Gilmour v Chief Commissioner of State Revenue [2007] NSWADT 145

CITATION: Gilmour v Chief Commissioner of State Revenue [2007] NSWADT 145

DIVISION: Revenue Division

APPLICANT PARTIES: Emma Elizabeth Gilmour RESPONDENT Chief Commissioner of State Revenue

FILE NUMBER: 066127

HEARING DATES: 15 May 2007

SUBMISSIONS CLOSED: 15 May 2007

DATE OF DECISION: 2 July 2007

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

Creamer v Chief Commissioner of State Revenue [2006] NSWADT 272 CASES CITED: Sagovac v Chief Commissioner of State Revenue [2005] NSWADT 91 Tuck v Chief Commissioner of State Revenue [2005] NSWADT 196

APPLICANT In person REPRESENTATION: RESPONDENT G Mackenzie, solicitor

ORDERS: 1. The decision of the Chief Commissioner of State Revenue is affirmed.; 2. The applicant is not entitled to have the 2 year concessional period extended for the 2005 and 2006 land tax years.; 3. The applicant is not eligible to receive a concession pursuant to Section 10T for the land tax year 2003 or pursuant to the various forms of Clause 6 of Schedule 1A for the land tax years 2004, 2005 and 2006.

REASONS FOR DECISION 1 The applicant purchased a vacant block of land at Bondi Beach and the settlement of that purchase occurred on 18 September 2002. The applicant intended to construct a residence on the vacant block of land and to then live in the newly constructed house as her principal place of residence as soon as it was completed. As at the date of hearing the house has not been completed and the applicant's estimate as to when it may be completed to the point that she may occupy the house as her principal place of residence is eighteen (18) months in the future. 2 The applicant has been responsible for obtaining a design of the house, lodging an application with the local council for development and then subsequently she will be responsible for construction of the house. 3 The applicant forwarded a Land Tax Variation Form to the respondent on 7 June 2006. A statutory declaration by the applicant was lodged with the Form setting out reasons why she believed that she should be granted an exemption from the requirement to pay land tax. This declaration set out that she intended to use the home to be built on the vacant block of land as her principal place of residence and that there had been a delay in obtaining the council's approval to the development application. 4 The respondent issued a Land Tax Notice on 26 July 2006 assessing the land for the 2005 and 2006 land tax years. Each of these amounts has been paid. 5 The applicant lodged an objection with the respondent setting out reasons why she should be granted an extension of time for the application of the concession pursuant to Clause 6 of Schedule 1A to the Land Tax Management Act 1956 ("LTM Act"). The applicant provided a summary of the activity which has taken place since 18 September 2002 and requested that the extension of time be granted as the delay was beyond her control. 6 The respondent refused to grant the extension on 5 October 2006 and the applicant then filed this application seeking a review of the Chief Commissioner's decision in respect of the land tax assessment. 7 The applicant has paid the land tax assessed for the 2005 land tax year. Legislation 8 The legislation applicable in respect of the 2003 land tax year is as set out in Section 10T of the LTM Act. The legislation applicable for the land tax years 2004, 2005, 2006 and 2007 is as set out in Clause 6 Schedule 1A to the LTM Act. 9 For the purposes of the 2003 land tax year: "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) (Repealed) (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 or joint owner. (4) This section applies to a person's ownership of land only for the 2 tax years immediately following the tax year in which: (a) the person became owner, or (b) the person, whose land was eligible for an exemption from tax under section 10(1) (r) in that tax year, ceased to be able to use and occupy the land as his or her principal place of residence because of damage to or destruction of the residence on the land by an event such as fire, earthquake, storm, accident or malicious damage, unless the Chief Commissioner extends or further extends it operation in a particular case on the basis of an acceptable delay in that case. (4A) This section does not apply in respect of land referred to in subsection 4(b) unless the land concerned was the principal place of residence, for the purposes of section 10(1)(r), of the person referred to in subsection (4)(b) immediately before the relevant damage or destruction occurred. (5) An acceptable delay is a delay in the commencement or completion of the building or other work necessary to enable the intended use and occupation of the land to become its actual use and occupation that the Chief Commissioner is satisfied is due primarily to reasons beyond the control of the owner." 10 For the purposes of the 2004 land tax year: "6 Concession for unoccupied land intended to be owner's principal place of residence 1. If the Chief Commissioner is satisfied that the owner of unoccupied land intends to use and occupy the land solely as his or her principal place of residence, the owner is taken, for the purposes of the principal place of residence exemption, to use and occupy that land as his or her principal place of residence. 2. This clause does not apply unless the Chief Commissioner is satisfied that: (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 satisfied 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. 5. If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person's ownership of the land and to continue to so use and occupy the land for at least 6 months. 6. The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the land 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. 7. This clause does not apply in respect of land owner by a person if: (a) the person or any member of the person's family (within the meaning of clause 12) is entitled to have his or her actual use and occupation of other land taken into account under section 9C or under this Schedule, or (b) the person or any joint owner of the land owns land outside New South Wales that is the principal place of residence of the person or joint owner, or (c) the land, or the land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it. 8. For the purposes of this clause: unoccupied land means land that is not being used or occupied for any purpose." 