. Background 2 In about 1998, the Applicants purchased a property - Unit 28, 2-4 Bellevue Street, Surry Hills ('the Surry Hills unit'), in which they resided with their children as their principal place of residence from about 2000. In or about 2001, Mistspot Pty Ltd, a company in which the Applicants were the sole directors and shareholders, purchased an oceanfront property in Liguria Street, South Coogee ('the Coogee property'). 3 On 9 July 2002, Randwick City Council approved a development application for the demolition of the existing dwelling at the Coogee property and the construction of a new dwelling and swimming pool. Mr Vassiliou obtained an owner builder permit to enable him to undertake the necessary construction work. Demolition of the existing dwelling commenced in about October 2002 and, between late 2002 and August 2003, excavation work was undertaken on the site and the footings laid. 4 In August 2003, the Applicants decided to purchase the Coogee property from Mistspot Pty Ltd. The transfer was signed on 17 November 2003, although the Applicants were not registered as proprietors until 16 February 2004. 5 Between August and November 2003, intensive building work was undertaken on site, so that by November 2003, the shell of the bottom of the dwelling was complete and a bottom room was watertight and had a temporary supply of power and water. From about 17 November 2003, having brought a mattress and other items to the Coogee property, Mr Vassiliou began sleeping there on four or five nights a week, both to secure the site and as a matter of convenience to enable him to undertake building work. Mrs Vassiliou and the Applicants' children continued to live at the Surry Hills unit, visiting Mr Vassiliou at the Coogee property during the week. He would spend the weekends with them. 6 On 17 November 2004, by which time the construction work on the Coogee property was almost complete, the Applicants claim that Mrs Vassiliou and the Applicants' children moved into the property. Thereafter, Mr Vassiliou continued to use part of the Surry Hills unit as an office for conducting his business until the unit was sold in late 2006. 7 On 30 November 2004, the Respondent issued a Land Tax Notice of Assessment to the Applicants for the 2004 Land Tax year in respect of the Coogee property and the neighbouring unit to the Surry Hills unit, also owned by the Applicants - Unit 27, 2-4 Bellevue Street, Surry Hills. On 18 January 2005, the Respondent issued a Land Tax Notice of Assessment to the Applicants for the 2005 Land Tax year once again in respect of the Coogee property and the neighbouring unit at Surry Hills. In both cases, the Surry Hills unit owned by the Applicants - Unit 28, 2-4 Bellevue Street, was assessed to be the Applicants' principal place of residence and exempt from Land Tax. 8 By letter dated 7 February 2006, Mr Vassiliou requested a variation of these assessments stating that he had used the Coogee property as his principal residence from November 2003 onwards. By letter of 6 April 2006, the Office of State Revenue ('OSR') requested copies of utility accounts or other documents to demonstrate his residency. The Applicants' accountant responded with a copy of an account dated 3 November 2003 for a car windscreen, addressed to Mr Vassiliou at the Coogee property, a rates notice for the Coogee property dated 23 January 2004, and a Sydney Water account for the Coogee property dated 4 February 2004, the latter two accounts both being addressed to the Applicants at the Surrey Hills unit. 9 By letter dated 6 October 2006, the OSR informed the Applicants that, based on available information, the Coogee property was not their principal place of residence for the 2004 and 2005 Land Tax years. By letters dated 16 and 21 November 2006, the Applicants' lawyers lodged an objection to this assessment. On 14 February 2007, the Commissioner disallowed the objection. 10 The Applicants' application to the Tribunal, filed on 26 April 2007, sought a review of the Commissioner's decision in respect of both the 2004 and 2005 Land Tax years. Prior to the hearing, the Applicants notified the Tribunal that they no longer contested the Commissioner's decision in respect of the 2004 Land Tax year. The Relevant Legislation 11 Pursuant to sections 7, 8 and 9 of the Land Tax Management Act 1956 ('the LTM Act'), Land Tax is payable on the taxable value of the land comprising the Applicants' Coogee property based on the ownership of the land as at midnight on the 31 December of each year. Thus, the Applicants were presumed to be liable for Land Tax on their Coogee property for the 2005 Land Tax year based on their ownership of the land on 31 December 2004, unless the land was exempted from tax. For the Land Tax year 2005, Schedule 1A of the LTM Act provided 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: (a) the land has a land value in respect of the year of less than the premium tax threshold, and a parcel of residential land, or (b) the land is: (i) a parcel of residential land, or (ii) a lot under the Strata Schemes (Freehold Development) Act 1973 or a lot under the Strata Schemes (Leasehold Development) Act 1986.