CITATION: William J Padget Pty Limited -v- Chief Commissioner of State Revenue [2004] NSWADT 129 DIVISION: Revenue Division APPLICANT PARTIES: William J Padget Pty Limited RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 036034 HEARING DATES: 01/04/2004 SUBMISSIONS CLOSED: 04/01/2004 DATE OF DECISION: 06/30/2004 BEFORE: Verick A - Judicial Member APPLICATION: Land tax exemption - principal place of residence MATTER FOR DECISION: Preliminary matter Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Land Tax Management Act 1956 Taxation Administration Act 1996 CASES CITED: APPLICANT REPRESENTATION: J Hmelnitsky, barrister RESPONDENT I Mescher, barrister ORDERS: The application is fixed for further directions hearing on 22 July 2004 at 10:00am. REASONS FOR DECISION Introduction 1 The matter concerns land tax assessments for years 1999 to 2003 made against the William J Padget Pty Limited (WPP Ltd) by the respondent in respect of land situated at 2 Tobruk Avenue, Cremorne (the land). 2 When this matter came up for hearing the only issue that was argued before the Tribunal was essentially whether WPP Ltd or William J Padget, a director and shareholder of the applicant, is the owner of part of the land for purposes of the Land Tax Assessment Act 1956 (the LTM Act). The principal issue was whether, pursuant to s 26 of the LTM Act William Padget should be treated as the owner of part of the land for land tax purposes. 3 However, when I began to consider my reasons for decision in this matter, the jurisdiction of the Tribunal to deal with this application became an issue that I had to address before ruling on the application. I have very carefully examined all relevant documentation including the law relating to objections and reviews of objection decisions and I am of the opinion that the Tribunal has no jurisdiction to consider this application for the reasons I will shortly provide. Background 4 I will first deal with the factual background in this matter. I have before me the documents lodged by the respondent under s 58 of the Administrative Decisions Tribunal Act 1997(the ADT Act), a statement filed by William Padget with several annex ures, and written submissions provided by both the respondent and on behalf of William Padget and WPP Ltd. 5 WPP Ltd was incorporated on 6 April 1973 and, soon after, purchased the property known as 2 Tobruk Avenue, Cremorne in New South Wales that was, at that time, registered on one title as Lot 1 DP 23880 Volume 12679 Folio 137. 6 Sometime in early 1988, WPP Ltd sought to subdivide the property as Lots 11 and 12 intending to sell Lot 11 to William Padget. In that process, WPP Ltd first obtained a valuation from the Valuer-General's Department in respect of the portion intended to be disposed of, being the proposed Lot 11. The valuation was agreed to as being $110,000 on or about the 28 April 1988. 7 On 26 July 1988, an agreement for sale of Lot 11 was entered into with WPP Ltd as vendor and William Padget as the purchaser. This document, although not executed by William Padget, was duly stamped on 26 July 1988 and a deposit was paid to WPP Ltd. 8 According to William Padget's statement, the "sale of Lot 11 was settled in or about late 1988" and the balance of the purchase price was paid to WPP Ltd. He has also stated, that on 30 July 1988, he caused WPP Ltd to execute and provide him with a Transfer for Lot 11. William Padget, who prepared the documentation for the transfer, claims that he "fixed the seal of another company by mistake on the Transfer". 9 William Padget claims that he did not lodge the Transfer for registration immediately as he was involved in proceedings concerning the subdivision in the Land and Environment Court. Approval for the subdivision occurred approximately two or three years after the contract for sale had been entered into. 10 William Padget also claims that he did not register the Transfer immediately because he "had already stamped the Contract with stamp duty". He was also involved in court proceedings with his builder from about 1992. In 1994 or 1995 the applicant's bank at Cremorne lost the title deeds of the property when it shut the Cremorne branch. 11 A house was built on Lot 11 "in or about 1996" which William Padget claims has been occupied by him as his residence. 