11 For the purposes of the 2005 land tax year clause 6 is substantially the same as for the 2005 land tax year. 12 For the purposes of the 2006 land tax year: "6 Concession for unoccupied land intended to be owner's 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. Note. It is an offence under section 55 of the Taxation Administration Act 1996 to make a statement to a tax officer, or give information to a tax officer, orally or in writing, knowing that it is false or misleading in a material particular. 1. 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. 2. 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 the 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. 3. 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. 4. If the principal place of residence exemption applies by operation of this clause to land not actually used and occupied by a person as his or her principal place of residence on a taxing date, that exemption is revoked if the person fails to actually use and occupy the land as his or her principal place of residence by the end of the period in which this clause applies in respect of the assessment of the person's ownership of the land and to continue to so use and occupy the land for at least 6 months. 5. The effect of the revocation is that the principal place of residence exemption is taken not to have applied to the land 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. 6. This clause does not apply in respect of land owned by a person if: (a) the person or any member of the person's family (within the meaning of clause 12) is entitled to have his or her actual use and occupation of other land taken into account under section 9C or under this Schedule, or (b) the person owns land outside New South Wales that is the principal place of residence of the person or a member of the person's family (within the meaning of clause 12), or (c) the land, or the land if combined with any adjoining land of which the person is an owner, is capable of having more than 2 residences or residential units lawfully built on it. 7. For the purposes of this clause: unoccupied land means land that is not being used or occupied for any purpose." 13 Clause 35 of Part 15 of Schedule 2 to the LTM Act also provides: "35 Application of principal place of residence exemption amendments 1. The amendments made to this Act by the 2003 amending Act (other than the amendments referred to in clause 34) apply in respect of a land tax year commencing on or after 1 January 2004 and do not affect any existing liability for land tax. 2. Subject to subclause (1), a reference in Schedule 1A to the principal place of residence exemption, in relation to land owned and occupied as a principal place of residence before 31 December 2003, is a reference to section 10 (1) (r) of this Act (as in force immediately before its substitution by the 2003 amending Act)." 14 Where an exemption has been granted pursuant to Section 10T or Clause 6 in Schedule 1A and subsequent to that exemption the provision is revoked, Clause 6(5) and Clause 6(6) of Schedule 1A then applies with the effect that the exemption is taken not to have applied to the land and land tax liability is to be assessed accordingly. 15 The applicant filed a statutory declaration setting out the history of the activity and events surrounding the development application to the local council and as to the continuing delays in respect the approval therefore, a synopsis of these delays will be set out in the submissions. The issues 16 Was the land at Bondi Beach eligible for exemption from land tax under the provisions of Section 10T LTM Act for the 2003 land tax year? Was the land at Bondi Beach liable to land tax for the land tax years 2004, 2005, 2006 and 2007 under the provisions of Clause 6 Schedule 1A of LTM Act? 17 Have the issues and events surrounding the proposed construction of the house on the vacant land at Bondi Beach demonstrated that the time period set out in Section 10T and/or Clause 6 Schedule 1A of the LTM Act should be extended pursuant to the discretion of the respondent and the Tribunal pursuant to Section 10T (5) or Clause 6(4) Schedule 1A of the LTM Act? Evidence 18 The applicant filed an affidavit by herself which set out the history of the purchase of the block of land, the activities undertaken to obtain consent of the Local Council to the proposed dwelling and the delays which occurred during the process. The applicant also filed affidavits by two other parties. Neither of those parties was called for examination, permitting subsequent cross examination. 19 The respondent filed a statement pursuant to Section 58 of the LTM Act. 20 Both parties relied on written and oral submissions. Applicant's Submissions 21 The applicant submitted that the activities that were set out in her affidavit as to the process of obtaining the consent of the Local Council and her personal circumstances should be taken into account to permit the period to be extended to allow her to be exempt from land tax for each of the relevant years. 22 The applicant settled the purchase on 18 September 2002. On 13 January 2003 the applicant engaged the services of a person to prepare plans to be submitted to the Local Council for approval of the proposed dwelling. Following extensive meetings between the applicant and various officers of the Local Council and with neighbours, the development application was submitted to the Local Council on 20 January 2006 together with a large number of documents that had been obtained by the applicant in response to the consultation with the Council officers. During this period the applicant's first child was born. Following further consultation between the applicant, the Local Council and other parties, the application was amended and submitted to the Local Council on 19 May 2006. Further negotiations occurred and the application was refused on 7 July 2006. Following further consultations the applicant lodged amended plans with the Local Council for review on 26 October 2006. The applicant received written notification of development approval on 19 February 2007. 