\ (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. 3. Residential land—meaning (1) In this Schedule, residential land means land that is used and occupied for residential purposes and for no other purpose, ..." 12 The Applicants contend that Mrs Vassiliou and the children moved into the property on 17 November 2004. Therefore, the only issue to be determined by the Tribunal is whether, pursuant to clause 2(2)(b) of Sch 1A, the Commissioner should be satisfied that as at 31 December 2004, the property was used and occupied by the Applicants as their principal place of residence. Pursuant to s 100(3) of the Taxation Administration Act 1996, the Applicants bear the onus of proving their case. Oral Evidence 13 Mr Vassiliou provided affidavits dated 18 August 2007 and 16 September 2007. He said that when searching through documents stored in his garage yesterday, he located an invoice for $700 from Prestige Removals, dated 5 November 2004, for seven hours in which they were engaged in removals from the Surry Hills unit to the Coogee property. Mr Vassiliou said, prior to that date, he had previously moved a lot of their furniture himself using a "ute", but there were some larger items such a pizza oven, a piano, an old fridge, an old lounge, and boxes of heavy items, which he employed Prestige Removals to move. 14 In cross-examination, Mr Vassiliou said that when he first began staying at the Coogee property from about 17 November 2003, he had a mattress and sheets, a camping stove, gas bottle and cooking utensils, a kettle, bar fridge, a radio and reading matter. Water and electricity were connected to the property and there was a working toilet and shower. 15 Mr Vassiliou acknowledged that when his family moved into the Coogee property in November 2004, there was still landscaping to be done and some external work, such as laying the footpath to the front entry. The Council did not issue an occupancy certificate for the dwelling until 2005. After his family moved in, he continued to use a bedroom at their Surry Hills unit as his office, although it was otherwise vacant until sold at auction in late 2006, with settlement occurring in early 2007. Mr Vassiliou said he or one of his family would go there about four times a week to collect the mail, put out the rubbish bins, or do a bit of paperwork. He agreed that he only changed the registered address of his business from the Surry Hills unit on 15 December 2006. 16 Mrs Vassiliou provided an affidavit dated 26 November 2007. She said that from about 17 November 2003, her husband was sleeping at the Coogee property on four or five nights a week. At that time, she was undertaking cleaning for their block of units at Surry Hills and would finish work between 10 am and 12 noon, when she had put out the rubbish bins. They had a cleaning contract for the building, which had commenced in about May/June 2000 and finished in May 2007. On school days, she would collect the children from school at 3.15 pm and then drive straight to the Coogee property with the children to see her husband. 17 Mrs Vassiliou said they used the two units they owned at Surry Hills themselves. After they moved to Coogee, she helped her husband with the redecorating of the units before they were sold. The redecorating took place over a period of three to five months. 18 Mrs Vassiliou said her husband borrowed a "ute" to move things to the Coogee property. He would get someone to help him if this involved moving something heavy. They only used removalists on one occasion. She said that she only changed the address on her driving licence in November 2005 because, when her husband came home one day having renewed his licence, he told her that she needed to do so. 19 Roland Brown, a neighbour of the Applicants, who "lives three doors down in the same street", gave oral evidence by conference telephone. He provided a statutory declaration dated 27 November 2007, having previously provided a statutory declaration dated 14 November 2006. Mr Brown said he first met Mr Vassiliou at the auction when Mr Vassiliou bought the Coogee property in about 2001. Mr Brown said he used to see Mr Vassiliou virtually every day when Mr Vassiliou was working on the property. He was aware of Mr Vassiliou living in the property to protect it, other houses in the street having been broken into. Mr Brown was not aware of whether Mr Vassiliou was there all the time. He remembered seeing Mrs Vassiliou and the children there visiting Mr Vassiliou, but does not recall how often or when. She often used to bring food for him. 20 Mr Brown said when Mrs Vassiliou and the children moved into the Coogee property, it was essentially finished, although there were still some things that needed doing. Mr Brown recalled that his own family came over from England to visit for the Christmas of 2004 and, while they were visiting, they all went to see the Applicants at the Coogee property. 