12 In addition to the above factual background, I need to also state that William Padget, in acquiring another residential property in the name of another private company situated in Queensland in December 2001, used the Cremorne property as a security for funds to purchase this property. William Padget also authorised the Bank to obtain a replacement Certificate of Title and also assisted the bank by providing a statutory declaration to obtain the replacement certificate of title for the necessary mortgage of the property to the bank. 13 A title search conducted by the respondent on 24 March 2004 indicates that both Lots 11 and 12 are still in the name of WPP Ltd. 14 William Padget in his statement cites the introduction of fringe benefits tax as a reason why a contract for sale of Lot 11 was entered into. He also suggests in correspondence with the respondent that, due to litigation with his builder, he has not registered the transfer of Lot 11 in his own name. 15 The respondent issued land tax assessments for tax years 1999 to 2003 on 18 June 2003 to WPP Ltd in respect of land described in the assessments as "2 TOBRUK AVE CREMORNE 2090". On 20 June 2003 William Padget lodged an objection against these assessments on the following grounds: "In reference to the assessment issued against the above named taxpayer, I wish to object to same, as land on which my home is built and purchased by me in 1988 has been included as being owned by the above named taxpayer and as I live in same the half known as lot 11 is not liable for land tax. The property was originally one lot being lot 1 DP 23880, but was subdivided into lots 11 and 12 and I own and live on lot 11. I enclose a copy of the contract for the purchase dated 28 July 1988 and stamped with NSW stamp duty. With introduction of Fringe Benefits Tax, it became impracticable to have a persons home in a company name, so as I was to build my home on this lot I had a valuation done of the proposed lot and the company, William J Padget Pty Limited sold it to me, and of cause I built my home on same and am at present living on same and have for some years. I intend to retire to the country soon, so I have been allocating individual numbers to parts of my dwelling and I have arranged for an agent to rent same and I hope by next year I will be gone and the parts rented, but at present only the writer and a friend live here, so this property, lot 11 is not subject to land tax." 16 On 31 July 2003 the respondent disallowed William Padget's objection on the following grounds: "I refer to your letter of 20 June 2003 objecting to the above land tax assessments. Your claim that the land described as lot 11 in dp 808770 situated at 2 Tobruk Avenue, Cremorne which was included in the above assessments is not held by the company taxpayer. You also claim that the same land is entitled to the exemption for land used and occupied as the owner's principal place of residence. We have considered your reasons carefully, but unfortunately we have to disallow your objection. A search of title confirms that the land described as lot 11 in dp808770 is registered in the name of the company taxpayer William J Padget P/L. Whilst it is acknowledged that a Contract for Sale was 'stamped', ie duty was paid, and executed in 1988, the land has continued to reflect the company William J Padget P/L as the registered proprietor of the land. The company continued to deal with the land, securing finance against the security of the land and providing mortgage to the National Bank of Australia for that security. In short, William J Padget P/L has remained the legal owner of the land and also acted in a capacity of the real owner of the land. The exemption for principal place of residence under section 10(1)(r) of the Land Tax Management Act, 1956 (the Act) requires the land to be a parcel of 'residential' land. 'Residential' land is defined in section 10(1D) of the Act to exclude land owned by a company. Consequently as the land is not 'residential' land the exemption under section 10(1)(r) of the Act has no application." 17 The application for review of the above decision to this Tribunal was made by William Padget who gave his home address as 5/2 Tobruk Avenue Cremorne 2090 and his postal address as PO Box 22, Tumbulgum, 2490. Reasons for the application for seeking review were shortly stated as follows: "I own and live in my own home and want that situation acknowledged." 18 When this matter came up for further directions on 4 November 2003, the Judicial Member attending to the directions hearing, amended the name of the applicant to "William J Padget Pty Ltd". 19 At the hearing of this matter, no question of jurisdiction was raised and arguments were directed to whether WPP Ltd or William Padget was the "owner" of lot 11 for purposes of the LTM Act. Reasons and decision on the jurisdiction issue 20 Section 96 of the Taxation Administration Act, 1996 (the TA Act) provides that a taxpayer may apply to the Tribunal for a review of a "decision of the Chief Commissioner that has been the subject of an objection". Section 86 of the TA Act gives taxpayers a right, if dissatisfied with an assessment issued by the Chief Commissioner or any other decision of the Chief Commissioner made under a taxation law, to lodge an objection. 