23 The applicant also submitted that the delay was not within her control and that the extraordinarily long period that has elapsed from the time that the applicant completed the purchase of the property to the date when final approval was given was beyond her control and therefore the extension of time is warranted. 24 Further, the applicant submitted that it was not incumbent upon her to proceed with the construction of a house which had development approval as at the time that she purchased the vacant land. The proposed house was not suitable for her pursuant to that approval and for that reason she did not proceed. In any event the applicant chose to proceed to seek a different approval. 25 The applicant submitted that Creamer v Chief Commissioner of State Revenue [2006] NSWADT 272 ("Creamer") and Sagovac v Chief Commissioner of State Revenue [2005] NSWADT 91 ("Sagovac") should not be followed as each matter was factually different. 26 The applicant also submitted that the reasons given by the respondent for refusal of the application were insufficient and not proper reasons. Respondent's Submissions 27 The respondent submitted that the intent of the Legislation was to provide a concession to an owner in respect of vacant land to allow the principal place of residence to be constructed within the prescribed time and for an extension of time to be granted in limited circumstances. 28 The respondent submitted that the discretionary power is available to permit the grant of an extension of time in circumstances where the delay is in the completion of the building or other works and where that delay is due primarily to reasons beyond the applicant's control. Each case depends on the facts of that case. 29 The respondent submitted that the application is in relation to the 2005 and 2006 land tax years and the circumstances leading up to the end of that period, and that the application for review was to be considered in respect of the operation of Clause 6 of Schedule 1A of LTM Act. The respondent also submitted that the Legislature specifically referred to the word "completion" in the circumstances where an owner intends to build on a vacant parcel of land, this being in contrast to the word "commencement" which is used to refer to where building works are being carried out (For instance, as referred to in Clause 6(3)(b).). Reference was specifically made to the Minister's second reading speech which introduced Schedule 1A: "The Bill will also remove certain restrictions on the current exemption on land where a new family residence is being built or an existing one is being refurbished, provided the owner takes up residence in the completed house within 2 years and remains in residence for at least 6 months." 30 The respondent submitted that the discretionary power to extend the two year period was not available in this instance as the applicant did not commence the building works prior to the end of the 2004 land tax year. The respondent submitted that consideration had been given to the reasons provided by the applicant in respect of her request for review of the refusal to exercise the discretionary power. The respondent referred to the decision in Creamer as supporting the view that the review turns upon the operation of Clause 6 of Schedule 1A. The respondent also submitted that the decision in Sagovac, which considered the provisions of Section 10T (being the predecessor to Clause 6 of Schedule 1A); and that the delay in this instance was primarily due to the decisions made by the applicant in relation to her election to seek a new development application, the design and size of the proposed dwelling, the management of the application and the process of lodgement with the Local Council and, subsequent to that lodgement, seeking consultation with the applicant's neighbours and other persons. 31 The respondent submitted that the Legislation specifically prescribed a two year period in Clause 6(3) (a) and that the power to extend this two year period is intended to redress situations where the delay has been caused due to circumstances beyond the control of the party seeking the extension. 32 The respondent further submitted that there is no provision whereby the Chief Commissioner, and in turn the Tribunal, has discretion to apply the exemption to unoccupied land that the owner has failed to actually use and occupy as the principal place of residence. Further the respondent submitted that the applicant had been provided with reasons for refusal of her objection to assessment. 33 The respondent submitted that in view of the delay the applicant has not satisfied the provisions of the LTM Act and that she is not entitled to an extension of time and is therefore liable to pay land tax for the 2005 and 2006 land tax years. Further, the concession which would have applied for the 2003 and 2004 land tax years should be revoked and the applicant liable to pay land tax for each of those years also. Reasons 34 The applicant purchased a block of land on 18 September 2002, and at this time there was available a development approval for a residence to be built upon the land. The land is said to be a difficult site and the applicant submitted that the development approval that existed was not suitable for her purposes in terms of her proposed principal place of residence and accordingly she sought a person to prepare plans for submission to the Local Council for approval of a proposed dwelling suitable for her requirements. The selection of the person took approximately four (4) months. 35 The applicant embarked on a tortuous exercise in seeking suitable plans for submission to the Local Council and engaged in extensive negotiations with Council officers and then with the neighbours to the land. The evidence that the applicant provided gave due attention to the difficulties that she has had in obtaining consent from the Local Council and to the deficiency of the original plans that she obtained. 