21 Victor Drollett, a close friend of the Applicants, provided an affidavit dated 27 November 2007. He supplied the scaffolding for the construction of the Applicants' Coogee dwelling and said that the scaffolding was gone by about May 2003, and the house had been completed at the time Mrs Vassiliou and the children moved in about November 2004. Mr Drollett said that he had helped Mr Vassiliou move some items into the house – beds and cupboards - and recommended a removalist. Mr Drollett and his wife have since visited the Applicants at the Coogee property. The Applicants' Submissions 22 Mr Jones, for the Applicants, said this is a straightforward matter: whether as at midnight on 31 December 2004 the Applicants were living at the Coogee property as their principal place of residence. The Applicants contend that the property became their home from when they moved in on 17 November 2004. That they did so at this time is the uncontradicted evidence of the Applicants and their witnesses Mr Brown and Mr Drollett. Moreover, the removalist's invoice also supports this evidence. 23 The only contrary evidence to which the Respondent can draw attention is of the Applicants not having changed their address on their driving licences, on the Electoral Roll and for the ASIC registration of their business. Mr Jones submitted that the Applicants have provided reasonable explanations for not having done so. He said the evidence as to the Applicants living at the Coogee property on 31 December 2004 is overwhelming, and the Tribunal should be satisfied on the balance of probabilities that it was their principal place of residence at this time. 24 In his written submissions, Mr Jones referred to the decision in Chief Commissioner of State Revenue v Aldridge [2003] NSWADTAP 50 ('Aldridge'), at par 26, where the Appeal Panel held that the Chief Commissioner's discretion in the predecessor to clause 2(2(b) does not confer a true discretion, but must be exercised if, on the objective facts, the land or flat is occupied by the person as their principal place of residence, as was the case with the Applicants and their Coogee property as at 31 December 2004. In Chief Commissioner of State Revenue v Ferrington [2004] NSWADTAP 41 ('Ferrington'), at par 42, the Appeal Panel affirmed that the assessment must be made objectively in the light of the circumstances relating to the actual occupation of the dwelling. The short length of a person's residence, while relevant, is not determinative of the issue. It is the nature of the occupation which provides the element of permanence. The Appeal Panel rejected the Chief Commissioner's submission that the person must occupy the premises for at least a couple of months. The Respondent's Submissions 25 Mr Rider, for the Respondent, said that the Applicants' evidence had been put on so late that the Respondent had been unable to test that evidence. In any event, he submitted, referring to the decision in Aldridge, there was no objective evidence in the nature of utility bills, or bank or mortgage statements to connect the Applicants to the Coogee property. Mr Rider noted that the Applicants continued to use the Surry Hills unit as their postal address, and that this address was that on their driving licences until October/November 2005, and was that against which they were registered on the NSW Electoral Roll. Also, the Surry Hills address was registered with ASIC as their company's principal place of business until December 2006. Finally, the Council did not issue a Certificate of Occupancy for the Coogee property until after December 2004. Thus, Mr Rider submitted that the Tribunal should not be satisfied that the Coogee property was the Applicants' principal place of residence on 31 December 2004 given the objective evidence to the contrary. 