Constantine v Chief Commissioner of State Revenue [2007] NSWADT 234

CITATION: Constantine v Chief Commissioner of State Revenue [2007] NSWADT 234

DIVISION: Revenue Division

APPLICANT PARTIES: Vasos Constantine (also known as William Constantine) RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 066124

HEARING DATES: On the papers

SUBMISSIONS CLOSED: 21 March 2007

DATE OF DECISION: 5 October 2007

BEFORE: Greenwood J - Judicial Member

CATCHWORDS: Land tax exemption - principal place of residence

MATTER FOR DECISION: Principal matter

Land Tax Management Act 1956 LEGISLATION CITED : State Revenue Legislation Further Amendment Act 2003 Taxation Administration Act 1996

CASES CITED: Ryan v Commissioner of Land Tax [1982] 1NSWLR 305

APPLICANT In person with M Grieco, agent REPRESENTATION: RESPONDENT H El-Hage, solicitor

ORDERS: The application is dismissed and the Chief Commissioner's decision is affirmed

REASONS FOR DECISION Facts 1 This matter comes before the Tribunal as a review of an assessment issued under the Land Tax Managements Act 1956 requiring the applicant to pay land tax for the years 2002, 2003, 2004, 2005 and 2006 land tax years on the property known as 17-25 Belmore Street, Mittagong (FI2/712650) and Braemar property. 2 The applicant purchased a property at Mittagong in 1961 in his sole name and further subdivided the property into two lots: a) 17-25 Belmore Street Mittagong FI 2/712650 ("Belmore") which remained in the applicant's sole name b) 6 Bong Bong Road Mittagong FI 2/562172 ("Bong Bong") which was transferred into the joint names of the applicant and his wife. 3 Both properties were adjoining with a common boundary and fencing between the two. 4 The applicant also owned a further property located at Old Hume Highway, Braemar ("Braemar"), which had not been disclosed by the applicant in his 2005 Land Tax Return and was not disclosed until on or about 21 July 2006 during a property inspection 5 The Bong Bong property was subsequently registered in the names of the applicant and his wife Ourania Constantine as joint tenants and the parties built a residence on this property and this property became their principal place of residence. The Commissioner applied the residential exemption to this property only for both the applicant and his wife for the relevant period of this assessment. 6 On the 19 February 2005 the applicant's wife died and by registration of a Notice of Death the applicant became the sole registered proprietor of the Bong Bong property. 7 In June 2003 the Respondent wrote to the applicant based on information received to advise that no land tax was levied for the 2003 land tax year, and that position was reassessed pursuant to subsequent inconsistent information received from the applicant. 8 On the 11 August 2006 the Respondent issued a Land Tax Notice of Assessment for the years 2002 to 2006 for the sum of $12,527.75 and interest for the Bong Bong and Hume Highway properties, to which the Applicant lodged his objection on the 16 August 2006. The Respondent disallowed the objection and the Applicant filed an application for a review pursuant to S96 of the Taxation Administration Act 1996 in this Tribunal. An order for a stay of the Chief Commissioner's decision was made by the Tribunal on 1 December 2006. 9 Various filing directions were made for the Applicant and the Respondent to file their material (both evidence and submissions) in support of their positions and further extended time was granted by the Tribunal upon application by the Applicant, for the both parties to file all additional material by 21 March 2007 and both parties agreed to the matter proceeding by way of a judicial decision being made on the material filed. The Applicant's Position 10 The Applicant's position is set out in his letter dated 6 January 2007 and filed in the Tribunal on the 12 January 2006 and which is summarised as follows: a) That the applicant owned both the Bong Bong property and the adjoining Belmore property for 40 years (he owned it soley as a single parcel of land before subdivision) and his name was on both certificates of title of the properties after subdivision and therefore he should be assessed as a single holding. b) That the Bong Bong property was his residence at all times. c) That the Belmore property was directly adjacent to the Bong Bong property, and he used the Belmore property as a hobby farm which has full access from the Bong Bong property and effectively used both properties as a residence. d) By further supplementary submissions filed, the Applicant submitted that he relied upon information published by the Commissioners office in an information booklet and by using that publication the Applicant had formed an opinion and course of conduct as to his land tax liability, which may have changed his potential to claim as a primary producer. No evidence was provided as to primary producing activities purported to having been undertaken. e) At all times throughout the conduct of this matter, the Applicant was represented by his daughter. The Respondent's Position 11 Pursuant to ss.7 and 8 of the Land Tax Management Act 1956, land tax is chargeable on the taxable value of land at Old Hume Highway, Belmore Street for the 2002, 2003, 2004, 2005 and 2006 land tax years based on the ownership of that land as at midnight on 31 December of 2001, 2002, 2003, 2004 and 2005 respectively. As at each of those dates, the land at Belmore Street was owned by the Applicant. As at midnight on 31 December 2001, 2002, 2003 and 2004, the land at Bong Bong Road and the land at Old Hume Highway were jointly owned by the Applicant and his wife. Following the death of his wife in February 2005, the Applicant became the sole owner of the land at Bong Bong Road and at Old Hume Highway as at 31 December 2005. As such, the Applicant is prime facie liable for land tax in respect of the 2002, 2003, 2004, 2005 and 2006 tax years based on the taxable value of the land at Belmore Street, Old Hume Highway and Bong Bong Road, except to the extent it can be shown that the land was exempt from land tax. 12 That because the Bong Bong land and the Belmore land were separate lots held in different titles (being different combinations of names) and were separate lots, that they did not satisfy the test set out in Ryan v Commissioner of Land Tax [1982] 1NSWLR 305 sufficiently to be treated as an undivided "parcel of residential land" and therefore the Belmore parcel of land did not attract the residence exemption. 