36 Clause 6 of Schedule 1A of the LTM Act which replaced Section 10T of the LTM Act as 31 December 2003 provided that an extension was available. This clause was further amended. 37 Both Section 10T and the various forms of Clause 6 of Schedule 1A of the LTM Act provide an exemption where the owner intends to use and occupy the land as the principal place of residence. The exemption exists for two tax years immediately following the tax year when the person became the owner and an extension of this time is at the discretion of the Chief Commissioner where the delay is one that is acceptable or is due primarily to reasons beyond the control of the owner. 38 At the time that the applicant purchased the land she intended it to be her principal place of residence. She further intended to apply for and obtain consent to the construction of her home on the land, and if this had occurred in a timely manner she would have been entitled to the exemption provided. 39 The applicant embarked on a difficult exercise in her attempts to construct her principal place of residence which, as at the date of hearing, had not been constructed and was unlikely to be constructed to a point where she could occupy it until some eighteen (18) months after the date of hearing. The applicant undertook an Owner Builder Information Course immediately following purchase of the land and then sought the services of a person to prepare plans to be submitted to the Local Council. Those plans were not prepared in a timely fashion and there is no information as to why the applicant was unaware that the delay was an extensive delay. This delay occurred in relation to the preparation of the plans and ultimately to their submission to the Local Council, the refusal of consent and the subsequent revised application being made to the Local Council. The cases which have considered the meaning of the phrase "beyond the control of" are Creamer, Sagovac and Tuck v Chief Commissioner of State Revenue [2005] NSWADT 196 ("Tuck"). It was found that where control of the delaying event lay with another person or authority (or even where the physical condition or state of mind of the applicant precluded the applicant from pressing the application) then it was beyond the control of the persons concerned. In the applicant's situation control of the delaying event lay with the applicant in that she sought the services of a particular party, she dealt with the Local Council officers, she was aware of the particular requirements of the Local Council, and she attended to seeking satisfaction of the Local Council's requirements. At no stage was the extensive delay between the purchase of the property and the lodgement of the application with the Local Council beyond her control. 40 The time taken between purchase and the lodgement of the application with the Local Council was some 3 years and 4 months. The Local Council refused the initial application some seven months after it was lodged with the Local Council. An amended application was then lodged with the Local Council some three (3) months later and ultimately approved by the Local Council some four (4) months later. Each of these four periods, in themselves, would in usual circumstances cause some concern in respect of delay and in respect of any obligation concerning the payment of rates and taxes including land tax. Notwithstanding this concern the applicant has proceeded to the point where she is now in the position of being able to construct the dwelling and ultimately being able to move into the dwelling as her principal place of residence. 41 Where the applicant sought professional advice concerning her liability to pay land tax, then that advice would have canvassed the potential liability for assessment for land tax, not only from expiry of the initial 2 year concession included in Section 10T and the various forms of Clause 6 of Schedule 1A of the LTM Act but including the land tax years of 2003 and 2004 42 The respondent's representative drew attention to Creamer, Sagovac and Tuck. Each of these cases has concerned the applicability of the exemption from land tax where vacant land was the subject of the assessment. There is no doubt that the applicant intended to build her principal place of residence on the land she had purchased. From the time of purchase she elected to pursue a particular sequence of events to achieve construction of the principal place of residence. The delays which occurred have been as a result of personal choice of the applicant in that she: (a) elected to forego the Development Approval already granted; (b) attended and gained a certificate in a Course in Owner Builder Information from TAFE; (c) selected a person to prepare plans; (d) engaged in consultation with the person preparing the plans, officers of the Local Council and neighbours; (e) lodged plans with the Local Council; and (f) dealt with a refusal to consent and lodged an amended application. 43 The applicant has not provided evidence that her physical condition or state of mind precluded her from pressing the steps referred to in (c), (d), (e) or (f) above and, in any event, in view of the choices made by the applicant this issue does not impact on the extensive delay which occurred and continues. 44 For the above reasons the application is refused. The decision of the Chief Commissioner of State Revenue is confirmed. The applicant is not eligible for an extension of time pursuant to the terms of Section 10T or pursuant to the various forms of Clause 6 of Schedule 1A of the LTM Act. This application is in respect of the assessment for the land tax years 2005 and 2006. As the application has been refused the provisions of Clause 6(5) and Clause 6(6) apply. Therefore, any land tax for the land tax years 2003 and 2004 now becomes due and payable. ORDER 1. The decision of the Chief Commissioner of State Revenue is affirmed. 2. The applicant is not entitled to have the 2 year concessional period extended for the 2005 and 2006 land tax years. 3. The applicant is not eligible to receive a concession pursuant to Section 10T for the land tax year 2003 or pursuant to the various forms of Clause 6 of Schedule 1A for the land tax years 2004, 2005 and 2006.