26 Mr Rider noted that in Chief Commissioner of State Revenue v Mesiti [2003] NSWADTAP 57, at 59, the Appeal Panel said, at par 59: "Whether it was her principal place of residence is an objective fact, to be decided by us. Her own impression does not conclude the matter." See also Ferrington, at par 44. Discussion 27 The basic principles used in determining whether a person has used land as their principal place of residence were discussed in Ferrington, at par 42. The Appeal Panel said: "First, the words 'principal place of residence' should be given their ordinary meaning in the context in which they appear ... Secondly, consideration of whether a person has been residing or occupying premises as their principal place of residence is to be assessed objectively, in the light of the circumstances relating to the actual occupation of the dwelling ... Thirdly, the intention of the person concerned, gauged objectively, is relevant but not determinative of the issue ... Fourthly, to occupy a home as his or her principal place of residence a person's occupation must have a degree of permanence to it: a connection to a place of residence of a transient, temporary, contingent or passing nature is not sufficient, nor is occupation for some other purpose ... Fifthly, the short length of a person's residence, while relevant, is not determinative of the issue ... This is so since a recipient's occupation of a home, while short, may have the requisite degree of permanence to it. But that will not happen if, when considered objectively, the occupation was transient, temporary, contingent or of a passing nature, or for some other purpose. One may occupy premises for a short time on a transient, temporary, or contingent basis, but one can also occupy for a short time as one's principal place of residence. It is the nature of the occupation which provides the element of permanence. The fact that a period of actual occupation is short, as in the present case, will in practice make it harder for a recipient to show that the occupation was as his or her principal place of residence, but it will not make it impossible ... Sixthly, the reasons for a person's departure from the home must be both reasonable and adequately explained when considered objectively in the light of their personal circumstances ..." 28 I found the Applicants' evidence compelling. Despite the evidence of their not changing their address for the purpose of their mail, their driving licences, the electoral roll, and their company registration, and not obtaining their Certificate of Occupancy for the dwelling from Randwick City Council until after they claim to have moved in on 17 November 2004, I accept the Applicants' evidence that the Coogee property was their permanent place of residence as at 31 December 2004. 29 In his statement dated 18 August 2007, Mr Vassiliou described the Coogee property as "our dream family home" (paragraph 12). He said he did not see any immediate need to change their address for official purposes because he would call into the Surrey Hills unit, where he maintained his office, on most days. In oral evidence, both Applicants referred to regularly visiting the Surry Hills unit after moving to the Coogee property. Mr Vassiliou said he maintained his office in a bedroom in the unit after they moved to the Coogee property, and Mrs Vassiliou said she continued to clean the building in which their unit is located until their cleaning contract for the building expired in May 2007. They did not finalise the sale of their Surry Hills unit until early 2007. In my view, their explanation for not immediately changing their address is a reasonable one. 30 The Applicants' evidence of their moving into the Coogee property is supported by the evidence of Mr Brown and Mr Drollett. While Mr Brown's and Mr Drollett's recollection of exact dates was not always clear, their evidence supported the Applicants' evidence of the Applicants moving into the Coogee property in November 2004 and of it being their principal place of residence thereafter. 31 While in my view Mr Vassiliou's occupation of the Coogee property from 17 November 2003 was of a more transient nature, I am satisfied that when Mrs Vassiliou and their children moved into the property on 17 November 2004, their occupation, viewed objectively, had the requisite degree of permanence to establish that from that time the Coogee property was their principal place of residence. This is despite the fact that on 31 December 2004 their occupation of the property had been for a relatively short period. 32 Thus, I am satisfied that the Coogee property was the Applicants' principal place of residence as at 31 December 2004, and clause 2(2)(b) of Sch 1A of the LTM Act is thereby satisfied. Decision That part of the decision under review concerning the Land Tax assessment for 2005 of land owned by the Applicants at Liguria Street, South Coogee is set aside and the Tribunal remits the matter to the Respondent for reconsideration with the direction that the Applicants' Liguria St, South Coogee land was their principal place of residence as at 31 December 2004.