13 The applicant objects to the land tax payable with respect to the land at Belmore Street. He relies on the principal place of residence exemption. On the material filed by the Applicant with the Tribunal, the applicant does not object to the land tax payable with respect to the land at Old Hume Highway. In any event, there is no exemption under the Land Tax Management Act 1956 which applied to that land as it was never used as a residence by the applicant and his wife. 14 Between 2002 and 2006, a number of amendments were made to the relevant sections of the Land Tax Management Act 1956 providing for the principal place of residence exemption. In particular, it is necessary to distinguish between the form of the legislation which applied for the 2002 and 2003 land tax years and that which applied for the 2004, 2005 and 2006 land tax years. 15 The provisions of S27 of the Land Tax Management Act 1956 in dealing with two separate owners of a parcel of land is not relevant and cannot been deemed to be applicable to joint owners, if they are in fact not actually joint for all parcels. Applicable Legislation 16 As at 31 December 2001, the taxing date for the 2002 land tax year pursuant to s.10 of the Land Tax Management Act 1956 relevantly provided: "10 Land exempted from tax (1) Except where otherwise expressly provided in this Act the following lands shall, subject to sections 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act: … p) with respect to taxation leviable or payable in respect of the year commencing 1 January 1991 or any succeeding year, land that: i) is land used for primary production in the course of the carrying on of a business of primary production, or ii) is land used for primary production (whether or not in the course of carrying on a business of primary production) if the land is within a "rural" or "non-urban" zone under a planning instrument or (in the case of land not within a zone under a planning instrument) is land that the Chief Commissioner is satisfied is rural land. … r) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1998 or any succeeding year, land that has a land value in respect of the year of less than the premium tax threshold and that is used and occupied as the principal place of residence of the owner of the land (or if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose (except as provided by subparagraph (iii), being: i) a strata lot, or ii) a parcel of residential land, or iii) a parcel of resident land on which there is also one of the residential occupancies referred to in subsection (1D)(b)(ii)(A)-(F), unless the owner or all of the joint owners who so used and occupied the lot or parcel (as appropriate) is such an owner by reason only of being a trustee, … (1D) In paragraph (r) of subsection (1) residential land means land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes: a) not being land that: i) is owned by a company, ii) is owned by or on behalf of a company and is land of which a mortgagee or person by way of security for money is in possession, iii) is held by a trustee for or on behalf of a company, or iv) in respect of which a company is jointly assessed with any other person, and b) not being a building or buildings: i) comprised of lots within a strata plan or residential units, ii) containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner and any one of the following residential occupancies: A) one room, B) one suite of rooms (not being a flat) each room of which all occupants of the suite are entitled to occupy, C) one flat, D) one suite of rooms (not being a flat) each room of which all occupants of the suite are entitled to occupy, and one room, E) one flat and one room, F) 2 rooms, each of which is separately occupied, or iii) from any part of which income is derived otherwise than as the consideration for one (but not more than one) of the residential occupancies referred to in subparagraph (ii)(A)-(F)". 17 Section 3 of the Land Tax Management Act 1956, as it applied for the 2002 land tax year (ie, as at 31 December 2001), relevantly provided: "(1) In this Act, unless the context or subject matter otherwise indicates or requires: … Land used for primary production means land used primarily for: a) the cultivation thereof for the purpose of selling the produce of such cultivation, b) the maintenance of animals (including birds), whether wild or domesticated, for the purpose of selling them or their natural increase or bodily produce, (b1) the purpose of commercial fishing (including preparation for that fishing and the storage or preparation of fish or fishing gear) and the commercial farming of fish, molluscs, crustaceans or other aquatic animals, c) the keeping of bees thereon for the purpose of selling their honey, d) a commercial plant nursery, but not including a nursery at which the principal cultivation is the maintenance of plants pending their sale to the general public, or e) the propagation for sale of mushrooms, orchids or flowers, and includes all land owned by a society registered as a rural society under the Co-operation, Community Settlement, and Credit Act 1923 as amended by subsequent Acts. … (2) For the purposes of this Act, in respect of any year in respect of which taxation is leviable or payable, land or a flat is not used or occupied as the principal place of residence of a person unless: a) that land or flat and no other land or flat has, since before the first day of July that last preceded the commencement of that year, been continuously used and occupied by that person for residential purposes and for no other purpose, or b) in any other case, the Chief Commissioner is satisfied that the land or flat is used and occupied by that person as the person's principal place of residence". 