21 In respect of objections against assessments, a taxpayer under s 86 of the TA Act is entitled to object against an assessment that has been served on the taxpayer, In short, s 86 only allows taxpayers affected by an assessment to lodge objections in respect of any assessment served on the relevant taxpayer. Section 87 of the TA Act requires that the objection in writing should state fully and in detail the grounds of objection. 22 In the present matter, William Padget objected against assessments issued to WPP Ltd. The objection was not on behalf of WPP Ltd but clearly made by William Padget on his own behalf – "I wish to object to …" were the precise words used in his objection dated 20 June 2003. 23 The respondent considered the objection and William Padget was provided with an objection decision on 31 July 2003 disallowing his objection. It was addressed to William Padget and referred to his letter of 20 June 2003. The respondent in his objection decision also only addressed the claims made by William Padget in his objection. In my opinion, the respondent was in error to treat, firstly, the notice of objection lodged by William Padget as a valid objection against the relevant assessments made against WPP Ltd and, secondly, to make an objection decision in respect of the invalid objection. 24 The application lodged by William Padget was on the basis of a decision erroneously made by the respondent and accordingly no objection decision was properly before the Tribunal. The attempt to amend the name of the applicant did not by itself "cure" the irregularities. The application should have been dismissed on the grounds that there was no jurisdiction with the Tribunal to consider an objection decision made against the wrong taxpayer. There is no provision in the TA Act that allows the respondent to substitute another person as the taxpayer, even if that party is related or a beneficiary of the taxpayer. It is unfortunate that the respondent did not bring to the attention of William Padget when the objection was received that he was not entitled to object against the assessment issued to WPP Ltd. Corporate entities have an independent legal status apart from their shareholders or directors. 25 The position might have been different if the objection decision related to WPP Ltd and William Padget had made the application in his own name by error. The amendment would have "cured" that problem. But in the present matter the objection lodged by William Padget related to his personal grounds and raised no grounds on behalf of WPP Ltd. It was clearly not a valid objection for purposes of s 86 of the TA Act. Some care on the part of the respondent is necessary to ensure that only valid and proper objections are processed. 26 Although I need not at this stage consider the submissions that have been made in relation to s 26 of the LTM Act I will nevertheless express some gratuitous comments. The facts surrounding this matter are very unusual and in part quite strange. The contract of sale was executed some 16 years ago and the sale for all purposes has been completed some years ago but the title in the relevant property remains in the name of the vendor, WPP Ltd. Even as late as December 2001 when the National Bank was authorised to obtain duplicate title to the whole property no attempt was made to regularise the ownership of Lot 11. William Padget assisted the bank to obtain a duplicate certificate of title by providing a sworn statutory declaration, presumably on behalf of WPP Ltd as being the owner. 27 This of course raises a number of questions when the operation of s 26 of the LTM Act is considered. Firstly, s 26 is designed to operate where a contract of sale of land has not been completed by the transfer of the relevant land. Here William Padget in his statement claims that the sale has been completed and full payment has been made and that there has been a transfer, though its legality is in question. It is not necessary for me to express any concluded view but on the basis of these observations and the history of this matter, it is difficult to conclude that the parties intend to transfer the relevant property to William Padget. There were fringe benefits tax reasons for the original decision and it is not clear why no attempt has been made in recent years to register the transfer of the property in the name of William Padget. If the parties on the other hand, do not wish to give effect to the transaction, other considerations arise, for example whether it is in fact a sham transaction. 28 The Tribunal has, in my opinion, no jurisdiction to consider an application, which relates to an objection decision not properly made by the respondent under the provisions of the TA Act. It is most unfortunate that the parties at hearing did not bring my attention to the jurisdiction issue. Before I make any final order in this matter, I will offer the parties an opportunity to address on the jurisdiction issue. I will accordingly fix this matter for further directions hearing on 22 July 2004 at 10 am. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.