18 Although some amendments were made after 31 December 2001 affecting the provisions set out above, for present purposes no relevant changes were made until the State Revenue Legislation Further Amendment Act 2003 took effect on 31 December 2003. The amendments which took effect on that date included transferring the substantive provisions dealing with the principal place of residence exemption from S.10(1)(r) to a new Sch. 1A. For the purposes of the 2004 land tax year, S.10(1) relevantly provided as at 31 December 2003: "10 Land exempted from tax 1) Except where otherwise expressly provided in this Act the following lands shall, subject to sections 10B, 10D, 10E, 10G and 10P, be exempted from taxation under this Act; …. r) land that is exempt from taxation under the principal place of residence exemption, as provided for by Schedule 1A" 19 As at 31 December 2003, Sch. 1A of the Land Tax Management Act 1956 relevantly provided as follows: " Schedule 1A Principal place of residence exemption Part 1 Preliminary 1. Definitions (1) In this Schedule: Principal place of residence exemption – see clause 2. Residential land – see clause 3. Taxing date – means midnight on the thirty-first day of December. (2) For the purposes of this Schedule, a reference to the owner of land includes, if there are joint owners, any one or more of those joint owners. Part 2 Principal place of residence exemption 2 Principal place of residence exemption (1) Land used and occupied buy 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 (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) If the owner of land is entitled to the exemption conferred by this clause, no other person is liable to be assessed for taxation under this Act in respect of the land during the period of the owner's entitlement to the exemption. (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, that use and occupation being use and occupation of a building or buildings designed, constructed or adapted for residential purposes, other than a building or buildings: (a) comprised of lots within a strata plan or residential units, or (b) containing (out of the total of all rooms in the building or buildings) occupancies other than that of the owner, or (c) from any part of which income is derived. (2) Land does not cease to be used and occupied as provided by subclause (1) by reason of there being on that land any building or improvement that is used or occupied for a purpose ancillary to the purposes for which the building is, or the buildings are, designed, constructed or adapted. Note. Clause 4 allows one residential occupancy to be disregarded in applying the principal place of residence exemption. Clause 5 allows the use of land for purposes ancillary to a business conducted at a different place to be disregarded in certain circumstances". 20 Section 3 relevantly provided as at 31 December 2003: " Definitions (1) In this Act, unless the context or subject matter otherwise indicates or requires: … 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". 21 There were minor amendments made to Sch. 1A to the Land Tax Management Act 1956 during the 2005 and 2006 land tax years, primarily relating to the change in dates. The amendments do not apply in this case. Reasons 22 The test for determining the application of the principal place of residence to two adjoining but separate parcels of residential land is set out in Ryan's case and it is the situation in this matter that the relevant legislation, namely the Land Tax Management Act 1956 is essentially the same legislation in both cases. In Ryan's case Hunt J at 307D-E stated: " a parcel of residential land not exceeding 2100 square metres in area that is used and occupied as his principal place of residence and for no other purpose by the owner of the land ,or where there are joint owners, as his principal place of residence and for no other purpose by any one or more of them … 23 The expression "residential land " is defined by S10(1)(D) as meaning: "... land that is used and occupied for residential purposes and for no other purpose, that use and occupation being use and occupation of a building that is designed ,constructed or adapted for residential purposes…." 24 Hunt J further went on to specify that a "parcel of residential land that consisted of more than one lot, provided the lots were" undivided not only by a physical separation but also: in use occupation and title 25 His honour also used the words "contiguous blocks" and the four part test. 26 In Ryan's case, the land owners did not own their two parcels in the same form of title as in this case. The applicant also did not (in this case for the relevant period 31December 2001,2002, 2003 and 2004) hold the land in the same title name/s as to meet the criteria of "undivided title", a situation which came about by virtue of this applicant's own earlier decision to subdivide and change the title to include his wife's name. 27 This Tribunal is bound to apply the test in Ryan's case and the series of cases which followed it. The issue here is also the relevant time periods for which the change in title occurred so as to constitute the rule of "undivided as to title" for the land tax periods in issue were 2002 to 2005 tax years, whilst one of the properties namely the Bong Bong property carried the wife's name and the Applicant's name, whilst the Belmore property was only in the applicant's name. Therefore for the purposes of those land tax years the two separate properties did not constitute "contiguous blocks" to be "a parcel of residential land" and the residential exemption could not apply to both lots, only to the Bong Bong Road property, where the applicant actually lived with his wife. 28 The Respondent has conceded that for the 2006 land tax year, the title to both properties became the same and the applicant was able to demonstrate the 4 part test was met as to all parts. The Applicant has not filed any evidence of primary production or hobby farm activities for commercial purposes, although he does make a statement that he makes no profit and accordingly those claims have no application to matters set out by the applicant in his Application for review of the Commissioner's current assessment and substance of matters for review filed with this Tribunal, principally the Applicant's case was one involving the application of residency exemption to the Commissioners assessment. 29 The Respondent has assessed the Applicant and his wife in respect of the land they held jointly and individually .The Applicant and his wife were assessed separately pursuant to the subsections of S27 of the Land Tax Management Act 1956. In this matter the one Applicant is named in relation to his own assessment. ORDER The application is dismissed and the Chief Commissioner's decision is affirmed.